We use cookies on this site to enhance your online experience. By continuing to use this site, you agree to accept cookies.


A log harvester that successfully bids on a B.C. Timber Sale will harvest the timber and sell it to one or more mills. Usually the sale price is negotiated, and the mill indicates that it will deduct stumpage from that price and remit that directly to the government.

In most cases, that system works just fine. In some cases, however, where that mill is suffering financial difficulties, that can become a real problem for the log harvester. Sometimes the mill pays late; sometimes it doesn’t pay at all.

Remember that it is the log harvester in this case that is the “licencee”. It is the log harvester that has promised the government that it will pay the stumpage. It is no excuse for the log harvester to say to government, “that money was deducted off my cheque by the mill, so I am not responsible.” The log harvester is responsible.

So, when the sale agreement is first negotiated with the mill, why doesn’t the log harvester ask for full payment, and promise to pay the stumpage from that? I suspect that few mills would enter into such an agreement. The reason for that lies in Sections 130 and 131 of the Forest Act.

Government writes the laws. When those laws concern monies owed to government, those laws favour government over individuals. This is a general rule that you can live by.

In the case of stumpage, the law makes the mill responsible for any unpaid stumpage on the timber it purchases. Essentially, the mill is made a guarantor of the log harvester’s promise to pay the stumpage debt. This law discourages the purchasing mill from paying the full price to the log harvester, for fear that the log harvester may not remit that stumpage, in which case the mill may have to pay it again.

(In fact, this promise to pay continues downstream. If the first purchasing mill resells the timber to another mill, the obligation to pay stumpage continues to that other mill. Only once the timber has been sawn into lumber is the next purchaser exempt from this requirement to pay.)

So, what can a log harvester do to protect himself? At the very least he should be monitoring carefully the mill’s stumpage payments to the government, to make sure those are being made in a timely fashion and in the appropriate amounts. The Ministry of Small Business and Revenue has an Accounts Receivable website (http://www.sbr.gov.bc.ca/business/Natural_Resources/ForestRevenue/agedforest.htm) that can be monitored, to make sure that stumpage payments are being made. If these reports do not get issued quickly enough, a telephone call may be in order.

Other than that, log harvesters may decide not to sell to mills that are having difficulty paying. Or, the log harvester may make an arrangement that sees the mill put some money up front, or that sees the mill make payments to both the harvester and the government on a weekly basis. Or, perhaps the parties could agree to pay the stumpage into a lawyer’s trust account, and to have the lawyer remit the stumpage to the government.

As I have said in the past, keep your purchasing mill on a tight credit leash.

At the end of the day, if the mill has deducted stumpage, and then goes bankrupt before that stumpage is paid, the log harvester ends up paying twice. He has had that stumpage money deducted from his cheque, and yet the government comes to him requiring that the stumpage be paid. Although the government could take collection proceedings against the mill, it rarely does. The government will take the path of least resistance--it will pursue the log harvester. In fact, it is only if the log harvester is insolvent and unable to pay its stumpage bill that government ever thinks about pursuing the mill for that stumpage.

I wonder if the government would consider amending its laws, to say that a mill that has deducted stumpage holds that stumpage as a trustee, rather than as an ordinary debtor? Would government consider being more aggressive in pursuing the mill, instead of the harvester, in these cases? We can only hope.

John Drayton is a Kamloops lawyer practicing in the areas of motor transport and forestry law.