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U.S.-Canada Trade Dispute

Last update:  December 1, 2017

Click here to go to view current Special Reports and the latest developments posted on Daily WoodWire > U.S.-Canada Lumber Trade Issue on this website.

Click here for the Abbreviated U.S. Canada Dispute Timeline (in PDF file format).

Click here for the timeline from 1982 to present and recent updates (below this article).

The U.S. Department of Commerce released its preliminary determination in the countervailing duty case against Canadian lumber imports April 25. This 12-page report details its findings. (in PDF file format).

Answers to frequently asked questions in the trade dispute

(The following is an article published in the May 5, 2017 issue of Random Lengths.)

 

Questions on duties answered; preliminary CVD will expire
The preliminary countervailing duty on Canadian softwood lumber shipments to the U.S. has only been in place for a week, and questions about its implementation are multiplying. Random Lengths has consulted with sources on both sides of the border to provide as many answers as possible. Here are the most common queries:

Q. When are Canadian shippers required to begin paying cash deposits on softwood lumber shipments to the U.S.? A: As of April 28, all companies must pay cash deposits to cover the preliminary countervailing duty. According to the ruling from the U.S. Department of Commerce, Canfor, West Fraser, Tolko, and Resolute are not required to pay retroactive duties. Cash deposits for those companies began on shipments that crossed the border on April 28 or later.
All other Canadian shippers must pay the preliminary CVD rate of 19.88% on shipments beginning January 28, or 90 days prior to the CVD order publishing in the Federal Register. J.D. Irving was assessed a retroactive duty of 3.02%.

Q: How long do preliminary duties apply? A: Under World Trade Organization regulations, preliminary CVD cash deposits are collected for four months after the ruling is published, and preliminary AD cash deposits are collected for six months. So in this case, preliminary CVD deposits would be collected until late August. The final CVD determination is currently scheduled for September 6, but could be delayed until early November. If the case is extended, that would delay the final injury ruling from the U.S. International Trade Commission until late December. Under that scenario, there would be a gap from late August until the end of the year when no CVD cash deposits would be collected.

However, if an affirmative anti-dumping duty determination is ruled on June 23, cash deposits on that duty will be collected for a maximum of six months following its publication in the Federal Register. Therefore, if a preliminary AD duty goes in effect in early July, it could be collected until early January 2018.

Q: Who collects the duties on Canadian lumber shipments to the U.S.? A: The U.S. government collects duties, and once the entire process of the investigations and appeals are completed, duties are disbursed into the U.S. Treasury.

Q: Who is required to pay duties that are covered under the CVD, AD investigations? A: Officially, the “importer of record” is the entity required to pay the duty. Despite the connotation of the name, the “importer of record” is usually the Canadian shipper. If both parties in a transaction agree, the buyer in the U.S. could be designated the “importer of record,” but that is rarely the case.

Q: Are all Canadian provinces covered in the CVD investigation? A: Currently, yes. Even though the Maritimes were not included in previous CVD cases or the recently-expired Softwood Lumber Agreement, Commerce did not exclude any provinces in its preliminary CVD determination. Whether provinces such as Nova Scotia, Prince Edward Island, Newfoundland, and Labrador will be excluded is expected to be addressed in the final CVD determination. Commerce has aligned the CVD and AD cases, and a final determination in both is currently scheduled for September 6. However, that date could be extended to early November.

Q: If final CVD and/or AD duties are imposed on Canadian lumber shipments to the U.S., what appeals or challenges can be filed? A: There are two kinds of appeals. One can be filed by Canada or by any private party that participated in the proceeding, claiming that Commerce, in its final AD/CVD determinations, or the International Trade Commission, which rules on injury, acted inconsistently with U.S. law. Normally these cases are heard in the U.S. Court of International Trade, which is a specialized federal district court in New York. Further appeals could be made to the Court of Appeals for the Federal Circuit in Washington, D.C., or rarely to the Supreme Court.

Because the case involves Canada, NAFTA provides that — at the request of any party — all of these cases are decided by special binational panels formed under NAFTA with Canadian and U.S. members.
Another possible type of challenge can be made only by the Government of Canada. It could initiate a dispute in the World Trade Organization in Geneva, Switzerland, alleging that the U.S. breached some obligation in the WTO agreements governing AD and CVD cases.

Q: Is negotiating a new Softwood Lumber Agreement still possible? A: Yes. Whether the duty investigations are still ongoing or final duties have been assessed, the two countries can still negotiate a settlement if both see it is in their best interest. The last SLA was signed in 2006, five years after CVD/AD duties were assessed on Canadian lumber shipments to the U.S.

Q: What specific lumber items are included in the duty investigations? A: For a full list of items included in the scope of the investigations, check with the CVD preliminary determination published by Commerce. A link is posted on our website at www.randomlengths.com. Click on In Depth, then U.S.-Canada trade dispute. View the 12-page report in PDF file format. A full list of items covered is included in Appendix I. Also, this article is available on our website at the above address. Click on In Depth, then U.S.-Canada trade dispute.

1982 to present

Last update:  December 1, 2017

Information about the current U.S.-Canada trade deal

Complete U.S.-Canada Trade Dispute Timeline, from 1982 to present  

A document showing the U.S.-Canada Trade Dispute Timeline, from 1982 to present (in PDF file format) provides background information year by year on the dispute, covers the process that created the current Trade Agreement, and the results of the agreement since.

Updates for the current year are also added below, on this page.

Additional Information on the U.S.-Canada Lumber Trade Issue is available on the Random Lengths website at: Daily WoodWire — U.S.-Canada Lumber Trade Issue: The latest developments in the dispute over Canadian lumber exports to the U.S.

Archived information about the previous Softwood Lumber Agreement, that expired in October 2015, is at the bottom of this page.


2016

MAY 2016 — Negotiators from the U.S. and Canada met in Ottawa May 26, and it appears that talks toward reaching a new accord between the countries are still in the preliminary stages. The leaders of both countries were hoping to see progress on the softwood lumber dispute before they met in Ottawa June 29 for the so-called Three Amigos Summit that includes Mexico’s president.  Spokespersons from each country issued statements that made it clear that progress has been difficult to this point.

JULY 2016 — In a joint statement issued by President Obama and Prime Minister Trudeau following a meeting in Ottawa in late June, softwood lumber talks between the countries are termed “challenging but productive.” Although they agree that significant differences remain regarding parameters of a new SLA, negotiators are not at an impasse. “Our dialogue will continue and, building on the progress achieved to date, our ministers will maintain an intensive pace of engagement with a view to achieving a mutually-acceptable agreement this fall.”

AUGUST 2016 — With two months to go before the one-year standstill period expires in October, most lumber traders in the U.S. and Canada are bracing for the two countries to head back to court in the longstanding dispute. The last time the U.S. filed a case seeking countervailing and anti-dumping duties against Canadian lumber imports was in April 2001. Canada’s chief negotiator, speaking before a parliamentary committee, acknowledged that reaching a deal by mid-October would be a challenge. “Although discussions have been constructive and have led to a better understanding of each party’s positions and concerns, Canada and the U.S. — I have to be honest — we do remain far apart on several key issues,” said Martin Moen. “Nonetheless, Canadian stakeholders continue to tell us very clearly that no deal is better than a bad deal.”

OCTOBER 2016 — The one-year standstill period ends without an immediate filing of countervailing and/or anti-dumping duty petitions from the U.S. Lumber Coalition. A Coalition spokesman says the strength of the case can be affected by the time periods to be examined in the investigation, which can affect when a case is filed. Despite the expiration of the standstill period, U.S. Trade Representative Michael Froman and Canada’s Minister of International Trade Chrystia Freeland issue a joint statement, vowing to continue negotiations. Traders also note a lingering discrepancy between Canadian and U.S. statistical reports measuring Canadian softwood lumber exports to the U.S.

NOVEMBER 2016 — The move traders had been anticipating for weeks happens the day after the U.S. Thanksgiving holiday when the U.S. Lumber Coalition files countervailing and anti-dumping duty petitions against Canadian lumber imports. Unlike previous litigation in the U.S.-Canada trade dispute, the Coalition does not seek specific CVD or AD duty rates. The Coalition argues that critical circumstances exist, which could make the duties retroactive.

2017

JANUARY 2017 — The U.S. International Trade Commission issues its preliminary ruling that there is a reasonable indication that the U.S. industry is materially injured by softwood lumber imports from Canada. This allows the trade cases to continue. Preliminary rulings from the Department of Commerce in the CVD and AD cases are expected in the spring.

FEBRUARY 2017 — Concern over the possibility of duties on Canadian lumber exports to the U.S. put prices of Canadian S-P-F and Western Red Cedar on sharp upward trajectories. Some Canadian mills speculate that duties could be 30% or higher and potentially retroactive to early February, and they sharply raise their quotes. Meanwhile, negotiations are at a standstill as new U.S. President Trump has appointed Wilbur Ross as new Secretary of Commerce and Robert Lighthizer as U.S. Trade Representative, but they have yet to be confirmed by the U.S. Senate. Four companies are selected to be investigated in the duty cases. They are Canfor, West Fraser, Tolko, and Resolute. If duties are affirmed, those companies will be assessed individual duties and all others would be assessed a weighted average of those four companies’ rates.

MARCH 2017 — The preliminary determination in the CVD case is just a month away, but no formal negotiations between the two countries have materialized. One key sticking point in the lack of negotiations is the fact that U.S. Trade Representative Robert Lighthizer has yet to be confirmed by the U.S. Senate. B.C.’s envoy in the dispute, former Canfor CEO David Emerson, believes formal talks will begin before the summer and that a deal could be done in a matter of months.

APRIL 2017 — The U.S. Department of Commerce issues its preliminary determination in the countervailing duty case, with duties averaging 19.88% levied against Canadian lumber exports to the U.S. The four mandatory respondents in the case are levied the following preliminary CVD rates: West Fraser, 24.12%; Canfor, 20.26%; Tolko, 19.50%; and Resolute, 12.82%. J.D. Irving requested to be a voluntary respondent in the investigation, and its individual rate was a much smaller 3.02%. All other Canadian mills were assessed the weighted average of the five investigated, which came to 19.88%. The preliminary CVD went into effect April 28. West Fraser, Canfor, Tolko, and Resolute are not assessed duties retroactive to January 28. However, J.D. Irving and all other Canadian shippers are required to pay retroactive duties. The preliminary anti-dumping duty determination is scheduled for June 23.

MAY 2017 — Following months of delays, Robert Lighthizer is confirmed as new U.S. Trade Representative. While the news may streamline negotiations with Canada, both administrations make it clear that broader NAFTA discussions are at the top of their agendas. President Trump files a 90-day notice with Congress on May 18, stating a desire to renegotiate NAFTA with Canada and Mexico. With those talks set to begin in mid-August, time to work toward a Softwood Lumber Agreement is shrinking.

JUNE 2017 — The U.S. Department of Commerce announces its preliminary determination in the anti-dumping duty case June 26. The average AD rate assessed is 6.87%, which combined with a preliminary CVD rate of 19.88% means most Canadian shippers will pay total duties of 26.75% on exports to the U.S. Individual AD rates are: Canfor, 7.72%; Resolute, 4.59%; Tolko, 7.53%; and West Fraser, 6.76%. Commerce also announces that Newfoundland and Labrador, Nova Scotia, and Prince Edward Island are excluded from the investigations, and will not be required to pay duties.

JULY 2017 — Rumors circulate that Commerce Secretary Wilbur Ross and Canadian Minister of Foreign Affairs Chrystia Freeland reached a handshake agreement in the softwood lumber dispute. Sources say the deal would involve a quota on Canadian shipments to the U.S. that would limit Canada’s market share in the U.S.; it would reportedly begin with a 31% market share and taper down to 28%. However, no deal is finalized, and the duty case continues its course. Meanwhile, parties on both sides of the border wait to see if Commerce grants a 60-day extension to the deadline in the CVD/AD cases. If Commerce issues its final determination on September 6 as scheduled, there would be a 60-day gap when the preliminary CVD would not be collected. If the 60-day extension is granted, the CVD gap would stretch to 120 days.

AUGUST 2017 — Hopes that a new U.S.-Canada Softwood Lumber Agreement can be reached before NAFTA talks begin August 16 appear slim. Canada’s ambassador to the U.S. says the two sides are close to a deal that would give Canada roughly a 30% share in the U.S. lumber market. The U.S. Lumber Coalition does not see a current framework for an acceptable deal. NAFTA talks begin without a new SLA. In late August, Commerce announces that the final determination in the CVD/AD investigations has been postponed until no later than November 13, thus extending the gap when the preliminary CVD will not be collected to approximately four months. The preliminary AD duty is still being collected.

NOVEMBER 2017 — Days ahead of its deadline, Commerce announces its final determinations in the CVD/AD investigations November 2. Most Canadian shippers will pay combined duties of 20.83% on lumber shipments to the U.S., which is down from the preliminary rate of 26.75%. Final duties will not be collected unless or until the U.S. International Trade Commission issues an affirmative final injury ruling, which is scheduled for December 18. Combined CVD/AD rates for the investigated companies are: Canfor 22.13%; Resolute 17.90%; Tolko 22.07%; West Fraser 23.76%; and J.D. Irving 9.92%. The final “all-other” CVD rate is 14.25%, and the final AD “all-other” rate is 6.58%. Commerce also announces that “critical circumstances” exist in the AD case with regards to Resolute, Tolko, West Fraser, and “all-others,” but did not exist for Canfor. AD duties will be collected retroactive to late March for all but Canfor. However, in its final ruling, Commerce said CVD duties will not be collected retroactively. If the ITC’s final injury ruling is affirmative, Commerce would issue CVD and AD orders around December 26. If the ITC’s final injury ruling is negative, the investigations and duties would be terminated.


Previous 2006 to 2015

This is archived information about the previous Softwood Lumber Agreement, that ended its nine-year run in October 2015

Answers to frequent questions about the tentative agreement  - This special report in PDF format was transmitted to all Random Lengths fax and EMS subscribers at 4:00 p.m. Pacific Time, May 12, 2006. Other information helpful to understanding the new U.S.-Canada lumber deal is below:

Explanation of the Random Lengths Framing Lumber Composite Price (pdf format) , designed to answer common questions about how the Random Lengths Framing Lumber Composite is calculated.

Items used in the composite, and the monthly averages for the Random Lengths Framing Lumber Composite from 1995 to present, can be found by going to www.rlpi.com > In Depth > Useful Data > Monthly Composite Prices


Canadian Tax Levels

Prevailing Monthly
Price*
Option A1 - Export Charge (Expressed as a % of Export Price) Option B2 - Export Charge
(Expressed as a % of Export Price) with Export Allocation
Over
$US355
No Export Charge
No Export Charge and no volume restraint
$US336-355
5%
2.5% Export Charge + maximum volume that can be exported to the United States cannot exceed the Region's share of 34% of Expected U.S. Consumption for the month
$US316-335
10%
3% Export Charge + maximum volume that can be exported to the United States cannot exceed the Region's share of 32% of Expected U.S. Consumption for the month
$US315 or under
15%
5% Export Charge + maximum volume that can be exported to the United States cannot exceed the Region's share of 30% of Expected U.S. Consumption for the month
*Four-week average of Random Lengths Framing Lumber Composite Price.
1 - Applies to B.C. and Alberta.
2 - Applies to Quebec, Ontario, Manitoba, and Saskatchewan.

2015 dates used to determine the monthly trigger price

To determine the monthly tax rate under the SLA, the most recent four-week average of the FLCP that is available 21 days before the beginning of the month is used. Here are the dates to determine the monthly trigger price through the expiration in October 2015:

Months From To
January 2015
November 14, 2014 December 5, 2014
February 2015 December 19, 2014 January 9, 2015
March 2015 January 16, 2015 February 6, 2015
April 2015 February 13, 2015 March 6, 2015
May 2015 March 20, 2015 April 10, 2015
June 2015 April 17, 2015 May 8, 2015
July 2015 May 15, 2015 June 5, 2015
August 2015 June 19, 2015 July 10, 2015
September 2015 July 17, 2015 August 7, 2015
October 2015 August 14, 2015 September 4, 2015
November 2015    
December 2015    
January 2016    

 

The dates are projections, and could be challenged by either government.


 Effective SLA Export Tax on Western Canadian Shipments to the U.S.

(Percentages)

  Jan Feb Mar Apr May Jun Jul Aug Sep Oct  Nov  Dec
2006                   15 15 15
2007 15 15 15 15 15 15 15 15 15 15 15 15
2008 15 15 15 15 15 15 15 15 15 15 15 15
2009 15 15 15 15 15 15 15 15 15 15 15 15
2010 15 15 15 15 10 0 10 15 15 15 15 15
2011 15 15 15 15 15 15 15 15 15 15 15 15
2012 15 15 15 15 15 10 5 10 10 5 10 10
2013 0 0 0
0
0
0  0
10
5
5
0
0 
2014 0  0 0 0 0  0  0 0  0  0  0  0
2015 0 0  0  5   5  10 15   5   5  15    
Reduced Tax Months: 0% 5% 10%

 


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