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Lumber Industry Felled

Dec 1, 2001

by Ernest Granson

Canadian lumber producers are in the dumps over new softwood duties

by Ernest Granson

Canadian lumber producers have been hit with a double whammy this year. Back in August, the U.S. Commerce Department instituted a 19.3% tariff on Canadian softwood lumber exported to the U.S., then on Halloween Day, the department imposed a further 12% to 13% anti-dumping duty. Both duties have been deemed retroactive to April 1st of this year.

American producers called for the tariffs because they say Canadian companies are selling lumber in the U.S. market at below cost. The dispute has been ongoing since 1982, when the U.S. industry first petitioned against Canadian softwood lumber imports, claiming the “stumpage” system of selling wood to producers in Canada essentially amounted to subsidization.

The U.S. Commerce Department ruled against that first claim, but it’s been a bitter battle since then. This latest volley is having a negative impact.

According to industry analyst Kevin Mack of KPMG Consulting in Edmonton, annual lumber production in Alberta amounts to approximately $1 billion. From that total, some $600 million to $800 million worth of softwood is exported to the U.S. The cost of the August announced tariff is directly tied to the price of lumber, but averages out to a $114 million hit for the Alberta lumber industry. That number does not take into account the fallout in lost sales and further consequences as a result of slowdowns and possible layoffs.

It’s possible things could have been worse. American industry lobby groups such as The “Coalition for Fair Lumber Imports” were calling for a 36% anti-dumping duty. The U.S. Commerce Department decided on the 12% to 13% after conducting audits on six major Canadian lumber companies including Weyerhaeuser Canada Ltd., Canfor Corp., Slocan Forest Products Ltd., Abitibi-Consolidated Inc., Tember Inc. and West Fraser Co. Ltd.

Each of those companies will have to pay its individual duty or dumping cost. The rest of the Canadian companies will pay duties based on the average.

However, Mack says there is no direct impact on the retail side in Canada.

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“It doesn’t really affect retail businesses here. For instance, it won’t cost you more to buy that piece of two by four, but it will cost more to buy it in the U.S.,” he says.

So far, there haven’t been any major shutdowns as a result of the tariff, although Mack says some mills have implemented reduced shifts or early holidays.

“What’s more important than lumber prices is the impact on communities across Alberta,” says Larry Skory, director of public affairs for the Alberta Forest Products Association. More than 10,000 Albertans’ jobs are dependent on the softwood lumber industry, both directly and indirectly. “We feel the two decisions, the anti-dumping and countervail decisions, are grossly unfair and without merit,” says Skory, whose organization represents the majority of the softwood players in the province.

Even if, as some analysts predict, Canada sees these decisions thrown out, it could take two years or longer, leaving the industry bankrupt, says Skory. “If we don’t get a resolution in the next couple of months… there will be serious ramifications for softwood lumber production, curtailments, downtime and job losses.

“Bottom line: it’s the most serious issue that the sawmilling industry has seen in many, many years.”

Discussions on both sides with the ultimate goal of generating a compromise were ongoing between Canadian and U.S. officials during the last several months, but after the imposition of the anti-dumping duty, Ottawa requested the World Trade Organization to step in.

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