DWM-logo.gif (6532 bytes)

July-August 2002

TIMBER!
How the Canadian Softwood Lumber Tariff Will Impact Your Company
by SAMANTHA CARPENTER

When faced with the question of whether their companies would be impacted by the Canadian softwood lumber tariff, many companies had never even heard of it. Many responded to my question by saying, “Could you send me more information?” or “I don’t know. I’ll have to get back to you.” For those of you who import lumber from Canada or for those of you who haven’t thought about how this could impact the building industry, you will want to read the following information. 

The Skinny
The U.S. Commerce Depart-ment announced in late March that it would be imposing a 27 percent tariff on Canadian softwood lumber.

An article written recently by David Phinney of the States News Service, said, “The new tariff resulted after a year-long investigation by the Commerce Department, which determined that Canadian loggers benefit from low fees charged for harvesting timber on public lands and that Canada also allows its producers to sell lumber at below-market prices to the United States—a practice known as dumping.”

According to Phinney, although price disputes between U.S. and Canadian timber interests have been taking place for decades, the situation was inflamed last year when the U.S. Coalition for Fair Lumber Imports filed a lawsuit in federal court that accused Canadian producers of selling timber at below fair-market prices. The lawsuit set in motion separate investigations by the Department of Commerce and the U.S. International Trade Commission (ITC).

In May, the ITC ruled that U.S. suppliers have not been “injured” by Canadian imports to date, thereby canceling a year’s worth of retroactive penalties and duties levied by the Commerce Department.

Canadian lumber suppliers, obviously upset with this decision, said they will take their case to the World Trade Organization. This process can take up to 19 months and will include another set of negotiations between Canadian and U.S. trade officials and lumber suppliers. 

In a move to curb what it found to be unfair competition, the Commerce Department called for a 19.3 percent countervailing tariff on softwood and an additional anti-dumping tariff of 9.67 percent to be placed across-the-board on most Canadian lumber, said Phinney.

But not all Canadian lumber will be hit. Some lumber from Canada’s Maritime provinces and small mills in Quebec is excluded from the duties because it wasn’t found to be government subsidized. The tariff will vary from company to company and ranges from 15.8 for Weyerhaeuser to 2.3 for West Fraser.

Take Cedar Out of the Fight
Weyerhaeuser Company, headquartered in Federal Way, Wash., has asked for the U.S. to remove cedar from the trade fight. The company has testified before the ITC in support of its application to have Western red cedar exempted from U.S. trade action against Canadian wood imports. The company testified that the import of Canadian Western red cedar actually complements, rather than harms, U.S. cedar production.

“We’ve always said that as a high-valued appearance product, Western red cedar does not belong in this dispute over structural grade lumber,” said Bill Gaynor, Weyer-haeuser’s senior vice president for Canada. “Everyone knows that Western red cedar is in short supply in the U.S. The irony is that U.S. businesses and jobs depend on a continued supply of Canadian cedar.” 

“The entire North American cedar industry is at risk if these duties are not removed. Price increases and a lack of supply will prompt consumers to turn from North American wood products and toward alternatives, including tropical hardwoods and composites,” said Gaynor. “We are also concerned about the impact duties will have on our employees and operating communities in coastal British Columbia, where the majority of Western red cedar is produced. A duty on Western red cedar is simply wrong and unjustifiable, particularly given the enormous human toll this trade action will have on Canadians and Americans working in the cedar industry.”

Industry Impact
There really isn’t a right or a wrong answer to how this tariff will impact the building-products industry. Basically, it will depend on the company—it will depend on how they have been getting their lumber supply in the past.

Some manufacturers may be luckier than others, but the demand for making products out of lumber may trickle down through the distributors and dealers to the homebuilders and, ultimately, the end consumer. The National Association of Homebuilders (NAHB) said it believes that 29 percent duties on imports of Canadian lumber “is without merit and will harm housing affordability and threaten the housing-led economic recovery.”

“Because the types of lumber imported from Canada are significantly different from most of the lumber produced in the U.S. and are used for different structural uses in home construction, enacting unjust lumber trade barriers will not protect domestic lumber producers from rightful competition with their northern neighbors,” said Florida homebuilder Barry Rutenberg, national vice president of NAHB and chairperson of the association’s building materials taskforce.

“These punitive tariffs will drive up the cost of housing and all kinds of wood products for millions of consumers and workers in lumber-dependent industries. If the entire 29 percent border duties are reflected in U.S. prices, this will add nearly $1,500 to the cost of building a typical new home. With housing activity providing millions of jobs each year and accounting for 14 percent of the national gross domestic product, this action would threaten the very industry that is leading our economic recovery,” said Rutenberg.

The Other Side
While the manufacturers, dealers and homebuilders who make, sell and use building products made out of softwood lumber may be really upset, there is another side to the story.

Otis Ingram, government affairs committee chairperson for the Forest Landowners Association, released the following statement—before the Canadian tariff decision was made—for a hearing of the Senate finance committee on Canada’s softwood lumber subsidies:

“By illegally subsidizing its lumber industry, the Canadian government fuels overproduction that results in widespread dumping of lumber on the U.S. market. Unable to compete against these products sold below-market prices, U.S. sawmills have closed their doors—and private woodland owners have seen the value of their timberland plummet. By destroying the U.S. lumber industry, Canada’s subsidies are also destroying the market for trees we landowners grow. Without a market for their trees, small, non-industrial woodland owners—who own the great majority of this nation’s forestland—cannot afford the costs of growing and replanting tress after harvest,” said Ingram.

Phinney’s article quoted Maine Republican Senators Susan Collins and Olympia Snowe who praised the Commerce Department’s ruling.

“The Administration’s final determination today demonstrates that the United States takes seriously the damage subsidized Canadian lumber has caused to our industries,” said Snowe, a member of the Senate committee on finance, which oversees trade policy. “My hope had been that the clear documentation the U.S. industry set forth in this case would encourage a negotiated solution, but unfortunately Canada did not present an acceptable, sound agreement that could have resolved this once and for all.”

How Do the Canadians Feel?
Canadian International Trade Minister Pierre Pettigrew called the duties obscene.

“The American administration did not find the nerve to confront its protectionist softwood lumber producers,” he said.

Editor’s Note: Now that you know about this tariff, if you are a manufacturer who imports lumber from Canada we would like to hear what impact you believe this will have on your business. E-mail scarpenter@glass.com with your comments. 

 


Samantha Carpenter is the editor of DWM/BCM magazine.

DWM
© Copyright Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.