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Softwood lumber producers face added duties from U.S.

A client selects planks at a lumber yard in Montreal in April. The U.S. plans to impose significant duties of up to 24 per cent on lumber imports.

Paul Chiasson/THE CANADIAN PRESS

The United States is expected this week to announce an anti-dumping duty of 10 per cent against Canadian lumber producers for allegedly undervaluing softwood, a move that would raise the overall punitive rate to nearly 30 per cent.

In April, the U.S. Department of Commerce imposed a countervailing duty of 19.88 per cent that hit most Canadian lumber producers.

The countervailing tariff is targeted at what the U.S. deems to be unfair subsidies in Canada while the anti-dumping duty is designed to penalize Canadian producers for allegedly selling softwood at below market value.

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The Canadian forestry industry is worried that the announcement scheduled for Friday will be largely a case of the Trump administration double-dipping through collecting extra money for alleged bad behaviour already factored into the initial duty disclosed in April.

A combined tariff averaging nearly 30 per cent will be a hefty amount, especially for smaller firms in Canada.

Earlier this month, Ottawa announced an $867-million aid package for Canada's forestry sector in an effort to help ease the financial pain from duties.

A group led by the U.S. Lumber Coalition, also known as the Petitioner, is warning the Commerce Department about a "particular market situation" in Canada that stems from alleged "distortions" in the softwood industry.

"The Department should issue a memorandum accepting Petitioner's particular market situation claim as timely and should reject arguments to the contrary," according to a submission by the influential group called COALITION, which stands for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations.

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The U.S. group is targeting four mandatory respondents from Canada for allegedly dumping lumber into the United States: Resolute Forest Products Inc. of Montreal and three B.C.-based producers – West Fraser Timber Co. Ltd., Canfor Corp. and Tolko Industries Ltd.

COALITION said market distortions in Canada are evident in subsidies for "bioenergy" or renewable energy programs that consume lumber byproducts. "The Canadian federal and provincial governments have encouraged the development of energy from biomass, including wood chips from softwood lumber, as a new market for lumber byproducts," COALITION said in a separate filing to the Commerce Department.

The lobby group also alleges there are Canadian subsidies for electricity and log supplies. "The Department has sufficient time to make a finding regarding Petitioner's particular market situation claim for the preliminary determination," the lobby group said.

The four mandatory respondents – Resolute, West Fraser, Canfor and Tolko – face paying individual anti-dumping rates. New Brunswick-based J.D. Irving Ltd., which is a voluntary respondent in the countervailing duty investigation, is not a respondent in the anti-dumping probe.

But Irving and the remaining producers will be subject to anti-dumping duties at a weighted average rate.

For the weighted average rate, RBC Dominion Securities Inc. analyst Paul Quinn and other industry experts are anticipating a preliminary anti-dumping duty of 10 per cent on Canadian lumber shipments south of the border.

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The countervailing duties that took effect on April 28 were: Irving at 3.02 per cent, Resolute at 12.82 per cent, Tolko at 19.50 per cent, Canfor at 20.26 per cent and West Fraser at 24.12 per cent. The remaining Canadian lumber exporters are paying 19.88 per cent.

In the trade dispute dating back to the early 1980s, the United States complains that Canadian lumber is unfairly subsidized by provincial governments. That's because most of the trees in Canada are on publicly owned land. By contrast in the United States, most timber is on private property and companies pay market rates to harvest it, Coalition argues.

The BC Lumber Trade Council is urging the Commerce Department to dismiss the U.S. lumber sector's push for extra duties.

"Notwithstanding its more than 40 pages of narrative and over 1,400 pages of accompanying exhibits, Petitioner's submission is noteworthy for failing to provide any actual evidence or data to support its allegation of a particular market situation," the council said in its 77-page filing to U.S. Commerce Secretary Wilbur Ross. "Engaging further in a particular market situation analysis in these circumstances would be pointless and a waste of resources for both the Department and the parties involved."

West Fraser, Canfor, Tolko and Resolute also voiced their objections in separate letters to Mr. Ross.

"Although Petitioner has included numerous allegations of claimed 'distortions' and 'artificial inflations' in lumber demand, Petitioner has utterly failed to provide substantial corroborating information to support these claims," West Fraser said.

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