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Forest Stewardship Council-U.S. v. U.S. Trade Representative

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WFLC Files Lawsuit Against U.S. Government For 2006 U.S. Trade Representative Decision Steering $350 Million In Public Funds To Timber Industry-Dominated Forest Foundations

COURT INFORMATION: U.S. Court of Appeals for the Ninth Circuit, No. 09-35985; U.S. District Court, Western District of Washington, No. C08-1358-RAJ

CLIENTS:  Forest Stewardship Council-U.S., Conservation Northwest, Center for Biological Diversity

DEFENDANTS:  Office of the United States Trade Representative; Ron Kirk, U.S. Trade Representative; United States Department of Commerce; Gary Locke, Secretary, U.S. Department of Commerce; United States Customs and Border Protection; and Alan Bersin, Commissioner, U.S. Customs and Border Protection 

STATUS:  On March 30, 2009, The Honorable Richard A. Jones heard oral argument on the defendants’ motion to dismiss.  On June 23, 2009, Judge Jones issued an Order granting the defendants’ motion.  Plaintiffs appealed Judge Jones’s decision to the U.S. Court of Appeals for the Ninth Circuit on October 29, 2009.  The case was argued and submitted for decision on November 2, 2010.  A memorandum affirming the District Court’s decision was issued Dec. 1, 2010.  The Court issued a mandate on Jan. 25, 2011, concluding litigation.   

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Lawsuit Asks for Declaration of Illegal Action and Future Oversight Remedies

On behalf of the Forest Stewardship Council U.S., Conservation Northwest, and the Center for Biological Diversity, the Washington Forest Law Center filed a lawsuit against the Bush Administration.  The lawsuit will have important implications for future forest policies.

The suit alleges that the Administration violated federal appropriations law when, in September of 2006, without any public process or Congressional approval, the Administration steered $350 million from Canadian lawsuit settlement funds to Bush-selected timber industry-dominated forestry foundations.  The suit asks the Court to declare that the Bush Administration violated the law and asks the Court to take reasonable and fair steps to ensure that the money is safeguarded until the Administration follows the law.  

“Once again the Bush Administration has made up its own rules.  Here, the Administration illegally gave away hundreds of millions of public dollars to organizations whose programs are not clearly established to advance the public interest,” said Joe Scott, the international programs director of Washington-based Conservation Northwest. 

One of the co-plaintiffs in the lawsuit is the Forest Stewardship Council – United States, which represents the most respected forest certification system in the United States.  Corey Brinkema, FSC-US’s President, explained why FSC-US joined the suit.  “FSC-US and our partners work tirelessly to develop and promote the highest standards for forest management as well as provide the public the opportunity to reward responsible forestry through choosing FSC-labeled products. The Administration’s action is a huge setback that if left unchecked, could significantly lower the bar for what is represented as sustainable forestry.” 

The suit argues that money the Bush Administration earmarked to the two timber industry-dominated organizations, the U.S. Endowment for Forest and Communities and American Forest Foundation, should instead have gone into U.S. Treasury.  “How this money is spent should have been up to Congress, not timber industry executives in a backroom deal with the Administration,” said Bill Snape, Senior Attorney for the Center for Biological Diversity.

BACKGROUND

By mid 2006, U.S. federal Courts and international trade bodies ruled that the U.S. violated international trade laws when it imposed approximately 30% “countervailing” and “anti-dumping” duties on the importation into the U.S. of softwood lumber from Canada.  Between May of 2002, when the duties were first imposed, and late 2006, $5.4 billion in Canadian “cash deposits” accumulated in U.S. Customs “clearing accounts.”  In October of 2006, the U.S. Court of International Trade in New York City ordered the U.S. to return this $5.4 billion to the Canadian importers.

The U.S. Trade Representative (USTR) engaged in intensive negotiations with Canada to settle the lawsuits and the decades-old trade war over the importation of lumber from Canada.  On September 12, 2006, the countries signed the U.S.-Canada Softwood Lumber Agreement (SLA).

In the SLA, the countries agreed that the U.S. would return $4.4 billion of the $5.4 billion in U.S.-held Canadian “cash deposits” to Canada and the U.S. would keep $1 billion of the Canadian deposits.  However, to avoid its legal duty to deposit its $1 billion settlement share into the U.S. Treasury, the USTR required Canada to take back all of the $5.4 billion and to “donate” $1 billion to private entities in the U.S. selected by the USTR in collaboration with the Bush Administration.

After conducting a non-public process coordinated with the Bush Administration, the USTR identified U.S. entities to receive the Canadians’ “donation.”  Specifically, the SLA required Canada to “donate” $550 million to two entities, the Coalition for Fair Lumber Imports (the U.S. timber industry association that sought the duties in 2002) ($500 million) and a Canadian-based Bi-National Council ($50 million) (a secretive organization centered in Canada to promote the North American lumber market).  One month later, the USTR earmarked and required Canada to “donate” the balance of the $450 million to three “meritorious initiative” entities that promote sustainable forestry and disaster relief:  the brand-new U.S. Endowment for Forestry and Communities received $200 million, a pre-existing foundation supporting small forest landowners, the American Forest Foundation received $150 million; and Habitat for Humanity International received $100 million.

NATURE OF LAWSUIT

The lawsuit alleges that the USTR violated federal law when it failed to deposit any of these public funds into the U.S. Treasury, did not conduct any type of public process prior to distributing them, failed to follow the National Environmental Policy Act, and failed to formally consult with Congress.  Instead, the Administration steered the money to not-for-profit organizations and industry trade associations that are operated or dominated by individuals with life-long ties and allegiances to the U.S. timber industry.  The money will be used by the timber industry entities to advance forest policies that may end up harming the forested environment and which do not advance the environmental protection or sustainable forestry goals of the SLA.

The lawsuit alleges that the U.S. Trade Representative and other federal agencies violated the Miscellaneous Receipts Act (MRA), 31 U.S.C. § 3302.  The MRA provides that officials or agents of the U.S. government receiving “money for the government from any source” must “deposit the money without delay in the Treasury.”  31 U.S.C. § 3302 (b).  The MRA also requires “a person having custody or possession of “public money” to “deposit the money without delay into the U.S. Treasury…”  31 U.S.C. § 3302 (c)(1).

The lawsuit argues that the proceeds of the SLA settlement were legally public monies under the MRA because the monies were, in effect, the United States’ share of a U.S.-settled lawsuit.  The suit alleges that the USTR violated the MRA when it steered $350 million of the Canadian cash deposits to the two timber industry foundations.  Instead, the USTR should have deposited this U.S. money into the U.S. Treasury and followed pertinent appropriations procedures in Congress.

The second cause of action alleges that the USTR violated its duty to conduct National Environmental Policy Act (NEPA) review for either the entire SLA or some aspect of the SLA, such as the “meritorious initiative” provision.  The NEPA claim would additionally require the USTR to conduct NEPA for future SLA implementation decisions.  This is the third time that public interest organizations have sued the USTR for failing to conduct NEPA for international trade agreements that could have potentially adverse environmental impacts. 

The lawsuit only challenges the $350 million that the USTR steered to the two timber industry foundations.  The lawsuit does not challenge the $500 million distribution to the Coalition for Fair Lumber Imports, the $100 million distribution to Habitat for Humanity International, or the $50 million distribution to the Bi-National Council.

WHAT REMEDIES ARE SOUGHT?

The lawsuit seeks a legal declaration from the Court that the $350 million diverted to the two timber industry foundations was “public money” and that the USTR violated the MRA by failing to deposit this money into the U.S. Treasury.  The lawsuit additionally asks the Court to grant future injunctive relief that implements the Court’s declaration that the USTR violated the MRA. 

The lawsuit does not ask the Court to take the money back from any of the SLA entities and does not allege that the two foundations have done anything illegal or improper in their administration of this money. 

For the NEPA claim, the plaintiffs are asking the Court to declare that the USTR needed to conduct NEPA for the SLA and its “meritorious initiative” grant-distribution process and must do so in the future.

 

Related Documents:

Read the Complaint.

Read the Press Release.

Read the news coverage.

 

Please contact Peter Goldman, WFLC Director and Staff Attorney, for more information.