US to reduce levies on most Canadian lumber producers

The 2006 Canada-US softwood lumber agreement expired in October 2015, without replacement. In the latest round of the trade dispute, Canadian producers have been paying U.S. duties on softwood lumber since April 2017.Christine Muschi/Reuters

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

The Commerce Department said late Monday that based on its preliminary assessment, the combined countervailing and anti-dumping duties would be 11.64% for most Canadian producers, down from 17.91% currently.

West Fraser, based in Vancouver, is the only company that will not benefit from the reduced rates, which are expected to take effect in the fall of 2022. Its duty rate is expected to increase to 13.09%, from 11.14% currently.

Rates will vary for three other lumber producers in addition to West Fraser.

International Trade Minister Mary Ng said she was determined to find a way to end US tariffs on softwood lumber.

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

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Canadian softwood lumber producers have been on a rollercoaster ride over tariff rates in the cross-border dispute that dates back almost 40 years.

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

The 2006 Canada-US softwood lumber agreement expired in October 2015, without replacement. In the latest round of the trade dispute, Canadian producers have been paying U.S. duties on softwood lumber since April 2017.

BC Lumber Trade Council President Susan Yurkovich said Canadian forestry companies will continue to pay unwarranted fees. “We continue to hope that the American industry will end this decades-long litigation,” she said in an email.

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

Canada counters that its producers receive no subsidies and that there has been no dumping on the US market.

The federal government is challenging U.S. softwood lumber tariffs in a process under the U.S.-Mexico-Canada Agreement that allows Canada and the U.S. to create trade panels to settle the disputes. In addition, Canada filed a complaint in 2017 with the World Trade Organization.

Timber prices have been volatile during the pandemic, fluctuating upwards as homeowners embarked on a DIY renovation spree from summer 2020 to spring 2021. They then fell for three months, before rebounding at the end of the summer of 2021.

Spot prices — what sawmills charge wholesalers — were 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. This price level is more than 170% higher than last August.

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

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

According to the interim tariff schedule that will take effect this fall, customs duties for Vancouver-based Canfor Corp. would drop to 6.75% from 19.54% currently.

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

Commerce also set JD Irving Ltd.’s interim rate. of Saint John at 7.09%, compared to 15.05% currently.

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

Canada has repeatedly won cross-border trade appeals in the 1982 softwood lumber dispute, but the US Lumber Coalition has proven a strong opponent.

“Enforcement of trade laws has resulted in dramatic growth in U.S.-made lumber by mitigating the harmful effects of subsidized and unfair Canadian imports,” coalition chairman Jason Brochu said in a statement released Monday.

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