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U.S. lumber producers eye New Brunswick with coming tariffs

A worker at the Delta Cedar Sawmill in Delta, B.C.

Darryl Dyck/The Canadian Press

U.S. lumber producers are expanding their attack on Canadian exporters by adding New Brunswick to the list of provinces targeted for tariffs.

A group led by the U.S. Lumber Coalition petitioned the U.S. Department of Commerce in November to challenge what it calls Canada's unfair subsidies for softwood lumber. Since then, the lobby group has stepped up its campaign, playing hardball in a letter last week to Wilbur Ross, the new U.S. Commerce Secretary.

In the April 3 letter, the U.S. group refers to itself as "Petitioner" – also known as COALITION, which stands for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations. The Atlantic provinces have escaped U.S. tariffs and quotas over the decades in the long-running softwood dispute dating back to 1982.

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"Although these past exclusions also covered products produced in the province of New Brunswick, Petitioner has alleged that softwood-lumber producers in New Brunswick benefit" from subsidies, COALITION told Mr. Ross.

The strategy to corral New Brunswick is part of the U.S. lumber industry's increasingly aggressive stance in the trade war against Canada, broadening the scope of complaints.

Preliminary countervailing duties are expected to be disclosed by the U.S. Department of Commerce on April 25, industry experts say. "We anticipate 'shock and awe' softwood-lumber duties," RBC Dominion Securities Inc. analyst Paul Quinn said in a research note.

Last month, Commerce officials met with representatives from the New Brunswick Lumber Producers and conglomerate J.D. Irving Ltd., the largest softwood producer in the Atlantic region.

Irving requested to become a voluntary respondent on Jan. 25 in the Commerce investigation into alleged Canadian lumber subsidies, according to an April 4 internal memo written by two Commerce officials. Irving should be accepted as a respondent, the officials recommended to Gary Taverman, the Commerce deputy assistant secretary for anti-dumping and countervailing duty operations.

The influential COALITION said it isn't asking Commerce staff to take action against Nova Scotia, Prince Edward Island and Newfoundland. Combined, those three Atlantic provinces accounted for only 1.5 per cent of lumber export volumes last year from Canada to the United States, but New Brunswick had a 7-per-cent share of the total.

Industry observers say Irving hopes that a company-specific duty will inflict less pain on the Saint John-based firm than a general duty that averages different rates to be assessed on leading Canadian companies.

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Irving is slated to be the lone voluntary respondent while four mandatory respondents have been selected by Commerce officials: Resolute Forest Products Inc. of Montreal and three B.C.-based producers, West Fraser Timber Co. Ltd., Canfor Corp. and Tolko Industries Ltd.

The five respondents each face a company-specific countervailing duty rate, while other Canadian softwood exporters will be subject to an average of those five preliminary rates.

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 Crown-owned property in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec. The 2006 Canada-U.S. softwood-lumber agreement, which covered those six provinces, expired in October, 2015.

After a one-year moratorium on legal proceedings, COALITION launched its petition this past November. The cross-border lumber fight is now in its the fifth round of trade litigation since the early 1980s.

The New Brunswick government denies allegations that it provides lumber subsidies, urging the U.S. Department of Commerce to take into account the availability of private timber in the province.

"We request that the department continue to exclude New Brunswick producers in recognition of the free-market conditions that prevail in the province's private stumpage market," the New Brunswick government and producers said in a recent letter to Mr. Ross.

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Irving said in a letter this week to Mr. Ross that in New Brunswick in 2015, "Crown stumpage rates in the province exceeded private stumpage prices," and the market isn't distorted.

Crown (publicly owned) timber had a 47.7-per-cent share of the total supply within New Brunswick in 2015, Irving added.

By contrast, Crown timber accounts for 95 per cent of British Columbia's forested lands. B.C. is Canada's largest lumber exporter into the United States.

A preliminary U.S. determination on anti-dumping duties is expected to be announced by late June.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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