Lower U.S. softwood lumber duties a 'relief' to local industry

New Brunswick lumber exporters are getting a break on duties that the U.S. government has been applying to their exports to the American market for the last three years.

The U.S. Commerce Department has decided to lower the 20.2 per cent duties it has been applying to most Canadian softwood exports to 8.9 per cent as part of its annual review of the rates. 

"This certainly will provide some relief, this new tariff rate based on the administrative review," said Mike Legere, the executive director of Forest NB.

New Brunswick Lumber Producers president Jerome Pelletier, who is a vice-president at J.D. Irving Ltd., called the decision "a significant improvement." 

Irving, which was already subject to a lower duty of 9.38 percent, will see that rate further reduced to 4.23 percent.

In 2017 the U.S., acting on a complaint by American lumber producers, applied new duties on Canadian lumber and eliminated the traditional New Brunswick exemption it had in place during previous tariff battles.

They argued that government subsidies allowed Canadian wood to enter the U.S. market at an unfairly low price.

Winning back the provincial exemption remains the main goal for the New Brunswick industry, Legere said. "Ultimately we still want that full exemption from duties."

Pelletier also called for the reinstatement of the exemption and said Canada and the U.S. should try to negotiate a settlement in the dispute.

Legere said high demand for lumber and high prices had helped mills do well despite the duties but they remain a drag on business. 

The elimination of the New Brunswick exemption sprang from U.S. industry complaints citing a 2008 report by New Brunswick's auditor-general that the provincial wood market was "not truly an open market."

It said the provincial system for surveying private wood sales to set the rate for government-owned Crown land relied on incomplete and sample sizes in some parts of the province, making it difficult to assess whether the Crown rate reflected market conditions.

Last month Auditor-General Kim Adair-MacPherson said the system had improved with "significant improvements in the process and the methodology."

But she said the province must now use the improved system to update rates annually, as required by law. The rates haven't been updated since 2015.

A decision memorandum released Tuesday by the U.S. government didn't reflect Adair-MacPherson's report and said Washington still believed private stumpage prices in New Brunswick were distorted by Crown lands' dominance in the wood supply market and a small number of buyers in the province.

Legere said the industry in the province will continue to press its case.
 
"We're free traders and we have an open and transparent market and that's what we're going to stake our claim on," he said.

Premier Blaine Higgs said this week's decision, combined with Adair-MacPherson's report, should "set us in the right direction" for getting the duties removed altogether.

Erroneous U.S. ruling

Earlier this year the World Trade Organization ruled that the U.S. was wrong to impose the duties on Canada in 2017.

It said the U.S. Commerce Department made errors in determining the benchmark Canadian timber prices to determine whether producers here were paying adequate stumpage fees to provincial governments. 

But the Trump administration swiftly attacked the ruling as unfair and said it would ask a WTO appeal process to overturn the ruling.

However, that appeal body can only function with a full complement of members, and the U.S. has refused to make appointments, effectively preventing it from functioning.

There's no word yet on whether President-elect Joe Biden will name new members so the appeal can proceed.

Higgs said he hopes Biden will make good on his promise to respect international agreements and opt to not appeal the decision.