The United States imposed April 7 nearly $55 million worth of import duties on softwood lumber from the Canadian provinces of Ontario, Quebec, Manitoba, and Saskatchewan over what it said was Canada's failure to fix a breach of a 2006 agreement between the two countries.
U.S. Trade Representative Ron Kirk, whose office announced the move, said the 10% ad valorem duties would remain in place until the U.S. collected $54.8 million.
The action follows a Feb. 26 ruling by a tribunal of LCIA, an international arbitration group, that found Canada violated the 2006 Softwood Lumber Agreement by failing to calculate quotas properly during the fix six months of 2007. It determined that Canada had to cure the breach by March 28.
"The United States is taking this action today to enforce our rights under the Softwood Lumber Agreement," Kirk said in a statement. "We regret that Canada has chosen not to meet its commitments and has made this action necessary. The Softwood Lumber Agreement brought more stability and certainty to an industry that sorely needed it. Current conditions--extremely weak demand and severely depressed prices for the softwood lumber industry--only make it clearer that Canada needs to fulfill its obligations under the Agreement and not continue to avoid the market consequences of its earlier breach."
The Globe and Mail newspaper of Toronto reported that local industry associations believe the ruling could force the loss of 10,000 timber-related jobs in the provinces affected. It also quoted Canadian trade minister Stockwell Day as saying his country will take the case back to arbitration before a trade tribunal in London.
In Washington, the U.S. Coalition for Fair Lumber Imports issued a news release applauding the U.S. government's action. "The United States is imposingas an import duty precisely the same tax that Canada should have imposed as an export charge," the Coalition said. "Earlier this month, the Canadian government ignored the clear LCIA directive by offering a lump-sum payment of US$46.7 million to the U.S. Treasury." The U.S. formally rejected that offer on April 2.
"Canada's unwillingness to adhere to thearbitration panel ruling was just the latest example of Canada's bad-faith approach to this trade agreement," the coalition quoted its chairman, Steve Swanson, as saying. "Canada was simply trying to provide yet another subsidy for its industry--to keep lesscompetitive companies operating at the expense of U.S. sawmills and workers."
The Softwood Lumber Agreement took effect Oct. 12, 2006, and is expected to remain in force at least seven years and possibly nine. As ProSalesreported in January 2007, the agreement ended a dispute over lumber tariffs that can be traced back to 1996, when the last agreement expired. As part of the new accord, the U.S. stopped charging duties on Canadian exports, and Canada was to impose a tax on exports ranging from 5% to 15% that's based on Random Lengths' Framing Lumber Composite Price. Exporters can reduce that tax by limiting their shipments to a prescribed percentage of U.S. consumption.