WTO board finds U.S. lumber duties illegal

GENEVA – The World Trade Organization sided with Canada on Monday in a dispute with the United States over lumber duties.

A WTO dispute panel ruled that some U.S. duties on Canadian lumber are illegal under international rules. Washington has the right to appeal.

Canadian Trade Minister Jim Peterson called the decision a “major victory for Canada.”

“The WTO panel’s message is clear – the countervailing and anti-dumping duties imposed by the United States on Canadian softwood lumber exports are baseless,” he said in a statement.

Acting on a complaint from Canada, the panel found that the U.S. International Trade Commission had failed to be “objective and unbiased” in reports on alleged “dumping” of Canadian lumber at below market price.

The U.S. commission ruled in May 2002 that imports of lumber from Canada were subsidized and threatened to damage the domestic lumber industry by depressing prices. It also said there was an “imminent” threat of a big increase in the level of imports.

Based on that finding, the Department of Commerce imposed extra duties on Canadian lumber imports.

Canada took its case to the WTO in May 2003. It claimed that the USITC’s findings had failed to take into account all the causes of reduced prices and that the decision was not based on an “objective examination” of the evidence, as required under WTO rules.

Monday’s ruling is the latest in a series of disputes over Canadian lumber being heard by the WTO and the North American Free Trade Agreement.

While most U.S. timber is harvested from private land at market prices, in Canada the government owns 90 percent of timberlands and charges fees – called stumpage – for logging. The fee is based on the cost of maintaining and restoring the forest.

U.S. timber companies contend that Canada’s stumpage fees are artificially low and amount to subsidies that allow Canadian mills to sell wood below market value.

In 2002, the United States imported nearly $6 billion of softwood lumber from Canada – about a third of the American market. Softwood lumber, from pine, spruce and other trees, is a key product in home construction.

The battle between the United States and Canada over lumber has been building since the expiration of their Softwood Lumber Agreement in March 2001.

Under that agreement, Canada had been allowed to ship 14.7 billion board feet of duty-free lumber to the United States each year, with tariffs set for shipments beyond that level. In return, the United States agreed not to launch any trade action, including the imposition of protective duties.

When the agreement ran out, the United States, under pressure from domestic producers, moved quickly to impose extra duties on Canadian imports.

So far, WTO rulings have been mixed, with some favoring the Canadian position and others siding with the United States.