The U.S. Department of Commerce is reducing duties for most Canadian softwood producers, but singled out Resolute Forest Products Inc. for higher rates.
In its latest assessment released on Tuesday, the Commerce Department said the combined countervailing and anti-dumping tariff will be 8.99 per cent imposed on most Canadian lumber producers, compared with 20.23 per cent currently.
The Commerce Department’s decision will translate into lumber duties starting to fall next week. The duties will drop to 8.97 per cent from 23.56 per cent at West Fraser Timber Co. Ltd. and fall to 4.62 per cent from 20.52 per cent at Canfor Corp.
West Fraser and Canfor are both based in British Columbia. J.D. Irving Ltd. of New Brunswick will see its duties decrease to 4.23 per cent from 9.38 per cent.
Montreal-based Resolute, however, faces an increase to 20.25 per cent from 17.90 per cent.
“Resolute is being countervailed for alleged subsidies that are tied to paper. Hence, Resolute is being penalized for being diversified, for being in Central Canada, and for having to buy damaged wood,” Resolute spokesman Seth Kursman said in a statement. The company also produces pulp and paper.
Susan Yurkovich, president of the BC Lumber Trade Council, said that while the lower rates for most producers are a step in the right direction, the duties in the long-running trade dispute are unwarranted.
“Our view is that we ultimately win these fights, but it takes a long time, a pile of resources and huge amounts of money,” Ms. Yurkovich said in an interview. “It’s a massive distraction and what we should be doing is focusing on meeting demand for people globally who want to build and use wood.”
Canada has already complained to the World Trade Organization. In August, the WTO sided with Canada, though that process has been stalled because the United States has refused to appoint its nominees to the WTO’s appellate body, Ms. Yurkovich said.
The Commerce Department started imposing preliminary duties on Canadian lumber in April, 2017. The current tariffs of 20.23 per cent took effect in January, 2018, consisting of 14.19 per cent in countervailing duties and 6.04 per cent in anti-dumping levies. The new rates, which the Commerce Department set after its preliminary findings in February this year, are pegged at 7.42 per cent for countervailing and 1.57 per cent for anti-dumping.
No refunds are expected to be given to Canadian producers until the trade dispute is resolved, which could take another two or three years.
Zoltan van Heyningen, executive director of the U.S. Lumber Coalition, said his group will vigorously challenge the lower rates.
“Cash deposits are held by the United States until the final conclusion of litigation in these cases,” he said in an e-mail to The Globe and Mail.
The issue of Canadian lumber shipments into the United States is not a direct part of the North American free-trade agreement nor the U.S.-Mexico-Canada Agreement (USMCA). But under NAFTA’s Chapter 19, Canada and the United States agreed to set up trade panels to settle disputes. The USMCA, which took effect on July 1, retains that appeal process.
Tuesday’s announcement “will have no effect on the over $4.3-billion of Canadian lumber duties being held on deposit by the U.S. government,” CIBC World Markets Inc. analyst Hamir Patel said in a research note. “While we continue to believe the majority of these deposits will eventually be returned back to Canadian producers as part of an eventual softwood lumber agreement, we do not believe any deal is likely to materialize until late 2022 at the earliest.”
Mr. Patel said the Canadian government and the incoming U.S. administration of president-elect Joe Biden won’t likely focus on solving the softwood issue immediately since the dispute “is not currently causing any major job losses in Canada, given robust commodity prices.”
The American lumber lobby has repeatedly argued that Canada dumps softwood into the United States at below market value. Canada counters that there have been no subsidies given to Canadian producers and no dumping into the U.S. market has occurred.
Preliminary findings from a second administrative review by the Commerce Department are expected in early 2021.
“The U.S. lumber industry will continue to push for the trade laws to be enforced to the fullest extent possible in the second administrative review to allow U.S. manufacturers and workers the chance to prosper,” U.S. Lumber Coalition co-chairman Jason Brochu said in a statement.
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