May 27, 2005

Panel rejects countervailing softwood duties

Ottawa, lumber sector laud NAFTA ruling

VANCOUVER

The forest industry and federal government welcomed the latest trade ruling they say reinforces Canada’s case in its softwood lumber battle with the United States.

In a ruling Monday, a dispute-settlement panel set up under the North American Free Trade Agreement once again rejected some of the U.S. calculations used to levy countervailing duties against Canadian lumber exports.

“We are pleased with the NAFTA panel’s decision, which found that the U.S. subsidy duties contravene U.S. law,” International Trade Minister Jim Peterson said in a statement.

In its 26-page ruling, the panel upheld a number of the U.S. Commerce Department’s arguments for the way it calculated the level of subsidy it claims Canadian lumber exporters get, based largely on low Crown timber-cutting fees or stumpage.

But it remanded five issues for Commerce to review, including some pricing and profit information relating to Quebec timber sales, profits earned by private log sellers in Ontario and a mathematical calculation used to arrive at the countervailing duty rate.

It also directed Commerce to exclude from duties Ontario companies whose logs were deemed to be unsubsidized and to take them out of the overall duty calculation for other Canadian exporters.

Canadian lumber, which has about one third of the U.S. market, was hit with an average 19 per cent countervailing duty in May 2002 following a trade complaint filed by American lumber producers. An added anti-dumping duty brought the overall tariff up to about 27 per cent.

A series of NAFTA panel decisions have cut both duties substantially but exporters are still paying an average 16.37 per cent countervailing duty and 11.54 anti-dumping rate, revised upward last month from 8.43 per cent.

Exporters, who ship more than $10 billion in lumber annually, have paid more than $4 billion to date.

This week’s decision was the fourth time the bi-national NAFTA panel has remanded the countervailing duty back to Commerce for review.

“The panel calls upon the parties to resolve the issues in accordance with the panel’s orders without further delay,” the ruling concluded. “It is the panel’s hope that the current proceeding will be the last review.”

“Clearly the panel expects the U.S. to come back with a determination on duties that falls in line with U.S. law,” Peterson said.

The Montreal-based Free Trade Lumber Council, echoed the trade minister, saying if Commerce complies with the panel’s instructions it should be the last review.

“Following these remand instructions, Commerce should not be able to find any subsidy, anywhere in Canada,” the council, which speaks for much of the Canadian lumber industry outside British Columbia, said in a news release.

The council noted that after the previous NAFTA panel remand, Commerce came up with a 1.88 per cent countervailing duty rate.

With Maritime producers already excluded because most of their timber comes from private woodlots, that leaves alleged subsidies only in Alberta, Manitoba and Saskatchewan, whose exports are relatively small, the council said.

“There can be no mistaking with this latest decision there is no subsidy in Canada,” said Carl Grenier, the council’s executive vice-president. “Timber is sold by governments and private parties alike at market prices, and our lumber is fairly traded.”

Grenier said this latest decision sets the stage for U.S. Customs to stop collecting countervailing duties by August, after panel’s 45-day deadline for compliance, unless the U.S. government mounts an extraordinary challenge against it.

Washington has already launched such a challenge against a NAFTA ruling last year that found Canadian softwood imports into the United States posed no threat of injury to American producers. A decision is expected this fall.

Canada has claimed victory in a string of NAFTA and World Trade Organization appeals against the lumber duties.

Last week, Ottawa asked for the establishment of a WTO compliance panel to review U.S. implementation of the world body’s anti-dumping rulings. It also sought authority to retaliate against $400 million in U.S. imports if necessary, the third such request related to the lumber case.

The Canadian Press

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