Application of the Government Corporation Control Act and the Miscellaneous Receipts Act to the Canadian Softwood Lumber Settlement Agreement

30 Op. O.L.C. 111

Application of the Government Corporation Control Act and the Miscellaneous Receipts Act to the Canadian Softwood Lumber Settlement Agreement

No. 06-7

United States Department of Justice

August 22, 2006

C KEVIN MARSHALL Deputy Assistant Attorney General Office of legal Counsel

Application of the Government Corporation Control Act and the Miscellaneous Receipts Act to the Canadian Softwood Lumber Settlement Agreement

An aspect of the proposed agreement between the United States and Canada settling various disputes regarding trade in softwood lumber products, in which duties now held by the United States would be distributed by a private foundation to "meritorious initiatives" related to, among other things, timber-reliant communities, would not violate the Government Corporation Control Act or the Miscellaneous Receipts Act.

MEMORANDUM OPINION FOR THE GENERAL COUNSEL UNITED STATES TRADE REPRESENTATIVE

The United States and Canada have negotiated an agreement settling various disputes regarding trade in softwood lumber products. You have asked whether one aspect of the proposed settlement, in which duties now held by the United States would be distributed by a private foundation to "meritorious initiatives" related to, among other things, timber-reliant communities, would violate the Government Corporation Control Act, 31 U.S.C. § 9102 (2000) or the Miscellaneous Receipts Act, id. § 3302(b). We conclude that this aspect of the settlement would not violate either statute. We express no opinion on other features of the settlement agreement.

I.

One of the disputes regarding trade in softwood lumber products involves the "Byrd Amendment" to title VII of the Tariff Act of 1930. See Continued Dumping and Subsidy Offset Act of 2000, Pub. L. No. 106-387, § 1003, 114 Stat. 1549, 1549A-73 (2000) (codified at 19 U.S.C. § 1675c (2000)). That Amendment requires the Commissioner of the United States Bureau of Customs and Border Protection ("Customs") to deposit into "special accounts" in the United States Treasury "all antidumping and countervailing duties (including interest earned on such duties) that are assessed after the effective date [of the statute]" under antidumping or countervailing duty orders entered by the Commissioner. Id. § 1675c(e). Customs must annually distribute the duties in these special accounts to "affected domestic producers" as a "continued dumping and subsidy offset." Id. § 1675c(a).^[1] [ 112]

Several producers and exporters of softwood lumber products ("Canadian Producers") have challenged in the United States Court of International Trade the application of the Byrd Amendment to goods imported into the United States from Canada. The Canadian Producers have argued that such application violates a clear statement requirement of the North American Free Trade Agreement ("NAFTA") Implementation Act under which any amendment to title VII of the Tariff Act "shall apply to goods from a NAFTA country only to the extent specified in the amendment." 19 U.S.C. § 3438 (2000). In April 2006, the court held that "Customs has violated U.S. law, specifically a provision of the NAFTA Implementation Act in applying the Byrd Amendment to antidumping and countervailing duties on goods from Canada and Mexico, 19 U.S.C. § 3438." Canadian Lumber Trade Alliance v. United States, 425 F.Supp.2d 1321, 1326 (Ct. Int'l Trade 2006).^[2] We understand that the Canadian Producers also have challenged before a NAFTA arbitration panel the authority of the United States to collect the antidumping and countervailing duties to which the Byrd Amendment applies.

The settlement that the United States, through the Trade Representative ("USTR"), has negotiated with Canada would, among other things, terminate numerous suits in various forums regarding trade in softwood lumber products. See generally Draft Softwood Lumber Agreement Between the Government of Canada and the Government of the United States of America (Aug. 1, 2006) ("Settlement Agreement" or "Agreement"). The Settlement Agreement would enter into force only if the parties to the disputes identified in the Agreement execute a "Termination of Litigation Agreement, " which is "a full and complete settlement of the issues raised by all of the parties." Settlement Agreement art. II; id. annex 2A. In addition, although the Canadian Lumber suit would not be terminated, the Settlement Agreement would terminate the application of the Byrd Amendment to duties involving softwood lumber products from Canada, by having the United States agree to revoke the applicable antidumping and countervailing duty orders. The United States would refund to certain "Importers of Record" (the vast majority of whom are Canadian Producers) or to their designees the funds concerning such products held in special accounts (approximately $5 billion). Id. art. III. According to the Agreement, most of the Importers of Record are expected to enter into escrow arrangements with the Government of Canada or its agent to sell their rights to the refunds and accrued interest to Canada in exchange for an immediate lump sum payment from Canada equal to approximately 80% of the deposits and interest. An additional $1 billion (approximately equal to the remaining 20% of the refunds) would be distributed, via the Government of Canada or its agent, to three escrow accounts identified by the United States, "whose beneficiaries are respectively": (1) "members of the Coalition for Fair Lumber Imports, " (2) "a binational industry council" whose creation Canada and [ 113] the United States would encourage, and (3) "meritorious initiatives in the United States identified by the United States in consultation with Canada as described in Article XIII(A)." From that $1 billion, Canada would "distribute . . . $US 450 million for the meritorious initiatives account." Id. annex 2C; see also Id. art. XIII (discussing the council and the meritorious initiatives) & annex 13.

Your question involves this "meritorious initiatives account." The Settlement Agreement generally describes as follows the uses to which the $450 million shall be put:

The funds shall support meritorious initiatives in the United States related to:

(a) educational and charitable causes in timber-reliant communities;

(b) low-income housing and disaster relief; or

(c) educational and public-interest projects addressing: (i) forest management issues that affect timber-reliant communities; or (ii) the sustainability of forests as sources of building materials, wildlife habitat, bio-energy recreation, and other values.

Id. art. XIII(A)(2). Article XIII further provides that "[b]y September 1, 2006, the United States, in consultation with Canada, shall identify the meritorious initiatives to receive the funds that are to be set aside for that purpose under Annex 2C." Id.; see also Id. annex 2C ("meritorious initiatives in the United States" are to be "identified by the United States in consultation with Canada as described in Article XIII(A)").

Your office has explained that the "beneficiary" of the third escrow account is not precisely "meritorious initiatives" themselves but rather a foundation that will control the "meritorious initiatives account" receiving the $450 million. The foundation will distribute these funds consistent with the three categories listed in Article XIII(A)(2).

The Settlement Agreement is silent on how the United States will identify this foundation, except to state the date—September 1—by which it should be done. Even if a later date is used in the final version of the Agreement, you expect that the deadline for identifying the foundation will predate the effective date of the Agreement, although identification of the foundation is not a condition for the Agreement to enter into force. See Settlement Agreement art. II. Beyond that, your office has explained to us as follows how the United States plans to proceed:

Th[e] foundation will be established in accordance with the terms of the settlement agreement by a board of directors of non-government employees (which will include two non-voting Canadian board [ 114] members). Those directors will also control the foundation once it is established.

The directors will be chosen by a bi-partisan group of non-government employees who are identified by USTR after consultation with the Presidential Personnel Office and with interested members of Congress. Neither the bi-partisan group nor the board members selected by this bi-partisan group will receive government appointments. Neither will they be subject to direction and control by any federal official. Although the bi-partisan group will be vetted by the Presidential Personnel Office, the board members selected by this bipartisan group will not. . . themselves be vetted by the White House or by . . . any government agency.

E-mail for C. Kevin Marshall, Deputy Assistant Attorney General Office of Legal Counsel, from David Apol, Office of the General Counsel, United States Trade Representative (July 28 2006). You have since informed us that the White House Council on Environmental Quality ("CEQ") has been working with USTR in choosing the bipartisan group. Apart from the requirements quoted above—that the directors be "non-government employees, " receive no "government appointments, " and not be "subject to direction and control by any federal official"; and that the choice of directors not be vetted by any government agency, including the White House—there will be no restrictions on whom the bipartisan group may select as directors. You have asked whether the establishment of this foundation, and the foundation's using its portion of the settlement funds to support "meritorious initiatives, " are consistent with the Government...