Canadian lumber producers in Atlantic Provinces may get break from U.S. antidumping and countervailing duties
The Commerce Department has preliminarily determined that it will not assess antidumping and countervailing duties on softwood lumber imports from Canada’s Atlantic Provinces of Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.
“The U.S. petitioners and other parties support this determination; it of course will be subject to further comment on the record,” said Commerce Secretary Wilbur Ross in a June 26 statement. “A final decision on the matter is expected by late summer.”
Alleged low stumpage rates in the Atlantic Provinces is the reason for the Commerce Department’s decision.
Meanwhile, the Commerce Department issued an affirmative preliminary determination in the antidumping duty investigation of softwood lumber from Canada. It determined that exporters from Canada have sold softwood lumber to the United States at 4.59 percent to 7.72 percent less than fair value. The department will instruct U.S. Customs and Border Protection (CBP) to collect cash deposits from importers of softwood lumber from Canada based on these preliminary rates.
Canada’s softwood lumber manufacturers will receive the following antidumping rates on their shipments to the United States: Canfor, 7.72 percent; Resolute, 4.59 percent; Tolko, 7.53 percent; West Fraser, 6.76 percent; and all others (including J.D. Irving), 6.87 percent.
The U.S. Lumber Coalition applauded the Commerce Department’s action against the alleged dumping.
“For years, Canada has unfairly distorted the softwood lumber market with billions of dollars in support of their producers,” said coalition spokesperson Zoltan van Heyningen. “This has allowed Canadian producers to dump their production on the U.S. market to the detriment of U.S. manufacturers, as now confirmed by the Department of Commerce.”
These preliminary antidumping rates are in addition to the preliminary countervailing duty rates that the Commerce Department assessed on softwood lumber April 24. When combined, the applicable duty rates range from 17.41 percent to 30.88 percent.
Dumping occurs when a foreign company’s products are sold on the U.S. market at less than fair value, while countervailable subsidies are provided by foreign governments to companies based on their export performance or use of domestic materials over those which are imported.
The Committee Overseeing Action for Lumber International Trade Investigations or Negotiations (Coalition) filed an antidumping and countervailing duty petition Nov. 25, and the Commerce Department announced Jan. 9 that it found enough evidence to begin an investigation.
In addition to the Washington, D.C.-based U.S. Lumber Coalition, the coalition’s members include Collum’s Lumber Products in South Carolina; Hankins in Mississippi; Weyerhaeuser Co. and Potlatch Corp. of Washington; Rex Lumber Co. in Florida; Sullivan Forestry Consultants in Georgia; Seneca Sawmill Co., Stimson Lumber Co., Swanson Group, Carpenters Industrial Council and Giustina Land and Timber Co. of Oregon; and Sierra Pacific Industries of California.
However, this most recent petition differed from four previous investigations, which only scrutinized the historical product of a primary mill, which is raw dimensional structural lumber used in homebuilding. The petitioner sought to include additional downstream industry products, such as pallets, fence pickets, trusses, flooring, bed frames, and door and window frames.
This latest Commerce Department antidumping and countervailing duty investigation follows the expiration of the nine-year-old Softwood Lumber Agreement (SLA) Oct. 12, 2015. The outgoing Obama administration and Congress failed to either extend the existing agreement or enter a new one with Canada before the end of 2016.
Prior to the 2006 SLA, battles between the two countries over softwood lumber raged, involving numerous countervailing and antidumping duty investigations, as well as many challenges in the World Trade Organization. The decades’ back-and-forth resulted in a form of stalemate, with neither side able to firmly claim victory. The U.S. government simply collected countervailing and antidumping duties on Canadian lumber imports. With the signing of the SLA in 2006, the United States ended its duty collections on Canadian softwood lumber, refunding 81 percent of the duties collected.
Battles between the two countries over softwood lumber raged, involving numerous countervailing and antidumping duty investigations, as well as many challenges in the World Trade Organization.
The 2006 SLA’s original duration was five years, allowing for automatic five-year extensions that hinged on agreement by both countries. The first five-year extension began in 2011, but just prior its expiration in 2015, Canada rejected any further extension of the agreement.
Meanwhile, a condition of the 2006 SLA provided that in the event the SLA was not renewed, a one-year moratorium would go into effect, disallowing the United States from taking punitive actions or implementing any investigations.
The Canadians said they refused to extend the SLA because they believed the U.S. coalition sought to increase softwood lumber volume restrictions.
According to the Commerce Department, imports of softwood lumber from Canada in 2015 were valued at $4.5 billion, and $5.7 billion in 2016. The U.S. industry’s latest antidumping and countervailing duty petition alleged that since the October 2015 expiration of the 2006 SLA, Canadian exports of softwood lumber products have increased substantially.
Michael Jones, president of Blaine, Wash.-based Jones & Jones Customs Brokers and Trade Consultants, who has handled Canadian softwood lumber imports for 45 years, said the Commerce Department’s latest decision, in his view, was “not unexpected.”
“These same provinces—Newfoundland and Labrador, Nova Scotia, and Prince Edward Island—were exempt from the four previous Canadian softwood lumber AD/CVD cases and the 2006 Softwood Lumber Agreement,” Jones said. “It is because the lumber industries in these provinces have been able to demonstrate they are not conferred subsidies in the manner of what the U.S. Coalition is alleging are low stumpage rates and apparently that they are not selling their lumber into the U.S. at a lower rate than they do domestic buyers.”
Jones said he is also skeptical whether the Commerce Department is able to confirm that the other Canadian provinces in the investigation, namely British Columbia, are “dumping” their lumber into the United States.
“I’ve not spoken with any Canadian mill, remanner or wholesaler, who has said that they sell to a U.S. buyer for less than a Canadian buyer,” he said. “If you have to add 19.88 percent CVD and 10 percent AD to sales to a U.S. buyer, which you wouldn’t have to include when selling to a Canadian buyer, that would obviously mean the sales to the U.S. would be at a cost of 30 percent more than sales to a Canadian buyer.”
I’ve not spoken with any Canadian mill, remanner or wholesaler, who has said that they sell to a U.S. buyer for less than a Canadian buyer.
Jones said he doesn’t believe the Commerce Department should even be accepting the U.S. Coalition’s petitions.
“They just keep filing the same petitions year after year, with nothing different, except that they want to include more products in the scope,” he said. “They’ve never brought any new evidence to be considered that would be different than they originally brought forth. I see this whole process as a waste of energy, time and money.”
As this is a preliminary decision by the Commerce Department with respect to the exclusion of lumber from the Atlantic Provinces, CBP for now will continue to collect countervailing duty cash deposits on imports of lumber from the Atlantic Provinces.
If the Commerce Department makes a final decision to exclude from its antidumping and countervailing duty investigations lumber imported from Canada’s Atlantic Provinces, then it will stop collecting the cash deposits and instruct CBP to refund the money.
Softwood lumber, like Canadian dairy products and refined sugar from Mexico, remain hot button trade issues that the Trump administration hopes to resolve, or at least soften, prior to starting its renegotiation of the North American Free Trade Agreement with Canada and Mexico in early August.