Canada wins key ruling on softwood

For the second time in less than a week, Canada apparently has won another round in the longstanding softwood lumber trade dispute with the United States.
A North American Free Trade Agreement panel ruled yesterday that the U.S. Commerce Department must review its subsidy calculations on Canadian lumber imports, which a B.C. lumber industry spokesman said likely will erase the perceived subsidy altogether.
Commerce has until July 30 to redo its calculations, said John Allan, president of the B.C. Lumber Trade Council.
“Our analysis would indicate that if the Department of Commerce faithfully implements what the panel is telling them to do, then there will be a finding of no subsidy for B.C. and quite likely for every province in the country,” Allan said in a conference call.
British Columbia accounts for about half the softwood lumber exported into the United States.
Canada’s $10-billion annual softwood export business currently is subject to an average 18.8 percent countervailing duty, plus anti-dumping duties that bring the total tariff up to around 27 percent.
If Commerce revises its methodology according to the NAFTA panel’s guidelines, Allan said B.C. subsidy rates would fall to below one percent.
Under trade law conventions, that means the rate would go to zero, eliminating the countervailing duty, he said. However, the lower anti-dumping duty still would apply.
Last Thursday, a U.S. Commerce Department administrative review cut the countervailing and anti-dumping rates on lumber exported between May, 2002 and March 31, 2003 to a total 13.2 percent—nine percent coming from countervailible subsidy.
The final rate does not take effect until December.
Later this week, the U.S. International Trade Commission, a branch of the Commerce Department, must re-submit its report to a separate NAFTA panel on the threat of injury posed by allegedly subsidized Canadian lumber to American competitors.
That panel rejected Commerce’s previous injury calculations. Canadian officials believe a victory before the injury panel effectively kills the U.S. lumber industry’s case for duties.
The U.S. Coalition for Fair Lumber Imports dismissed yesterday’s report as irrelevant.
“The odd thing about all this litigation is that this decision has no effect on what will be collected as that figure will be set in the Department of Commerce’s final administrative review results in early December,” coalition chairman Rusty Wood said in a news release.
For the fourth time in two decades, the coalition succeeded in 2001 in having punishing duties slapped on Canadian lumber, which supplies about one-third of the U.S. homebuilding and renovation market.
The duties were confirmed the following year and have cost Canadian producers more than $2 billion (U.S.) so far. The money is held in trust while the complex appeals proceed.
The coalition’s member companies argue Canadian exports are subsidized through provincial forestry policies, especially artificially low stumpage or Crown timber-cutting fees.
The NAFTA ruling yesterday stems from its rejection last August of Commerce’s decision to use cross-border timber-pricing comparisons to determine if Canadian logs were being sold at below-market value.
The NAFTA panel rejected that approach so Commerce derived a different methodology using Canada-only price comparisons.
Now, said Allan, the panel has nixed that approach, too, agreeing with Canadian submissions that Commerce’s calculations contain critical errors and don’t reflect the way Crown timber is actually priced.
The federal International Trade Department also is pleased with the report, a spokesman said from Ottawa.
“Today is the second time that the NAFTA panel’s asked the U.S. to get their act together,” said Andre Lemay.
“It’s our position that if the U.S. does a proper determination under U.S. law, it will find that Canadian softwood lumber exports are not subsidized,” he added.