Finished lumber is run through the wrap-and-strap machine at West Fraser Pacific Inland Resources sawmill in Smithers, B.C., on Feb. 4, 2020.Jesse Winter/Reuters
The U.S. Department of Commerce is seeking to double tariff rates against most Canadian softwood producers even as lumber prices hover around record highs.
In a decision on Friday for preliminary new rates, the Commerce Department raised the combined duties for most Canadian lumber producers to 18.32 per cent, compared with the current 8.99 per cent.
Vancouver-based Canfor Corp. and Montreal-based Resolute Forest Products Ltd. face even higher duties for their shipments south of the border.
The combination of countervailing and anti-dumping rates are a result of the Commerce Department’s second administrative review of duties. The proposed rates will not take effect immediately since they are subject to further review over the next six months before final duties are set.
Two-by-fours made from Western spruce, pine and fir sold last week for a record US$1,640 for 1,000 board feet, according to industry newsletter Madison’s Lumber Reporter. Those benchmark prices stayed flat this week, but they have shot up 340 per cent since mid-May of 2020.
The Commerce Department’s latest move is based on scrutinizing data from 2019, when lumber traded mostly between US$300 and US$400 for 1,000 board feet.
Susan Yurkovich, president of the BC Lumber Trade Council, said the decision to sharply raise duties is an egregious move. “As U.S. producers remain unable to meet domestic demand, the ongoing actions of the industry, resulting in these unwarranted tariffs, will ultimately further hurt American consumers by adding to their costs,” Ms. Yurkovich said in a statement.
Under the revised tariff schedule, Canfor would see its duties soar to 21.04 per cent, up from the current 4.62 per cent. Vancouver-based West Fraser Timber Co. Ltd. is facing a preliminary new rate of 11.38 per cent, compared with 8.97 per cent.
The Commerce Department decided Resolute’s revised duties should be 30.22 per cent, up from the current 20.25 per cent. Saint John-based J.D. Irving Ltd.’s preliminary rate is 15.82 per cent, compared with 4.23 per cent today.
The National Association of Home Builders in the United States has been leading a campaign to lobby the Biden administration to reach a new Canada-U.S. softwood lumber agreement. The association calculates that lumber supplies now cost almost US$53,000 in the construction of a new American single-family home, tripling over the past year.
U.S. lumber production accounts for only 70 per cent of its domestic demand. Canada provides most of the balance of lumber supplies sought by the U.S.
But the powerful U.S. Lumber Coalition, which represents American producers and private woodland owners, said in a release on Friday from Washington that it applauds the decision to increase duties.
“More U.S. lumber being produced by U.S. workers to build U.S. homes is a win-win for America,” coalition co-chairman Jason Brochu said. “Strong trade enforcement is creating long-term confidence in the U.S. sawmilling industry. This is exactly what must happen for further expansion of U.S. softwood lumber manufacturing and jobs.”
Canada has repeatedly won cross-border trade arguments on appeal in the long-running lumber battle dating back to 1982.
The 2006 Canada-U.S. softwood agreement expired in October, 2015. In the latest round of the trade dispute, Canadian producers have been paying U.S. lumber duties since April, 2017.
Resolute spokesman Seth Kursman estimates Canadian producers have paid deposits for duties totalling about US$5-billion over the past four years. “The American consumer should not be a second-tier consideration to a small group of U.S. companies and landowners motivated by their own narrow self-interest,” Mr. Kursman said.
After reviewing data from 2017 and 2018, the Commerce Department reduced the duties for most Canadian producers in late 2020 to 8.99 per cent, compared with 20.23 per cent previously.
The U.S. and Canada have different systems for charging producers to chop down trees.
In much of Canada, the forests are on Crown land, with buyers paying “stumpage fees” to provincial governments for the right to log. The core of the U.S. complaint about Canadian lumber exports is the wood is sold far too cheaply, then dumped into the American market.
“We will keep challenging these unwarranted and damaging duties through all available avenues,” Canada’s International Trade Minister, Mary Ng, said in a statement late Friday. “We remain confident that a negotiated solution to this longstanding trade issue is not only possible, but in the best interest of both our countries.”
U.S. lumber producers argue provincial governments in Canada are undercharging for the right to clear forests, thereby subsidizing Canadian firms that turn timber into products such as two-by-fours.
Canada argues provincial stumpage fees are fair and do not amount to subsidies.
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Brent Jang