The U.S. Lumber Coalition has filed a petition asking the U.S. Department of Commerce to investigate Canadian softwood lumber shipments with an eye to potentially levying new duties, kicking off a fresh round of litigation between two countries with a long history of trade disputes over wood.
The petition is said to be hundreds of pages long and its exact contents are not yet known.
But the arguments it makes are expected to be familiar to the Canadian industry, which has had to defend itself against complaints of unfair subsidization and dumping in the past.
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In a news release, the U.S. lobby group alleged that Canadian provinces provide trees to lumber producers for a fee that is below the market value for timber, which Canada denies.
“Canadian lumber is being sold for less than fair value in the United States,” the release said. Friday’s petition details the alleged injury suffered by U.S. industry and workers because of “unfair” imports.
After the previous softwood lumber agreement expired last year, it said, Canadian imports surged from 29.5 per cent of U.S. total consumption in the third quarter of 2015 to 33.1 per cent in the fourth quarter of the same year and to 34.1 per cent so far in 2016 — at the “direct expense” of U.S. producers.
But U.S. construction has also been on the rise, and the Canadian lumber industry maintains its American counterparts cannot fulfil the requirements on its own.
The petition blames Canadian imports for a drop in lumber prices. Mill closures and job losses resulted, it said, calling on the United States to “impose duties to offset the harm.”
‘Never been found in the wrong’
The move was previewed Thursday evening in a statement issued by a spokesman for International Trade Minister Chrystia Freeland.
“Canada is prepared for any situation, and our government will vigorously defend the interests of Canadian workers and producers,” Alex Lawrence wrote.
“Our softwood lumber producers and workers have never been found in the wrong; international bodies have always sided with our industry in the past.”
Canada’s previous agreement with the Americans expired in 2015. A one-year litigation standstill period, during which no new trade actions could commence, expired Oct. 12 and this petition has been expected ever since.
In the meantime, the Canadian government has been trying unsuccessfully over the last year to negotiate a new deal.
Freeland has been meeting with industry representatives on both sides of the border. She met her counterpart, U.S. trade representative Mike Froman, as recently as last weekend at the APEC summit in Lima, Peru.
But those efforts have not forestalled the resumption of hostilites. The industry has taken the first step towards what could be billions of dollars worth of duties and drawn-out litigation in response.
“Here we are again,” Susan Yurkovich, the president of the B.C. Lumber Trade Council, told CBC News. “We never thought because they didn’t file in October that they wouldn’t.
“We are well-prepared to address whatever is in the petition,” she said.
A statement released by her council Friday said the claims by the U.S. lumber lobby are “based on unsubstantiated arguments.”
“It’s not great news. You don’t want to spend your time and energy on litigation. You’d much rather be focused on doing positive things like growing markets,” she said, as she prepared to leave for a trip to Asia to promote her industry’s products.
Nevertheless, her industry is in good shape for a fight.
“We’ve been here before and we’ll work through it,” she said.
The B.C. minister responsible for the forest industry, Steve Thomson, also expressed disappointment, as well as hope that an agreement to prevent duties could still be reached.
“While our preference remains free trade, a managed-trade agreement is preferable to litigation, which is not only costly for lumber producers and the federal and provincial governments, but also creates increased market uncertainty, harming producers on both sides of the border, and increases the costs of lumber to U.S. consumers.
“We encourage the U.S. government to review previous cases and determine that the U.S. industry allegations against Canada and B.C. are unfounded,” a statement issued by Thomson said.
No duties until next spring?
Now that a petition has been filed, the U.S. Department of Commerce may initiate an investigation within the next month.
It could take between 65 and 130 days to issue a preliminary determination on countervailing duties, and even longer for an anti-dumping investigation.
The earliest Canadian exporters could face duties again is next spring — near the end of the first quarter or early in the second quarter of 2017. But duties could be retroactive for up to 90 days.
A final determination on U.S. duties could come late in the year. The Commerce Department may start with a high determination, begin collecting duties, but then revise downward.
The Canadian government and industry are expected to fire back, challenging the U.S. duties on two fronts simultaneously: a binational NAFTA panel and the World Trade Organization.
Talks between Canadian and American officials towards reaching another deal to resolve the issue are expected to continue, despite the petition.
The U.S. industry needs to sign off and agree not to litigate the matter further in order for any agreement to hold, but negotiations towards such an agreement can continue as litigation proceeds.