The U.S. Department of Commerce announced last week that preliminary countervailing duties (CVD) of nearly 20 per cent will be applied to the majority of Canadian softwood lumber shipments entering the U.S.
The U.S. Department of Commerce argues that the countervailing duty is required to offset what in its view is unfair subsidies that Canadian and provincial governments allegedly provide to lumber companies.
Steve Zika, Chief Executive Officer of Hampton Affiliates - company that owns Babine and Decker Lake Forest Products, said he wasn’t surprised by the announcement.
“The preliminary CVD rates announced were in the range that many people predicted,” he said. “The unfortunate part was the critical circumstances announcement that will negatively affect all the small producers and family owned companies in Canada.”
The critical circumstances announcement means that companies may be assessed countervailing duties on their shipments made since about Jan. 31, 2016 - 90 days prior to the notice being published in the U.S. federal register, expected around May 1.
“Deposits for these retroactive duties will be required to be paid to the U.S. in May and will be a substantial amount for Babine and Decker Lake,” said Zika.
However, Zika said no layoffs are expected to take place in the Burns Lake area mills.
When asked if Hampton Affiliates will appeal this decision, Zika said there’s not much that individual companies can do.
“Babine Forest Products is still assessing its options, but most of the negotiations are government to government, so a single small company has very little it can do to change the outcome,” he said.
“It is disappointing that the U.S. continues to push for Canadian lumber tariffs in light of strong lumber markets for all in North America,” he continued. “With improving housing forecasts in the U.S., there is a significant need for Canadian lumber to meet demand.”
The Canadian forest products industry is expected to take yet another hit in June, when the U.S. Department of Commerce releases its preliminary determination on anti-dumping duties.
“No one really knows what the anti-dumping duty rates will be when announced at the end of June,” said Zika. “But once again critical circumstances will apply to all the same smaller companies.”
The Department of Commerce argues that an anti-dumping duty may be required to offset what in its view are unfair selling practices by Canadian lumber companies that are allegedly selling lumber into the U.S. at a price below their costs or sales value in Canada.
Meanwhile Zika says the Burns Lake area mills will continue to focus on “safety and performance.”
“We sell lumber to many countries around the world and will continue to diversify our product mix when it makes economic sense,” said Zika. “The percentage of lumber we sell to the U.S. will thus vary as markets react and evolve to these artificial duties.”
“We have confidence that the British Columbia and Canadian governments will work through these unfortunate political issues and we will eventually return to a fair trading environment with our most important trade partner,” he added.