U.S. to reduce levies on most Canadian softwood producers

February 1, 2022

By: The Working Forest Staff

THE GLOBE AND MAIL — The U.S. Department of Commerce plans to decrease tariffs for most Canadian softwood producers but raise them for West Fraser Timber Co. Ltd. WFG-T , Canada’s largest lumber company.

The Commerce Department said late on Monday that based on its preliminary assessment, the combined countervailing and anti-dumping tariffs will be 11.64 percent for most Canadian producers, compared with 17.91 percent currently.

Vancouver-based West Fraser is the only company that will not benefit from the lower rates, which are intended to take effect in the fall of 2022. Its duty rate is slated to increase to 13.09 percent from the current 11.14 percent.

The tariffs will vary for three other lumber producers besides West Fraser.

International Trade Minister Mary Ng said she is committed to finding a way to end the U.S. lumber tariffs.

“The U.S. Department of Commerce is indicating with these preliminary results that it intends to maintain its unjustified duties on imports of Canadian softwood lumber,” Ms. Ng said in a statement after the announcement. “They are a tax on American consumers and reduce the affordability of housing for American home buyers at a time when housing prices are already at record highs.”

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Canadian lumber producers have been on a roller-coaster ride when it comes to duty rates in the cross-border dispute that dates back nearly 40 years.

Only nine weeks ago, the Commerce Department doubled tariffs on most Canadian producers, and those duty rates are likely to remain in effect until September.

The 2006 Canada-U.S. softwood agreement expired in October 2015, with no replacement. In the latest round of the trade dispute, Canadian producers have been paying U.S. lumber duties since April 2017.

B.C. Lumber Trade Council president Susan Yurkovich said Canadian forestry companies will still pay unwarranted duties. “We continue to hope that the U.S. industry will put an end to this decades-long litigation,” she said in an e-mail.

The revisions announced on Monday are still subject to verification by the Commerce Department, which will also accept submissions from parties such as the U.S. Lumber Coalition and representatives of Canadian producers. The coalition has repeatedly argued that Canada subsidizes lumber production and dumps softwood into the U.S. market at below market value.

Canada counters that its producers get no subsidies, and no dumping into the U.S. market has occurred.

The federal government is challenging U.S. lumber tariffs in a process under the U.S.-Mexico-Canada Agreement that allows Canada and the United States to set up trade panels to settle disputes. As well, Canada complained in 2017 to the World Trade Organization.

Lumber prices have been volatile during the pandemic, with wild swings upward when homeowners went on a do-it-yourself renovation binge from the summer of 2020 to the spring of 2021. They then slumped for three months, before rebounding in the late summer of 2021.

Cash prices – what sawmills charge wholesalers – were at US$1,220 last week for 1,000 board feet of two-by-fours made from Western spruce, pine, and fir, according to Madison’s Lumber Reporter, a Vancouver-based industry newsletter. That pricing level is more than 170 percent higher compared with last August.

“We do not believe the Canadian government or Biden administration is focused on solving this issue as the trade dispute is not currently causing any job losses in Canada given healthy commodity prices,” CIBC World Markets Inc. analyst Hamir Patel said in a research note on Monday.

Mr. Patel estimates Canadian producers have paid deposits for duties totaling more than $6.4-billion since 2017.

Under the preliminary tariff schedule to take effect this fall, duties for Vancouver-based Canfor Corp. would tumble to 6.75 percent from the current 19.54 percent.

Montreal-based Resolute Forest Products Ltd. would have a preliminary new rate of 20.24 percent, compared with 29.66 percent today.

The Commerce Department also set Saint John-based J.D. Irving Ltd.’s preliminary rate at 7.09 percent, compared with the current 15.05 percent.

The latest preliminary rates are based on an evaluation of industry data for 2020.

Canada has repeatedly won cross-border trade arguments on appeal in the softwood dispute dating back to 1982, but the U.S. Lumber Coalition has proven to be a powerful opponent.

“Trade law enforcement has resulted in dramatic growth of U.S.-made lumber by mitigating the harmful effects of Canada’s subsidized and unfairly traded imports,” coalition chairman Jason Brochu said in a release on Monday.

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