March 30, 2001 (3:20 p.m. EST) No. 40

CANADA WINS CASE IN SOFTWOOD LUMBER DISPUTE

International Trade Minister Pierre Pettigrew expressed his satisfaction today that the Arbitral Panel, established under the Canada-U.S. Softwood Lumber Agreement, has ruled that the United States breached that agreement when it chose to reclassify drilled studs and notched lumber.

"We respect international trade rules," said Mr. Pettigrew. "The arbitrary U.S. reclassification of these products has been found to be in breach of the Softwood Lumber Agreement. Canadian exporters were not circumventing the Agreement. The decision effectively refutes the allegations of the U.S. industry coalition. This is one more indication that the Government of Canada will defend the rights of the Canadian softwood lumber industry."

The dispute arose when the United States unilaterally reclassified drilled studs in 1998. Canada challenged this decision. Two World Customs Organization decisions subsequently found in favour of Canada's position. Meanwhile, the United States opted to reclassify notched lumber as well. At that point, Canada invoked the dispute settlement provision of the Softwood Lumber Agreement and requested the formation of an Arbitral Panel to consider the drilled studs and notched lumber tariff classification matters. Yesterday's decision is the result.

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A backgrounder is attached.

For further information, media representatives may contact:

Sébastien Théberge

Office of the Minister for International Trade

(613) 992-7332

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

Backgrounder

Drilled studs and notched lumber are designed specifically for use in the construction of stud wall assemblies. Drilled studs are spruce, pine or fir boards with one or more drilled holes approximately 16 inches from the end. Notched lumber is spruce, pine or fir boards with one or more small rectangular notches cut out of their edges. The holes and notches allow for the passage of wires or pipes in a wall.

On June 26, 1998, U.S. Customs gave notice that it intended to reclassify drilled studs from Canada under HTSUS 4407, a product category subject to the import restrictions of the Softwood Lumber Agreement. On October 6, 1999, a U.S. Appeals Court ruled that the Court of International Trade judge who ruled in favour of the U.S. reclassification did not have the authority to do so. However, the original U.S. Customs reclassification remained in effect.

On September 2, 1998, Canada asked the Harmonized System Committee of the World Customs Organization (HSC), the international organization responsible for resolving classification issues, to render its decision on this matter. The HSC supported Canada by a vote of 21 to 1. The reservation was filed by the U.S. side and was reconsidered by the Committee on October 14, 1999. The HSC again supported Canada, by a vote of 19 to 8. Nevertheless, the United States indicated that it had no intention of abiding by these decisions.

On February 3, 1999, U.S. Customs gave notice that it intended to reclassify notched lumber, to include it in a product category subject to the import restrictions of the Softwood Lumber Agreement. This reclassification came into effect on June 9, 1999.

On December 22, 1999, Canada invoked the dispute settlement provisions of the Softwood Lumber Agreement and requested the formation of an Arbitral Panel to consider the drilled studs and notched lumber tariff classification matters.