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U.S. Investigating Canadian Timber Business
U.S. officials investigating Canadian timber industry after American companies file lawsuit, seek duties on imports of Canadian softwood lumber.

By Staff Writer
Date Posted: 6/1/2001

The U.S. Commerce Department and the U.S. International Trade Commission will spend the next several months investigating the Canadian timber business.

The Commerce Department investigation into whether Canada undercuts the U.S. softwood lumber industry by unfair government subsidies was launched after action by U.S. lumber producers.

Meanwhile, the timber industry in British Columbia, fearing that even small duties would be harmful, favored negotiations to settle the dispute while producers in Eastern Canada were willing to brace for a long legal battle. British Columbia accounts for roughly half of Canadian lumber exports to the U.S.

Bob Plecas, president of the British Columbia Lumber Trade Council, called the duty process "biased and not fair." Even a duty of only 20% would result in layoffs of thousands of mill workers, he contended. "If we’ve got to go through it we will, but there’s got to be a better way."

By contrast, Richard Belanger, president of Daaquam Lumber in Quebec, said producers in the East were "ready to fight." Belanger said, "There is no subsidy in Quebec."

When the U.S.–Canadian Softwood Lumber Agreement expired, the Coalition for Fair Lumber Imports filed a petition seeking stiff duties on Canadian imports and an anti-dumping lawsuit that claims that Canadian producers sell wood below cost. The Coalition for Fair Lumber Imports is an alliance representing lumber manufacturers, loggers, and timber growers.

Initially, a team of economists and lawyers will conduct a fact-finding mission in Canada. They will seek figures on production costs and other information from Canadian timber companies and government officials.

The U.S. International Trade Commission must make a preliminary decision as to whether the U.S. lumber industry suffered harm or is threatened with injury. If the review finds U.S. producers have been harmed, the Commerce Department would determine the extent of subsidies and begin collecting duties after the preliminary findings, which are expected this summer. Duties would be retroactive to the start of the investigation, which was launched in April.

Many U.S. sawmills have shut down because abundant lumber supplies have sent prices to their lowest levels since the early 1990s, although prices have started to recover.

U.S. lumber yards let their inventories run low as the March 31 expiration date for the lumber treaty neared, expecting that Canadian producers would flood the U.S. with exports. Instead, Canadian mills restricted shipments.

The situation has impacted the industrial softwood market, which is a source of raw material for the pallet industry. Since Canadian wholesalers and sawmills are in the dark about how much duty may be placed on material, shipments of economy material have dwindled to a standstill.

Canadian producers apparently have given up on a proposal for the countries to appoint special envoys to hash out a resolution to the dispute. Trade Minister Pierre Pettigrew said he was losing enthusiasm for the appointment of special envoys, and the U.S. has shown little support for the proposal.

Under the 1996 lumber pact, Canada’s four major lumber-producing provinces were allowed to export 14.7 billion board feet duty-free annually before sliding fees were imposed.

In the request filed by the Coalition for Fair Lumber Imports, U.S. lumber companies are seeking import duties of up to 78% on softwood lumber entering the country from Canada. The request was filed immediately after the expiration of the lumber pact.

"All we ask for is fairness," said W.J. "Rusty" Wood, chairman of the coalition. Canada circumvented the five-year-old lumber treaty "from day one," he said.

Canadians initially reacted with defiance and fear. Some condemned the move by the U.S. lumber producers but also urged quick negotiations in order to avoid harming the Canadian forest products industry in a drawn-out trade battle.

Duncan Davies, head of International Forest Products, another major British Columbia producer, said duties of nearly 80% "would result in very significant shutdowns, if not a full shutdown of our industry," in British Columbia and elsewhere.

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