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U.S. plans to raise tariffs against Canadian softwood lumber producers

CANADA (From news reports) -- The U.S. Department of Commerce plans to raise tariffs levied against Canadian softwood lumber producers, marking the latest salvo in the long-running trade dispute.

Based on the Commerce Department's preliminary assessment, the combined countervailing and anti-dumping duty rates will be 13.86 per cent for most Canadian producers, compared with 8.05 per cent currently.

"Canada is extremely disappointed that the U.S. Department of Commerce has signaled its intention to significantly increase its duties on softwood lumber from Canada," International Trade Minister Mary Ng said in a statement on Thursday.

The U.S. duties will differ for four of the lumber producers based in Canada.

Under the preliminary tariff schedule to take effect by this autumn, duties for Vancouver-based Canfor Corp. would rise to 15.79 per cent from the current 6.61 per cent.

Vancouver-based West Fraser Timber Co. Ltd.'s duty rate is slated to climb to 12.07 per cent from 9.25 per cent.

Saint John-based J.D. Irving Ltd.'s duty rate would increase to 11.03 per cent from the recent 7.98 per cent, while Vernon, B.C.-based Tolko Industries Ltd.'s tariff is set to rise to 16.76 per cent from 8.05 per cent.

The Commerce Department will make further adjustments by August to set final rates in its fifth administrative review, which is based on lumber markets in 2022.

A 2006 Canada-U.S. softwood agreement expired in 2015, with no replacement. In the latest phase of the trade fight, the Commerce Department started imposing tariffs on Canadian lumber in 2017.

The U.S. lumber lobby has long argued that Canadian producers receive unfair provincial softwood subsidies and dump product south of the border at below market value. But Global Affairs Canada has said international panels have consistently ruled in favour of Canada as a fair trading partner.

The dispute revolves around U.S. restrictions on Canadian exports of softwood to American buyers.

The U.S. says the measures are necessary to protect its lumber industry, because Canadian forests are mostly on public land, where buyers pay "stumpage fees" to provincial governments for the right to log. The U.S. argues those fees can give Canadian loggers a competitive advantage over American loggers, who harvest timber largely from private lands and bid against each other for the privilege.

The U.S. Lumber Coalition argues that the U.S. has a better system for soliciting competitive bids for private timber rights, based on market forces.

"The U.S. Lumber Coalition supports the Commerce Department's continued commitment to enforce the U.S. trade laws against subsidized and unfairly traded Canadian lumber imports," coalition chairman Andrew Miller said in a news release on Thursday.

Canada counters that its producers don't receive subsidies, and they have not been dumping into the U.S. market.

"U.S. duties on softwood lumber already unjustifiably harm consumers and producers on both sides of the border," Ms. Ng said.

The Canadian government is challenging the lumber tariffs in a process under the Canada-United States-Mexico Agreement that allows Canada and the U.S. to set up trade panels to settle disputes. As well, Canada complained in 2017 to the World Trade Organization in the battle that dates back to the early 1980s.

"These duties continue to be unwarranted and unfair," Kurt Niquidet, vice-president of the BC Lumber Trade Council, said in an e-mail on Thursday. "Although these rates are not yet finalized, they continue to misrepresent reality."

Cash prices - what sawmills charge wholesalers - were at US$442 last week for 1,000 board feet of two-by-fours made from Western spruce, pine and fir, according to Madison's Lumber Reporter, a Vancouver-based industry newsletter. That pricing level is 19-per-cent higher compared with a year earlier, but down 63 per cent from early 2022.

Lumber markets have been volatile over the past four years, after the COVID-19 pandemic initially eroded demand but then consumers went on a spending spree. In the summer of 2020, people stuck at home started a do-it-yourself bonanza, snapping up construction materials for decks, fences and renovations.

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