Softwood Lumber Trade Case and What It Means for Your Business

November 1, 2017

The November 8, 2017 announcement the U.S. Department of Commerce made on the final determinations in their anti-dumping (AD) and countervailing duty (CVD) investigations into imports of certain softwood lumber products from Canada had some unexpected twists to it. The final tariffs of 14.25%for countervailing duties and 6.58% for anti-dumping means an average of 20.83% against most Canadian shipments into the US, which is lower than what the previous combined rate of 26.75%, had been set at.

You can read the announcement here.

As members of the association and readers of this column know, we have been in this fight for a year now. Wood pallets had never before been included in the previous Canadian Softwood Lumber scope of investigations into anti-dumping or countervailing and we had no reason to expect that this would happen in this round of negotiations. Looking back to a year ago when we first learned that the wood pallet and container industry have been targeted in these investigations your association’s efforts made a notable achievement in getting assembled pallets removed from the list of dutiable softwood exports. The whole process of getting the Government of Canada Softwood Lumber Division familiarized with our industry, and providing the submissions used to argue the case in front of the US Department of Commerce took considerable effort to provide the data gathering, analysis and strategy work by members of the CWPCA Trade Advisory Committee.

The remaining issue that we were unable to get resolved is that unassembled pallets are still targeted by the investigation and as a result of this final decision those unassembled pallets manufactured of softwood lumber will be subject to a combined duty of 20.83%. 

 In the final analysis, we made a very strong case in our submissions through the Government of Canada in the scope of investigations that an unassembled pallet is a finished product, the same as an assembled pallet, but are shipped in this manner in order to lower the shipping costs. Secondly, we made ample arguments in our submissions that unassembled pallets can not be used as lumber in residential home construction, as was being put forward by the US lumber coalition. We worked very hard to get these points across by several means but in the end we were unable to get this area changed as well.

Through our advocacy efforts we protected key aspects of our cross border trade in wood packaging and made our voices heard.

How this duty will affect the shipment of unassembled pallets into the US is being evaluated. Many manufacturers of unassembled pallets have been working hard to continue shipping into the US during this interim period and are resolved to find a way to continue to service their customers even with the duties applied. Certainly it makes doing business in the US that much more difficult.

If we can take solace in any one issue it is that our industry wasn’t singled out for this treatment. The remanufacturing industry has also been targeted, as have exporters of softwood products such as fencing, bed frames, truss components, door and window frames.

The other issue that people aren’t talking about is that the final anti-dumping and countervailing duties will not take effect until the date of publication of the U.S. Department of Commerce’s final duty Orders in the U.S. Federal Register, which is expected late in December 2017 or January 2018.  

Countervailing duty will not take effect until after the U.S. International Trade Commission makes its final ruling into the issue of whether U.S. Lumber producers have been injured by softwood lumber exports from Canada. Therefore, for the next month at least, shipments of Canadian softwood products are expected to be strong and heavy until the date of publication. The consequence for our wood packaging industry is that domestic supplies of industrial grade softwood material are going to be very tight and prices aren’t expected to come down soon.

For members who are following the Softwood Lumber trade case negotiations we have to wonder: what’s next? There were high hopes that a softwood deal between Canada and the U.S. would be reached this summer that included a Canadian quota system that limited Canada’s share of the U.S. market but that failed to materialize. Canada has appealed the CVD and AD duty ruling to the NAFTA Trade Dispute mechanism, referred to as Chapter 19. However with NAFTA under negotiation as well and the dispute resolution mechanisms targeted for change it is unlikely this route is going to be successful anytime soon.

My sense though is that the industry needs to make their customers and supply chain partners aware that these periods of tight supply and high lumber prices are going to be reflected in the cost of product and they need to be prepared for it.

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