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The United States and Canada have been involved in a long-standing dispute regarding the softwood lumber trade. Canada is the primary exporter of softwood lumber to the United States. In 2008, Canada exported approximately $3.2 billion worth of softwood lumber products to the United States, about 17 times the amount supplied by the next biggest exporter to the United States. After several years of litigation related to U.S. allegations of unfair Canadian subsidies, the United States and Canada signed the 2006 Softwood Lumber Agreement ("agreement"). The agreement ended ongoing litigation and requires, among other things, Canadian federal and provincial governments to establish export charges and quotas for Canadian lumber exports and for the two countries to exchange information to support monitoring compliance with the agreement. In 2008, the United States passed the Softwood Lumber Act that requires, among other things, that the U.S. government reconcile and verify softwood lumber trade data. The act also requires GAO to report on (1) whether countries that export softwood lumber or softwood lumber products to the United States are complying with international agreements entered into by those countries and the United States; and (2) the effectiveness of the U.S. government in carrying out the reconciliations and verifications mandated by the Softwood Lumber Act. This letter contains information in response to the first mandate concerning compliance with international softwood lumber agreements. In accordance with our agreement with the Senate Committee on Finance and the House Ways and Means Committee, we will issue a separate report in December 2009 that will supply additional information and findings on U.S. efforts to monitor compliance and will also address U.S. efforts to reconcile and verify softwood value data. We focused on Canada because it is the only country with which the United States has an agreement specifically related to softwood lumber and is by far the largest exporter of softwood lumber to the United States. We are not conducting a legal review of compliance with the Softwood Lumber Agreement. Our objectives in this review are to describe (1) U.S. government agency efforts to monitor compliance with the agreement, including cooperating with the Canadian government, (2) operational challenges agencies face in monitoring compliance, and (3) current compliance concerns.

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