Canada concerned about lumber plan in U.S. farm bill

By Missy Ryan

WASHINGTON (Reuters) - Canada is concerned a plan to tighten rules for U.S.-Canadian lumber trade, included in a giant U.S. bill which looks likely to become law, will pose new problems for its timber industry, the Canadian embassy in Washington said on Thursday.

"The Embassy of Canada is aware of this initiative and is concerned that the proposed U.S. Importer Declaration Program will adversely affect the Canadian softwood lumber industry," said Tristan Landry, a spokesman for the embassy.

"Canada continues to abide by the terms set out by the Softwood Lumber Agreement, and expects that the U.S. will do the same," he said.

The measure in the 2008 farm bill would require lumber importers to declare that their U.S.-bound shipments respect the terms of a 2006 bilateral agreement on lumber trade, a long-time source of tension between the neighboring countries.

It would also require the U.S. government to verify compliance with the agreement and impose penalties on importers who knowingly violate trade rules.

When it was rolled out in late 2006, the lumber agreement was heralded as a way to end decades of lawsuits in which U.S. companies argued they were unable to compete with low-priced Canadian imports.

But complaints quickly sprang up from the U.S. side, and the Bush administration initiated several arbitration cases in hopes of proving Canada was not living up to the deal.

The arbitration court has already ruled in one of those cases, handing down a split decision on whether Canada was shipping too much lumber southward.

The new farm bill measure is supported by some timber-state lawmakers, such as Sen. Max Baucus of Montana, but it is opposed by the Bush administration.

"It is high time we enforce our softwood lumber agreements, so that Montana and all American lumber industries get a fair shake in a fair market," Baucus said this week.

The Coalition for Fair Lumber Imports, a U.S. industry group, believes Canada has let about $50 million go uncollected in lumber export taxes.

The administration has already promised a veto for the broad-ranging $289 billion farm bill, which covers everything from food stamps to farm subsidies.

Strong House and Senate votes for the bill suggest Congress may be able to override the veto.

"The extra paperwork required by this new proposal will be an unnecessary burden and will add further instability to this sector and to the U.S. supply chains for which Canadian lumber is a key input," Landry said in an e-mail.

(Editing by Jim Marshall)