In 1996 the United States and Canada reached a five-year trade agreement, The Softwood Lumber Agreement. Under its terms, Canadian lumber exports to the United States were limited to 14.7 billion board feet (34.7 million cubic metres) per year. However, when the agreement expired on April 2, 2001, the two countries were unable to reach consensus on a replacement agreement. The United States held that the Canadian and provincial governments unfairly subsidized their lumber industries, because the majority of Canadian lumber is harvested from crown lands. In addition, forestry agreements are set up in order to assure continuing employment in local communities, many of whom are completely dependent on forestry.
On April 25, 2002, the United States Department of Commerce announced it had determined subsidy and antidumping rates, with a final subsidy rate of 18.79% and an average dumping rate of 8.43%, to give a combined CVD/AD rate of 27.22%. Specific companies were charged higher or lower dumping rates, including Abitibi (12.44%), Weyerhaeuser (12.39%), Tembec (10.21%), Slocan (7.71%), Canfor (5.96%) and West Fraser (2.18%).
On August 13, 2003, a NAFTA panel released a ruling that said, although the Canadian lumber industry did get a financial contribution from the government, the tariffs imposed by the US were too high. [1]
Discussions between the two countries to resolve the problem are ongoing. The dispute has had its biggest effect on British Columbia, the major Canadian exporter of softwood lumber to the United States.