U.S. delays final decision for tougher duties on Canadian softwood

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The U.S. government is delaying a final decision on punitive duties against Canadian softwood lumber, easing some pressure amid renegotiation of the North American free-trade agreement.

Commerce Secretary Wilbur Ross announced late Monday that a ruling due next week will be put off until Nov. 14 in hopes the two sides can cut a deal to end the dispute.

"I remain hopeful that we can reach a negotiated solution that satisfies the concerns of all parties," Mr. Ross said in a statement. "This extension could provide the time needed to address the complex issues at hand and to reach an equitable and durable suspension agreement."

If the U.S. had announced a decision next week that – as widely expected – confirmed hefty fees on Canadian lumber, Ottawa could then have started litigation under Chapter 19 of NAFTA. Canada's ambassador to the U.S., David MacNaughton, had warned last week that Canada was ready to go this route if it couldn't get a deal.

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"We will take all necessary steps to litigate this matter until we get a fair arrangement as we have in the past," he said in a Facebook Live event.

The Trump administration wants to gut Chapter 19, which allows countries to challenge each others' punitive duties at binational trade panels, in the continuing talks to overhaul NAFTA. Canada has said it would walk away from the negotiating table if the U.S. doesn't allow the trade panels to stay.

Putting off a potential Chapter 19 case could help to turn the temperature down on the matter while NAFTA negotiators work. It also gives the two countries more time to reach a softwood agreement that would ensure the fight does not get caught up in the broader NAFTA talks.

Ottawa and Washington were close to a softwood deal this summer that would have imposed a cap on how much lumber Canada could export to the U.S. Under the terms of that agreement, the cap would have started at a little more than 30 per cent of the U.S. market, declining to a little less than 30 per cent over five years, then staying at that level for another five.

Canada also wanted a provision that would allow it to go over the cap if there was more demand for softwood than the U.S. industry could fill. It was this last point, Canada said, that sank the deal because the American lumber industry refused to agree to it.

U.S. industry sources insist the problem is that some Canadian provinces, including B.C., want the option of their softwood companies paying an export tax instead of abiding by the market cap. One Canadian source, however, said B.C. is willing to agree to the cap.

Earlier this year, the U.S. government slapped two sets of preliminary duties – countervailing and anti-dumping – on Canadian softwood. The larger countervailing duties lifted at the end of last week, offering some respite for Canadian softwood exporters.