New Brunswick mills facing increase in U.S. duties on softwood lumber

New Brunswick softwood lumber producers are being hit once again with higher duties on their exports to the United States.

After a year-long reprieve that gave mills a break thanks to lower duties, the U.S. Commerce Department is raising them again. 

Wood from New Brunswick producers, and most producers in the rest of Canada, will now be charged a duty of 11.59 per cent.

That's an increase from the 8.9 per cent that was in effect since last year for most New Brunswick mills and the 4.23 per cent that applied to wood from J.D. Irving Ltd.

"We're very disappointed with the U.S. government's decision to increase these unfair and unwarranted duties against New Brunswick's exports of softwood lumber," Premier Blaine Higgs said in a written statement.

"It's important to remember that in September 2020, the World Trade Organization decision on this case was overwhelmingly favourable to Canada and New Brunswick."

The New Brunswick Lumber Producers, an industry group representing companies affected by the U.S. trade action, did not immediately respond to a request for comment.

Higgs said his government would continue to work with Ottawa to fight the tariffs "through all the legal avenues available."

But given how long that can take, "it's time for the Governments of Canada and the U.S. to return to the bargaining table to resolve this dispute and avoid further protracted litigation," Higgs said.

American competitors have complained for years that Canadian wood is so subsidized that sales in the U.S. amount to unfair competition. The U.S. has repeatedly applied duties to artificially raise the price of the Canadian lumber for buyers south of the border.

New Brunswick and the rest of Atlantic Canada were exempt from that for decades. But in 2017 the U.S. ended the exemption for New Brunswick.

A U.S. lumber group argued that the province's 2014 forestry plan was leading to more and more wood exports from publicly owned Crown land that it considered subsidized.

It also cited 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 year Auditor General Kim Adair-MacPherson said the market survey system had improved with "significant improvements in the process and the methodology."

The previous provincial Liberal government of Brian Gallant had hired a Washington-based lobbyist with Republican connections to try to get changes to the duties, but to no avail.

And J.D. Irving volunteered to submit itself to a separate investigation that allowed it to win a lower duty rate than other provincial producers. 

Under U.S. law, duties are reviewed every year, and last year's review led to lower rates. But the 2021 review has raised them again.

This year's review focused on two non-New Brunswick companies, Canfor Corp. and West Fraser Mills Ltd. It set new rates for both companies and set a figure between those two rates to all other Canadian companies.

That applies to J.D. Irving Ltd., Twin Rivers Paper Co. Inc. and many smaller New Brunswick mills.

The September, 2020 WTO ruling said the U.S. was wrong to impose duties in 2017 because the Commerce Department made mistakes calculating benchmark Canadian timber prices used to assess if mills were paying appropriate provincial stumpage fees. 

At the time the Trump administration attacked the ruling as unfair and said it would invoke a WTO appeal process, but that couldn't go forward because Trump was refusing to make U.S. appointments to the appeal body.

So far the Biden administration has not made any appointments either, extending the logjam.