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U.S. slaps additional duty on Canadian lumber producers

Workers sort wood at Murray Brothers Lumber Company woodlot in Madawaska, Ont. in this file photo.

Sean Kilpatrick/THE CANADIAN PRESS

The U.S. Department of Commerce is imposing additional tariffs on Canadian softwood lumber producers, threatening forestry jobs and escalating trade tensions between the two countries.

The new anti-dumping duty of nearly 7 per cent against Canadian lumber producers for allegedly undervaluing softwood boosts total U.S. tariffs to almost 27 per cent and comes after an April countervailing duty that averaged 19.88 per cent.

"We will vigorously defend Canada's softwood lumber industry, including through litigation, and we expect to prevail as we have in the past," said a joint statement issued by Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr. "We will continue our determined efforts to maintain a dialogue with our American counterparts to encourage them to rescind this unwarranted trade action."

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The Canadian government hopes to keep the softwood dispute separate from looming talks to renegotiate the North American free-trade agreement.

The combined lumber tariffs are already having a significant impact on the forestry industry, with potential job losses in the thousands and financial-aid packages coming from federal and provincial governments.

Unifor, Canada's largest private-sector union, believes the U.S. duties will place up to 25,000 workers at risk of being laid off, or 12 per cent of an estimated 202,000 union and non-union jobs in Canada's forestry sector. Federal and provincial governments have pledged more than $1-billion in aid and loans to the forestry industry.

The financial pain will gradually increase over this summer and fall. That's because under preliminary rulings, countervailing duties will last for four months while anti-dumping tariffs will be in force for six months. Longer-lasting tariffs could be next, once final determinations are made by the U.S. Department of Commerce by the end of 2017. Many firms also face paying retroactive duties dating back to late January.

The countervailing tariff is targeted at what the United States 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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Resolute Forest Products Inc., one of the companies targeted by the tariffs, expressed disappointment on Monday. "We believe that we should have nothing less than free, unencumbered access," spokesman Seth Kursman said in an interview. "We're not satisfied. This is political gamesmanship."

Some observers say that higher lumber prices should temporarily help Canadian producers while reducing the impact on workers. The Conference Board of Canada recently warned that the trade dispute could trigger 2,200 forestry job cuts across Canada. British Columbia is Canada's largest lumber exporter south of the border, followed by Quebec, Ontario, Alberta and New Brunswick.

"This action by the U.S. lumber lobby ultimately punishes American consumers who are faced with higher lumber prices when they buy, build or renovate their home," BC Lumber Trade Council president Susan Yurkovich said in a statement.

The influential U.S. group called COALITION, which stands for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations, did not ask the U.S. Department of Commerce to take action against Nova Scotia, Prince Edward Island and Newfoundland. The department said in a preliminary ruling that it will continue to exclude those three Atlantic provinces from any lumber duties.

Combined, those three Atlantic provinces accounted for less than 1.6 per cent of total Canadian softwood shipments into the United States last year.

All four Atlantic provinces had escaped U.S. tariffs and quotas over the decades in the long-running softwood dispute, but COALITION's strategy to corral New Brunswick this time is part of the U.S. lumber industry's increasingly aggressive stand in the trade war against Canada.

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"For years, Canada has unfairly distorted the softwood lumber market with billions of dollars in support of their producers," U.S. Lumber Coalition spokesman Zoltan van Heyningen said in a release on Monday.

On June 1, Ottawa announced an $867-million aid package for Canada's forestry sector in an effort to help ease the financial pain from duties levied by the United States.

In April, Quebec pledged as much as $300-million in loans and loan guarantees to help the province's lumber producers deal with the duties.

The four mandatory respondents from Canada targeted for allegedly dumping lumber into the United States are Montreal-based Resolute and three B.C.-based producers: West Fraser Timber Co. Ltd., Canfor Corp. and Tolko Industries Ltd.

The anti-dumping tariffs have been imposed as follows: Canfor 7.72 per cent; Tolko 7.53 per cent; West Fraser 6.76 per cent and Resolute 4.59 per cent. Other Canadian producers will pay 6.87 per cent, raising the overall punitive tariffs to a weighted average of 26.75 per cent.

The countervailing duties that took effect on April 28 were: New Brunswick-based J.D. Irving Ltd. 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 softwood exporters are paying 19.88 per cent.

Resolute, Tolko, Canfor and West Fraser are the only firms to escape the 90-day retroactive penalty related to countervailing duties for "critical circumstances" – a scenario in which Canadian lumber exports rise at least 15 per cent in the months after an investigation is launched but before duties take effect.

Before the announcement of the preliminary anti-dumping rate, Quebec Premier Philippe Couillard said Monday both the Quebec and federal governments have repeatedly told their American counterparts that there have been no subsidies given to Canadian producers and that no dumping into the U.S. market has occurred.

With a report from Nicolas Van Praet in Montreal

Video: Why the U.S. has a problem with Canada's softwood exports
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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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