The U.S. Department of Commerce is doubling duty rates against most Canadian softwood producers as the American lumber lobby gains the upper hand in the latest phase of the trade dispute.
In a decision on Wednesday announcing new rates after an administrative review, the Commerce Department said that it will increase duties for most Canadian lumber producers to 17.9 per cent, compared with the current 8.99 per cent.
The Commerce Department had telegraphed its intentions in May to raise tariffs, proposing a preliminary rate of 18.32 per cent, and has now reduced that amount slightly.
Notable outliers are Montreal-based Resolute Forest Products Ltd. and Vancouver-based Canfor Corp., which will have to pay even higher tariffs for their shipments to the United States.
The new rates are expected to take effect on Dec. 1, adding to the upward pricing pressure over the past two months in the volatile lumber market.
The U.S. Lumber Coalition applauded the decision to apply higher tariffs against what it calls unfairly traded Canadian lumber. “Trade-law enforcement maximizes long-term domestic production and lumber availability,” Jason Brochu, the coalition’s chairman, said in a release.
But Susan Yurkovich, president of the BC Lumber Trade Council, issued a statement to criticize what she calls “meritless allegations” in the U.S. that have resulted in the Commerce Department imposing protectionist duties based on data from 2019.
“As we have repeatedly stated, these unfair duties hurt not only B.C. businesses and workers, but also U.S. consumers looking to repair, remodel and build new homes,” she said. “As U.S. producers remain unable to meet domestic demand, these duties are a threat to postpandemic recovery on both sides of the border.”
Under the new tariff schedule, Canfor will see its duties surge to 19.54 per cent, up from the current 4.62 per cent. Vancouver-based West Fraser Timber Co. Ltd. will pay a rate of 11.12 per cent, compared with 8.97 per cent, while Resolute’s new tariff will be 29.66 per cent, up from the current 20.25 per cent.
Saint John-based J.D. Irving Ltd.’s rate will be 15 per cent, compared with 4.23 per cent today.
“We believe the new rates will then be in effect until September, 2022, when the third administrative review’s rates would likely take effect,” CIBC World Markets Inc. analyst Hamir Patel said in a research note.
Mr. Patel said the combined countervailing and anti-dumping rates announced on Wednesday are in line with what he had anticipated, but there will be options for Canada to seek trade remedies.
“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,” Mr. Patel said.
Still, B.C.’s forestry sector is worried about widespread job losses over the long term from provincial issues, including challenges in obtaining steady supplies of timber.
In British Columbia, after introducing proposed restrictions on logging of old-growth trees, the provincial government said there could be 4,500 direct forestry jobs lost. The BC Council of Forest Industries, however, estimates 8,600 direct jobs in B.C. would be at risk out of a total of 18,500 forestry-related positions that could be lost from having further restrictions on timber supplies.
The 2006 Canada-U.S. softwood agreement expired in October, 2015. In the latest round of the decades-long trade dispute, Canadian producers have been paying U.S. lumber duties since April, 2017.
Two-by-fours made from Western spruce, pine and fir (SPF) sold last week for US$630 for 1,000 board feet, up from August’s average of about US$450 but down from record highs of more than US$1,600 in May, according to industry newsletter Madison’s Lumber Reporter.
Paul Quinn, an analyst at RBC Dominion Securities Inc., said West Fraser ended up in a favourable competitive position among Canadian producers since the company will pay lower tariffs than its rivals. “West Fraser will have an advantaged position with SPF exports to the United States,” Mr. Quinn said in a research note.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.