Advocacy Update: Canada Appeals Countervailing Duties in Softwood Lumber Dispute
       By Ben Gann, NLBMDA Vice President of Legislative and Political Affairs
 
The Canadian government announced this week that it is challenging the countervailing duties (CVD) placed on softwood lumber imports to the United States (U.S.). Under Chapter 19 of the North American Free Trade Agreement (NAFTA), Canada can request a binational panel from the two countries to review the U.S. Department of Commerce's final determination. At the center of the dispute, the U.S. government accuses the Canadian government of unfairly subsidizing and dumping softwood lumber. Canada strongly denies the accusations. [1]

 On November 2, the Department of Commerce finalized antidumping duties (AD) and CVD on softwood lumber imports from Canada to the U.S. The Commerce Department's decision must still be approved by the U.S. International Trade Commission (ITC), which is scheduled to make its final determinations by December 18.

 If upheld, which appears likely, most Canadian firms will pay a combined AD/CVD rate of 20.83 percent, which is less than the preliminary combined rate of 26.75 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.

 Most Canadian firms will pay rate of 14.25 percent in countervailing duties. In addition, five Canadian companies (Canfor, J.D. Irving, Resolute, Tolko, and West Fraser) will pay differing rates based on the subsidy rate determined by the Commerce Department. Canfor will pay 13.24 percent, J.D. Irving will pay 3.34 percent, Resolute will pay 14.7 percent, Tolko will pay 14.85 percent, and West Fraser will pay 18.19 percent. The Canadian government

In the antidumping duties investigation, the Commerce Department established a final determination of 6.58 percent for most producers and exporters of softwood lumber from Canada. However, four Canadian companies (Canfor, Resolute, Tolko, and West Fraser) will pay different rates. Canfor will pay 8.89 percent, Resolute will pay 3.2 percent, Tolko will pay 7.22 percent, and West Fraser will pay 5.57 percent.

 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.

In addition, Canada is expected to bring a case against the U.S. under the World Trade Organization (WTO) dispute settlement system. Here, the Canadian government would allege that the determinations by the Commerce Department and the ITC violate the U.S.' obligations under the WTO Antidumping Agreement and Agreement on Subsidies and Countervailing Measures.  Unlike with the NAFTA Chapter 19 case, this would be 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. [2]

 The increasing likelihood of 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.

 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 $436 per thousand board feet, an increase of 27 percent over the past year. The increase has been even more significant for the panel market. The Random Lengths Structural Panel Composite price is now $486 per thousand board feet, an increase of 34 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 77 antidumping and countervailing duty investigations this year - a 61 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.

 Questions? Contact Ben Gann, NLBMDA Vice President of Legislative and Political Affairs at [email protected] or 202.367.2346.