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U.S.-Canada Trade Dispute

Last update:  April 18, 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 Sept. 23, 2016 issue of Random Lengths.)

 

When the Softwood Lumber Agreement ended its nine-year run in October 2015, a one-year standstill period when neither the U.S. nor Canada could file a trade case was included in the negotiations.

That period will expire in mid-October, which has generated plenty of questions from traders regarding what the next steps will be in the longstanding trade dispute. Below is the list of the most common questions we’ve heard, and our best attempt to provide the most up-to-date answers.

Q. If a settlement isn’t negotiated in the next few weeks, what is the earliest that countervailing and/or anti-dumping duty cases could be filed?  A. October 13.

Q. If a duty case is filed, can the two countries continue negotiations toward a settlement?  A. Yes. In fact, when the Softwood Lumber Agreement was signed in October 2006, the U.S. was collecting CVD and AD duties from Canada at the time.

Q. How long does it usually take from when a CVD and/or AD case is filed to when there is a preliminary ruling?  A. It depends. An investigation is initiated 20 days after a petition is filed, although this can be extended 20 additional days in rare circumstances. Then, the U.S. Department of Commerce has between 65 and 130 days to issue a preliminary CVD determination, and 140 to 190 days to issue a preliminary AD determination.

Q. Some traders have speculated that it could be next spring before any cash deposits would be required from Canadian shippers. Is this accurate?  A. Cash deposits begin to apply when Commerce publishes its preliminary CVD and AD determinations. Because of the complexity of this case, Commerce could very well take the full 130 days to issue a preliminary CVD determination.

If a case is filed on October 13 and you allow 20 days for initiation of the investigation, 130 days for a preliminary CVD determination, and another week for it to get published in the Federal Register, that would take the timeline to late March 2017 for the period when cash deposits could begin. There are a lot of variables to consider, which could alter that timeline in either direction.

Q. Could duties be applied retroactively?  A. Yes. In ordinary cases, cash deposits are required beginning on the date the preliminary CVD or AD determination is published in the Federal Register.

In some instances — the technical term is “critical circumstances” — the duty requirements can be retroactive for up to 90 days. If the preliminary CVD determination were published in late March as was outlined in the previous paragraph, that could make CVD duties retroactive to late December. Again, this is an estimate of how a duty case could transpire, but several variables could alter that timeline.

There are several criteria to meet “critical circumstances.” Among them are if imports of softwood lumber from Canada to the U.S. have recently increased significantly, and if the International Trade Commission finds that the remedial effect of the CVD/AD orders would be undermined by not making the duties retroactive.

Q. How is the amount of the duties determined, and is there a maximum rate?  A. CVD duties are equal to the subsidy found to exist by Commerce. For the main alleged subsidy — the provision of standing timber on government land to lumber producers — the amount has in the past been calculated as the total amount by which Canadian timber used in sawmills over a 12-month period was priced below market value, divided by the total value of the production of sawmills (lumber and byproducts) in the same period.

AD duties for an individual company are equal to the amount by which lumber was sold in the U.S. by that company at less than fair value during a 12-month period, divided by that company’s total U.S. sales.

There is no maximum duty rate.

Q. Who collects duties?  A. The U.S. government collects countervailing and anti-dumping duties. In the case of the SLA, taxes imposed on Canadian lumber shipments to the U.S. were collected by the Canadian government.

Q. Are trade officials from Canada and the U.S. still working toward a negotiated settlement?  A. Yes, although it currently appears unlikely that a deal will be reached before the end of the standstill period in mid-October. Here are the latest statements issued on the topic by each government:

U.S. Trade Representative Michael Froman: “U.S. and Canadian negotiators are working intensively to try to reach an agreement consistent with the joint statement issued by President Obama and Prime Minister Trudeau at the North American Leaders’ Summit on June 29. The leaders agreed that a new agreement would be designed to maintain Canadian imports at or below an agreed U.S. market share. While these are difficult negotiations and significant gaps remain, the United States is committed to continued engagement with Canada to see if a new agreement can be achieved.”

Canada’s International Trade Minister Chrystia Freeland: “This is a notoriously, historically tough and complicated issue to resolve. We know it may not be possible, but we are working hard at it. We are looking for a good deal, but we are not looking for any deal.”

Q. If 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, which would be to 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.

1982 to present

Last update:  April 18, 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.


2015

FEBRUARY 2015 — The expiration of the Softwood Lumber Agreement is still eight months away, but chatter has already begun about whether a new agreement can be reached, and if so, when. Most Canadians are in favor of re-signing the current agreement with few, if any, alterations. The U.S. Lumber Coalition, which represents much of the U.S. industry, says rubber-stamping the current SLA is a nonstarter. If the SLA expires in October without a new agreement in place, no trade cases can be filed for at least a year.

APRIL 2015 — By the slimmest possible margin, Canadians will retain the same tax levels in May as they are currently paying in April. Shippers in B.C. and Alberta will pay a 5% tax on lumber shipments to the U.S., while those in Quebec, Ontario, Manitoba, and Saskatchewan will pay 2.5% plus face quota restrictions.

MAY 2015 — For the first time since August 2013, the tax under the Softwood Lumber Agreement hit 10% for Western Canadians. Since the inception of the SLA, the monthly tax level has been at 10% or 15% for 73 months out of a total 104. However, Canadian exporters to the U.S. have operated under a zero tax in 24 of the 29 months since January 2013.

JUNE 2015 — With the SLA set to expire in October after nine years, it doesn’t appear serious negotiations between Canada and the U.S. are underway to sign a replacement agreement. A section of the SLA stipulates that after it expires on October 12, no lumber trade cases can be filed for at least one year. Many Canadians have said they would be amenable to renewing the SLA in its current form. The U.S. Lumber Coalition, which represents much of the U.S. industry, is against rubber-stamping the SLA. In other SLA news, producers and secondary suppliers in Saskatchewan report a “race to the border” amid a squeeze in quota. Suppliers say they expect to hit their cap on quota in mid-June, at which time shipping to the U.S. will come to a halt.

JULY 2015 — Traders widely expect Western Canadian producers to resume shipping to the U.S. in earnest in August, when the SLA tax falls to 5% from 15% in July. But there’s another driver making the U.S. market look more attractive to Canadian producers in August: currency exchange. The Canadian dollar per one U.S. dollar recently rose to $C1.30, after having hovered in a $C1.21-1.26 range through much of the year to date. Since trading near par in early 2013, the loonie per one greenback has been on a steady climb.

AUGUST 2015 — With the expiration of the Softwood Lumber Agreement only two months away, it appears unlikely that negotiations toward a new agreement will happen in the short term. There are no signs any serious negotiations are currently taking place, and it’s unlikely any negotiations will happen until after Canada’s federal election, scheduled for October 19.

SEPTEMBER 2015 — Speculation about a possible extension of the SLA makes the rounds in lumber markets, but no credible sources have indicated that either side is angling toward that end. Canadian sources report there have been informal discussions regarding a path forward, but goals and expectations widely differ among producers within the various provinces. The current agreement calls for a one-year standstill in which no litigation may be filed after expiration.

OCTOBER 2015 — The nine-year Softwood Lumber Agreement expires on October 12, and Canadians no longer face taxes or quota restrictions on lumber shipments to the U.S. Many traders anticipated that lumber prices would weaken upon the SLA’s expiration, but markets rally instead. Many buyers stayed out of the market in early October, and the need to buy jolted the market into action in mid-October. In regards to trade negotiations, some traders wonder if the trend toward Canadian ownership in the U.S. will carry some weight in discussions. The U.S. Lumber Coalition is emphatic that its legal standing to petition the U.S. Commerce Department to file a new case is secure despite the fact that Canadian ownership of U.S. sawmills is now up to about 40. Canada elects a new prime minister as Justin Trudeau unseats Stephen Harper.

NOVEMBER 2015 — As U.S. officials prepare for the Thanksgiving break, little has happened in the softwood lumber file as Justin Trudeau begins his reign as prime minister of Canada. No official negotiations toward a new softwood lumber accord have been scheduled. Some in Western Canada reiterate their desire for an agreement similar to the previous SLA, while Quebec pushes its case for exemption from further lumber taxes and/or quotas. The U.S. Lumber Coalition believes the 2006 SLA is outdated due to the evolution of global timber and lumber markets, and would like to see a revised agreement.

2016

FEBRUARY 2016 — Canadian Prime Minister Justin Trudeau is scheduled to visit the White House in March. Softwood lumber is scheduled to be part of the agenda during the visit. Several factors may be on the table when official talks begin toward a new SLA. Currency exchange rates could be included as part of the discussions, as well as potential caps on imports, changes to the previous tax structure, protection against import surges, and other factors.

MARCH 2016 — Optimism for the U.S. and Canada negotiating a new Softwood Lumber Agreement gained steam when Canadian Prime Minister Justin Trudeau visited the White House March 10. Trudeau and President Obama instructed trade officials from both countries to explore all options for solving the trade dispute, and report back within 100 days. Neither side can file a new trade case until October. So trade officials have plenty to do in working through what Canada’s international trade minister called “the fiendish complexity” of the softwood lumber issue.

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.


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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