US Lumber Coalition calls for DOC investigation on imported lumber from Canada

VANCOUVER (Scrap Monster): The statement issued by International Trade Minister Chrystia Freeland’s office suggests that the US Lumber Coalition is planning to request an investigation by the US Department of Commerce (DOC) on lumber imports from Canada. This is feared to trigger another costly trade war between the two nations. The US trade group aims to curb the volume of Canadian softwood entering the US market. Meantime, the US Lumber Coalition top executive has declined to comment on the matter.

According to existing rule, the US government could impose preliminary duties on Canadian softwood lumber imports into the country, six months after a trade case is commenced with the Department of Commerce. The filing of trade case on Friday would essentially mean that duties could be levied from as early as spring of March or April next year. Also, the duties could be retroactive for up to 90 days. The duties, if imposed would lead to heavy cost burden for Canadian timber companies, having to pay millions of dollars per year to the US government to keep exporting their lumber to that country.

The imposition of tariffs is subject to evidence of subsidization of lumber by Canadian authorities or dumping of products at a cheaper rate which tend to hurt US domestic lumber producers. It must be noted that investigations carried out on similar allegations by the US in the past have failed to find any evidence for Canadian lumber hurting US industry. In this context, Freeland's press secretary, Alex Lawrence in an email, noted that Canadian lumber producers and workers have never been found wrong by international bodies in the past.

Predictably, Canada is expected to launch litigation against duties, under the North American Free Trade Agreement (NAFTA). The country is also likely to challenge the duties before World Trade Organization (WTO). Both these actions would likely result in months and years of legal battle. The Canadian Trade Ministry has already made it clear that the country is prepared for any situation and that the government is committed to vigorously defend the interests of Canadian forestry industry and the thousands of workers who depend on it for their livelihood.

The tariffs, if imposed, are feared to lead to significant job losses. For instance, the imposition of combined duty of 27.22% in early 2000s by the US had resulted in almost 15,000 job losses in the B.C alone.

With US elections coming to an end, the future of a possible softwood lumber deal between the US and Canada depends a lot on the priorities of president elect Donald Trump. Any progress can be expected only after the new president takes office in end-January next year. The deal is vitally important to B.C as softwood lumber is the region’s key export item to the US. According to estimates, Canadian lumber accounted for nearly 31% of the US market in early-2016.

The lumber trade dispute between the two countries is dated back to 1982. The two countries had signed a bilateral agreement in September 2006. The original seven-year agreement had an optional provision to extend for a period of two years upon consensus by both parties. Accordingly, the deal which came to an end in 2013 was extended until 2015. As per the terms of the deal, parties were prohibited from engaging in trade actions for one-year grace period, which has already come to an end on 12th October, 2016.