Canada is challenging U.S. lumber tariffs by taking its fight to the World Trade Organization, the second appeal launched in two weeks by the federal government.
Stephen de Boer, Canada's ambassador and permanent representative to the WTO, made the formal request on Tuesday through the group that referees global commerce.
He wrote two letters to U.S. trade diplomat Christopher Wilson, asking for WTO consultations with the United States to discuss the long-running softwood-lumber dispute. One letter raises concerns about the Trump administration's countervailing duty and the other complains about the anti-dumping tariff.
The final determination on Nov. 2 by the U.S. Department of Commerce resulted in a countervailing duty of 14.25 per cent and anti-dumping duty of 6.58 per cent against most Canadian lumber shipments south of the border, for a combined tariff averaging 20.83 per cent.
The litigation through the WTO follows Canada's decision on Nov. 14 to take its softwood battle against the United States to one of the most contentious elements of the North American free-trade agreement – Chapter 19, which sets up trade panels to settle disputes. Ottawa is hoping a binational panel under NAFTA will strike down countervailing duties on Canadian softwood.
The new anti-dumping rate – for what the Americans describe as Canada selling softwood below market value – kicked in on Nov. 8. The new countervailing duty would take effect after the U.S. International Trade Commission votes, by Dec. 7, on the issue of U.S. lumber producers being injured.
Mr. de Boer said the United States made inconsistent calculations related to lumber pricing, which in turn led to anti-dumping measures that fail to comply with international trade rules. He also questioned the Commerce Department's decision to slap on the countervailing duty against what the United States sees as subsidized Canadian lumber.
U.S. producers say that under their system, the cost of timber rights on private land is more expensive than the Canadian stumpage fees paid by forestry companies to cut trees down on provincially owned property.
The Commerce Department ruled that provincial stumpage fees paid by Canadian lumber firms are too low and amount to subsidies. The United States "incorrectly determined the existence and amount of any benefit," Mr. de Boer wrote. "Canada has distinct provincial markets for stumpage that reflect important differences in the provincial forests, the availability, accessibility, and quality of standing timber, transportation costs, distance to market and other prevailing market conditions."
Another option is for Canada to challenge the punitive tariffs in front of the U.S. Court of International Trade.
Foreign Affairs Minister Chrystia Freeland's office reiterated Canada's view that the United States has moved unfairly with a protectionist stand against Canadian softwood.
"The U.S. Department of Commerce's decision to impose punitive anti-dumping and countervailing duties on Canadian softwood lumber producers is unfair, unwarranted and deeply troubling," according to a statement issued by Ms. Freeland's office.
The softwood appeal process is unfolding as the United States takes aim at other Canadian forestry products – uncoated groundwood paper such as newsprint, directory paper and book-grade pages.
Groundwood from Canada is subsidized and being dumped at below market value, according to U.S. producer North Pacific Paper Co., also known as Norpac.
Norpac said the Commerce Department should disregard the views of Resolute Forest Products Inc. and White Birch Paper Co. because those firms focus on their Canadian mills. White Birch closed its Bear Island mill in Virginia in the summer.
Resolute, White Birch, Catalyst Paper Corp., Kruger Inc., Tembec Inc., Alberta Newsprint Co. and Irving Paper Ltd. produce uncoated groundwood paper in Canada, according to Norpac, which is based in Washington State.
The U.S. International Trade Commission issued a preliminary ruling in September that the U.S. groundwood industry is being injured by Canadian shipments.
Norpac argues that Canadian forestry firms have benefited from a wide range of subsidies directly and indirectly, including Catalyst receiving favourable electricity rates in British Columbia.
The U.S. paper maker said the Canadian government and six provinces have provided subsidies to paper mills in Canada: Newfoundland and Labrador, British Columbia, Alberta, Ontario, Quebec and New Brunswick.