The U.S. Department of Commerce is moving to level tariffs of up to 24 percent on Canadian lumber imports following decades of complaints from American timber companies who say their northern competitors are unfairly subsidized.
The tariffs could boost prices for American lumber companies, while also raising the overall cost of home building and construction projects.
In a preliminary determination in its “countervailing duty investigation” of softwood lumber from Canada, the federal agency announced Monday evening that it has found that Canadian lumber exporters are receiving subsidies in the range of 3.02 percent to 24.12 percent on sales that in 2016 totalled $5.66 billion.
Canadian Prime Minister Martin watches logs being cut at sawmill in Richmond British Columbia (REUTERS/Andy Clark)
The Department of Commerce “determined a need to impose countervailing duties of roughly $1 billion on Canadian softwood lumber exports to us,” said Secretary of Commerce Wilbur Ross.
The agency said it would instruct the U.S. Customs and Border Protection to impose duties on imports based on those preliminary rates for different companies, and that some companies will be subject to retroactive duties.
Under the preliminary subsidy rates for five major exporters, Canfor Corporation will pay 20.26 percent; J.D. Irving 3.02 percent; Resolute FP Canada 12.82 percent; Tolko Industries Ltd. 19.50 percent; and West Fraser Mills 24.12 percent. A rate of 19.88 percent was set for all other Canadian exporters.
New Brunswick-based J.D. Irving and Quebec-based Maibec both operate lumber mills in northern Maine, and J.D. Irving also is the state’s largest landowner with 1.2 million acres of forestland.
The U.S. Lumber Coalition last year petitioned the U.S. Department of Commerce to impose tariffs on Canadian lumber, following decades of complaints by American logging companies who say their Canadian competitors depress prices in the U.S. with cheap lumber cut from Canadian public forest land.
News of the tariffs sent the U.S. dollar surging Tuesday to its highest level against its Canadian counterpart in more than a year, according to the Reuters news agency. The dollar hit $1.3615 Canadian, its highest level against the loonie since late February 2016.
The U.S. move set a tense tone as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement, Reuters reported.
“It reflects what is going to happen with the trade relationships for the U.S. and its neighbor,” said Sireen Harajli, FX strategist at Mizuho in New York. “This is a negative reflection on that trade relationship.”
Logs sit piled on a Vancouver beach (REUTERS/Andy Clark)
The Canadian federal government quickly issued a statement indicating it “will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation. This decision will negatively affect workers on both sides of the border, and will ultimately increase costs for American families who want to build or renovate homes.”
In the week leading up to the countervailing duty announcement, the provincial government of New Brunswick, which leases land to Irving and other companies, said it was preparing to fight for an exclusion from tariffs.
New Brunswick Premier Brian Gallant and other provincial leaders lobbied the American federal and state governments ahead of the decision, with New Brunswick Treasury Board President Roger Melanson visiting with Massachusetts and Maine officials earlier this month.
New Brunswick has been excluded from previous softwood lumber agreements and lawsuits due to “Atlantic Canada’s unique market conditions,” the province’s Energy and Resource Development agency said in a media release.
Melanson said in the media release that the exclusions are still justified because New Brunswick has a “robust” private timber market, not just logging on government-owned land, and that logging on government-owned land is priced at a “fair market value” and not subsidized.
The provincial government has set up a task force to “determine and mitigate” the potential impact of lumber tariffs from the U.S.
The forest products sector contributes more than $1.45 billion (Canadian) to New Brunswick’s economy and employs about 22,000 people in the province. Maine’s forest products industry contributes an estimated $8.5 billion to the economy statewide and counts about 33,500 employees.
