The U.S. Department of Commerce has rejected a request from Canada’s shake and shingle industry to be exempt from tariffs against Canadian softwood lumber.
The recently formed Shake and Shingle Alliance asked the Commerce Department in June to review the scope of products that fall under the softwood file. U.S. tariffs average 20.23 per cent against most Canadian lumber sent south of the border.
In a ruling this week, the Commerce Department cited a passage from the U.S. Department of Agriculture’s Wood Handbook, which refers to the production of shakes and shingles as being part of the lumber sector. “This excerpt supports the proposition that there is no clear distinction between shake and shingle production and the lumber industry,” according to a 20-page ruling from the Commerce Department’s anti-dumping and countervailing duty operations.
The Canadian alliance argues its members' cedar products are thin enough to warrant tariff exemptions, and should not be confused with lumber. Cedar shakes and shingles (CSS) are used mostly for roofing, but also for siding.
U.S. Customs and Border Protection told Canadian makers of the wood materials in a notice in March that cedar products that are tapered to less than six millimetres in thickness at one end are not necessarily exempt from the softwood tariffs.
The Commerce Department agreed in its ruling this week: “CSS are not outside of the scope of the orders simply because a portion of the product is tapered to less than six millimetres."
The decision is a painful blow to Canadian producers, which began paying U.S. duties in March on cedar shakes and shingles, said Hugh Farris, a sales representative at Best Quality Cedar Products Ltd. in Maple Ridge, B.C.
“It’s pretty frightening, and I’m still in shock. The Commerce Department disregarded us. It seems outrageous,” Mr. Farris said in an interview on Tuesday.
Best Quality, one of 12 members of the alliance, shut down operations for four weeks this summer as demand slumped from U.S. customers. Five alliance members are based in British Columbia, four in Quebec and three in New Brunswick.
Mr. Farris said temporary shutdowns are looming at many mills, and that would include a yet-to-be-determined number of layoffs from Best Quality’s payroll of more than 55 workers. “We have built up quite a bit of inventory, so layoffs are a matter of time,” he said.
This week’s ruling said wood shims, which are used to fill small gaps, and certain siding products are already subject to duties, and they are similar to the cedar roofing materials being produced by members of the alliance.
The alliance is now examining its options for appealing the Commerce Department’s decision.
Until this year, U.S. tariffs had not been applied on Canadian cedar shakes and shingles since 1991. The administration of Ronald Reagan put a 35-per-cent duty on Canadian shakes and shingles in May, 1986. Then-prime minister Brian Mulroney’s government imposed tariffs a month later on U.S. items such as books, computer components and Christmas trees. The Americans gradually reduced the duties against shakes and shingles, ending them in June, 1991.
Canada has repeatedly won cross-border trade arguments on appeal in the long-running softwood battle dating back to 1982. The latest clash over softwood is the fifth round in the fight.
The United States began imposing preliminary duties on Canadian lumber in April, 2017. The final combined tariffs took effect in early 2018. Those duties work out to a weighted average of 20.23 per cent, consisting of 14.19 per cent in countervailing duties and 6.04 per cent in anti-dumping levies, imposed against most Canadian lumber exporters.
In November, 2017, the Canadian government began filing documents to appeal the Commerce Department’s lumber tariffs, launching the action through the Chapter 19 dispute-resolution mechanism of the North American free-trade agreement. Ottawa is also challenging U.S. lumber duties by taking its fight to the World Trade Organization.