U.S. to increase tariff on Canadian lumber Step taken to counteract dumping of softwood

WASHINGTON – The Bush administration said Wednesday it would impose another tariff on Canadian lumber after finding Canada is dumping its wood on the United States at artificially low prices.

The 12.6 percent duty will be added to the 19.3 percent tariff put on Canadian softwood lumber in August because the administration found the Canadian government unfairly subsidizes its industry.

The Commerce Department set different dumping tariffs for six forest products companies after reviewing them individually. Those rates range from 5.9 to 19.2 percent.

Softwood lumber comes from fir, pine and other cone-bearing trees. Last year the United States imported $6.4 billion worth of Canadian softwood lumber, which is used for home frames, wood siding, flooring and other purposes.

The U.S. lumber industry had been pressing for tariffs, saying they’re needed to save jobs, while opponents say they will drive up prices of wood products for U.S. consumers. An economist for a homebuilders group says the two tariffs would add about $1,500 to the price of an average home.

Both tariffs have been imposed on a preliminary basis while the Commerce Department and the U.S. International Trade Commission make their final determinations on the two investigations. Those decisions are expected next spring. However, it’s unlikely either would decide to rescind the tariffs.

The U.S. and Canadian lumber industries have battled over prices for decades. U.S. lumber producers allege Canada charges unfairly low “stumpage” fees to companies that log on government lands, allowing Canadian firms to sell lumber in the United States for less than the cost of production. They also say the fees amount to a government subsidy.

Canadian producers have denied the accusations. They also contend their lumber should be shipped into the United States duty-free, reflecting the open trade expected among the United States, Canada and Mexico under the North American Free Trade Agreement.

When the 19.3 percent penalty tariff was announced in August, Maine’s two U.S. senators said the price of softwood lumber had dropped by more than a third over the past year because of Canadian competition. Republican Sens. Olympia Snowe and Susan Collins also said many lumber mills had been forced to close.

Some industry officials in Maine, however, fear the new duties will hurt anyone who owns, cuts or transports wood from the state.

“This can’t help but have a negative effect on the Maine industry,” said John Cashwell, president of Seven Islands Land Co., based in Bangor. “We are still trying to figure out the effect, but it won’t be good,” he said Wednesday.

Don Tardie, vice president of wood products for Nexfor Fraser Papers Inc., which owns lumber mills in Ashland and Masardis and forestland in northern Maine, said last summer that softwood flows freely both ways across the Maine-New Brunswick border. Much of the wood that supplies the Quebec mills along the Maine border comes from the Maine woods and much of the finished lumber from those mills returns to Maine, he said.

Tardie stressed that the Maritime Provinces and the section of Quebec along the Maine border do not benefit from the same lowered stumpage fees the rest of the provinces do.

“For Maine, New Brunswick and Quebec, it is better if the present agreement continues,” Tardie had said. “There is virtually no border between Maine and New Brunswick, and wood flows in both direction all the time. The last thing you want is lines drawn in the sand and very protectionist attitudes, especially on the U.S. side.”

Cashwell said softwood lumber prices are as low now as they have been in 10 to 15 years.

“The effects remain to be seen,” he said. “Countervailing duties announced in August have already had some pricing affects on lumber pricing with Quebec.”

Because Quebec woodlots north of the St. Lawrence River benefit from lowered stumpage fees, anti-dumping fees have been applied to any lumber coming from the entire province. Because of the unique situation with the Maritimes, however, those provinces were exempted from the 19.3 percent tariff when it was imposed in August. But the added duties announced Wednesday reportedly were established across the board on all Canadian lumber.

U.S. Rep. John Baldacci said he believed the rates levied against the Maritimes, however, would be on the low end of the 5.9 to 19.2 percent range announced Wednesday. He warned that the dumping tariff may not be good for the Maine woods industry and promised to work with industry and affected businesses to resolve the issue.

Elliot Feldman, an attorney representing Canadian lumber interests, said the tariffs are a tool to force Canada to negotiate.

“Canadians would like to believe they are best friends to the United States, but that’s not the case when it comes to lumber,” he said.

The dispute heated up when a 5-year-old softwood trade agreement expired March 31. A new agreement has not been reached, despite talks.

This month, President Bush appointed former Montana Gov. Marc Racicot to be the U.S. envoy to try to jump-start the discussions. Both sides met in Montreal last week and more talks are planned in November.

Canada also has taken the issue up with the World Trade Organization.

The trade commission, which is part of the federal government, found in May a “reasonable indication” that the U.S. industry is facing harm from Canadian imports. Three months later, Commerce Secretary Donald Evans announced the first tariff, which he made retroactive to May.

The Canadian lumber industry says it’s been hurt significantly by the first tariff, which has forced mills to close and left thousands out of work.

The United States imported 36 percent of its softwood lumber last year, nearly all of it from Canada. In 1999, there were 807 U.S. softwood lumber producers, concentrated in the West.