Canada Criticizes US Move to Nearly Double Softwood Lumber Tariff

Stacks of lumber are seen at Teal-Jones Group sawmill in Surrey, B.C., on May 30, 2021. (The Canadian Press/Darryl Dyck)

Canada is criticizing the U.S. Department of Commerce for nearly doubling the duties it imposes on softwood lumber, saying the decision is both “unfair” and “unwarranted.”

International trade minister Mary Ng said the U.S. has increased the duties on Canadian softwood lumber from 8.05 percent to 14.54 percent—a nearly 6.5 percent increase.

“Baseless and unfair U.S. duties on softwood lumber unjustifiably harm consumers and producers on both sides of the border,” Ng said in an Aug. 13 statement.

“We will always fight for the best interest of Canadians and continue to use all available avenues to vigorously defend the workers, businesses, and communities who rely on softwood lumber for their livelihoods.”

British Columbia Minister of Forests Bruce Ralston said he is “disappointed” by the move.

“Duties on Canada’s softwood lumber exports cannot be justified,” Ralston said in a statement. “Alongside the Government of Canada and our partners in the forestry sector, we will continue to fight unfair duties through every avenue.”

Ng and Ralston both said legal action under the North American Free Trade Agreement and the Canada-United States-Mexico Agreement could be a next step if the long-standing dispute cannot be resolved.

If litigation were to move ahead, the case would be heard by the U.S. Court of International Trade and at the World Trade Organization, Ng said.

The U.S. Department of Commerce made public in February its plan to hike softwood lumber duties, although it indicated at the time the tariff would be set to 13.86 percent. The tariff announced this week is 0.68 percent higher than expected.

The Department of Commerce uses the U.S. Tariff Act to determine if goods are being sold at less than fair value or if they’re benefiting from subsidies provided by foreign governments.

Canadian provinces that produce lumber establish stumpage fees for timber harvested from Crown land. This system has largely been viewed as unfair by U.S. producers, who are required to pay market rates.

U.S. ambassador to Canada David Cohen said last summer the U.S. would be willing to negotiate the tariff amount, but only if Canada gets rid of stumpage fees.

“The United States is open to resolving our differences with Canada over softwood lumber to ensure a level playing field for U.S. industry,” Cohen said.

“U.S. trade officials have communicated to Canada our commitment to reaching an agreement if Canada addresses underlying policy issues related to subsidization and fair competition.”

The U.S. Lumber Coalition, in an Aug. 13 statement, lauded the U.S. tariff decision, saying it “substantiates that Canada continues to subsidize and dump its softwood lumber products in the United States.”

It’s a practice that distorts the U.S. softwood lumber market and negatively impacts the country’s sawmills and communities, the group said.

“The United States does not need the unfairly traded Canadian lumber imports to supply current levels of home construction,” U.S. Lumber Coalition chairman Andrew Miller said in the statement. “What American mills, workers, and timberland holders need is the continued strong enforcement of the U.S. trade laws [to] help facilitate a level playing field.”

B.C. Lumber Trade Council president Kurt Niquidet disagreed with the U.S. Lumber Coalition’s assessment, saying the increased tariffs will have a negative impact on both sides of the border. He said in a statement the tariff would drive up lumber and building material costs for U.S. consumers while also making it harder for Canadian lumber producers who have already paid more than CA$9 billion in duties.

Digital Services Tax

The two countries have also recently been at odds over Canada’s new Digital Services Tax, a 3 percent levy aimed at foreign companies that receive revenue from Canadian subscribers and contributors.

The tax, which came into effect on July 4, has received heavy pushback from the U.S. The office of the country’s Trade Representative Katherine Tai said earlier this year they planned to fight its implementation.

The Computer and Communications Industry Association, which represents many big tech companies including Amazon, Apple and Uber, have called on U.S. President Joe Biden’s administration to take formal steps against the tax under the U.S.-Mexico-Canada Free Trade Agreement.

Other countries have implemented similar tools to tax the profits of large multinational companies in the digital sector. Critics of the Canadian tax wanted Ottawa to put it on hold to give the Organisation for Economic Co-operation and Development (OECD) time to implement a global framework.

That framework has seen significant delays, however, particularly from the U.S. where moves to sign on to the agreement could remain stalled by the political realm of a divided Congress.

The Liberals maintained they have been clear with their southern neighbour that Canada would proceed with the tax if there was no movement on the global framework.

The Canadian Press contributed to this report.