The ups and downs of the U.S. softwood lumber dispute have created a crippling decade of uncertainty for B.C. companies, particularly the value-added manufacturing sector.
The Independent Wood Processors Association (IWPA) has put out a release analyzing the recent preliminary U.S. softwood lumber ruling now under review, noting “the dispute has become a broken process” penalizing both businesses and consumers on both sides of the border, without bringing either side closer to resolution.
“Nearly 10 years into this dispute, we are still watching the same movie over and over again – more duties, more reviews, more appeals – and no resolution,” said Andy Rielly, chair of the IWPA, and owner of Yarrow Wood. “This ongoing cycle is creating uncertainty for businesses, workers, and consumers across North America and highlights the urgent need for a negotiated solution.”
What’s at stake? There may be a couple of logging companies, but there are about a dozen wood manufacturing outfits in and around Chilliwack, such as Visscher Lumber, Yarrow Wood, Woodtone, and more, with hundreds of jobs on the line.
Chilliwack Coun. Jeff Shields, who is also the CFO of Visscher Lumber in Chilliwack, said whether or not there’s a legitimate basis for these duties, the value-added sector should viewed separately from the timber-harvesting companies.
Under the IWPA the value-added sector has tried to get that over-arching message across, using their collective voice, that the problem is perception of subsidy.
“They understand how it works but argue because it’s government controlled that it has to be subsidy,” Shields said, adding the last time Canada obtained a negotiated settlement on softwood lumber duties was under the Harper government in 2015, and what that did was provide certainty.
It’s that kind of certainty the industry now requires.
“In 2015, at Visscher, we probably had a workforce of 50 employees on the manufacturing side,” Shields said.
Now there are about 25 workers doing that work.
If the price of value-added wood products gets too high for example, Shields said it means their customers who put manufactured softwood into their finished products, will swap out the wood element for plastic to save money.
“So if there is in fact a subsidy, it applies to those cutting trees,” Shields said. It’s not the manufacturing companies buying lumber at market value and then processing it.
“Primarily all timber cut in Canada comes from Crown land and the logging company is charged a ‘stumpage fee’ for each tree.
“This fee is adjusted quarterly based on the Vancouver log market. In the U.S., the trees are harvested from private land. Both market based systems, but with obvious differences.”
The U.S. Department of Commerce posted a preliminary tariff rate to be finalized in August, and it includes a countervailing duty of 14.17 per cent and an anti-dumping duty of 10.66 per cent, for a total combined rate of 24.83 per cent.
The current rate of 35.16 per cent will remain in effect, until a final decision is made.
While the preliminary rate suggests an imminent reduction, the uncertainty remains over whether the final rate will hold or rise. Additional tariffs could keep the total tariff burden above 35 per cent.
The IWPA, which represents British Columbia’s small and medium-sized value-added wood manufacturers, says the ongoing dispute “continues to unfairly harm companies that should never have been included in the first place.”
“Our businesses buy wood the same way American companies do. We go into the market and pay the market price,” said Brian Menzies, executive director of IWPA.
“We are not subsidized. We are not the problem. This is beginning to look less like trade enforcement and more like protectionism masquerading as trade policy.”
The association posits that the U.S. Lumber Coalition, led by a few major land-owning lumber companies, has to stop relying on procedural trade actions and engage in honest discussions about the real issues behind the dispute.
“If the U.S. industry has real concerns, then let’s hear them,” said Menzies. “Enough hiding behind paperwork, bureaucracy, and endless administrative rulings. It is time to come to the table and have a serious conversation about the market realities and structural interests driving this dispute.
“Businesses on both sides of the border need certainty.”