NLBMDA provides softwood lumber dispute update

The National Lumber and Building Materials Dealers Association (NLBMDA) gave its update regarding the softwood lumber dispute between the United States and Canada.

Ben Gann, NLBMDA vp of legislative and political affairs, presented the following about situation:

The U.S. International Trade Commission (ITC) on December 7 upheld the antidumping duties (AD) and countervailing duties (CVD) placed on softwood lumber imported from Canada to the U.S. The decision by the ITC follows the Department of Commerce’s announcement last month finalizing AD and CVD on Canadian softwood lumber.

Most Canadian firms will pay a combined AD/CVD rate of 20.83 percent. For the five companies (Canfor, J.D. Irving, Resolute, Tolko, and West Fraser) directly involved in the investigation, they will pay a combined rate that is different. Canfor will pay 22.13 percent, J.D. Irving will pay 9.92 percent, Resolute will pay 17.9 percent, Tolko will pay 22.07 percent, and West Fraser will pay 23.76 percent. Duties will not apply to softwood lumber harvested in the Atlantic Provinces of Newfoundland and Labrador, Nova Scotia, and Prince Edwards Island.

The Canadian government has responded on two fronts in the ongoing softwood lumber dispute. First, it challenged the countervailing duties (CVD) under Chapter 19 of the North American Free Trade Agreement (NAFTA) on November 14. Second, Canada opened a World Trade Organization (WTO) case against the U.S. regarding the duties on November 28.

NAFTA Chapter 19 panels decide if an antidumping or countervailing duty determination is in accordance with the applicable national law, rather than with NAFTA obligations. Thus, Chapter 19 panels principally serve a judicial function, rather than a NAFTA dispute settlement function. As part of the NAFTA renegotiation, the U.S. has proposed eliminating Chapter 19 and relying on domestic courts to hear disputes, a position Canada strongly opposes.

Canada’s case against the U.S under the World Trade Organization (WTO) dispute settlement system is different from the NAFTA process. Here, the Canadian government complaint focuses on the method used by the Commerce Department to calculate duty rates. The Commerce Department used a method known as “zeroing” that disregards negative dumping margins in calculations and increases the duty rates. The WTO has historically found the practice of zeroing to be a violation of the General Agreement on Tariffs and Trade (GATT).

Unlike with the NAFTA Chapter 19 case, the WTO case is a purely government-to-government dispute regarding the application of international trade agreement obligations, rather than a dispute involving private parties regarding the application of U.S. law.[1]

The litigation does not preclude the two countries coming together and reaching a new agreement. However, the last agreement reached in 2006 occurred four years after antidumping and countervailing duties were first imposed and litigation on those determinations had begun. In discussions with U.S. and Canadian trade officials, NLBMDA has stated that duties are a poor substitute for a long-term agreement that provides predictability and stability for softwood lumber supply and prices.

Lumber prices have increased over the past year in part because of the duties placed on Canadian softwood lumber imported to the U.S. The Random Lengths Framing Lumber Composite price is now $434 per thousand board feet, an increase of 21 percent over the past year, and the Random Lengths Structural Panel Composite price is now $427 per thousand board feet, an increase of 17 percent over the past year.

In 2016, imports of softwood lumber from Canada into the U.S. were valued at an estimated $5.66 billion. The Trump Administration has initiated 79 antidumping and countervailing duty investigations this year – a 65 percent increase from 48 in the previous year.

NLBMDA will continue to engage with the Department of Commerce, Canadian government officials, and Congress on the softwood lumber dispute in hopes of reaching a new agreement that does not put American lumber producers at a competitive disadvantage, unnecessarily restrict the availability of products, or increase the cost of housing to the detriment of prospective homebuyers and consumers.