Commerce to Require CV Duty Cash Deposits on Softwood Lumber in Long-standing Feud With Canada

The Commerce Department will require cash deposits of estimated countervailing duties on softwood lumber from Canada, it said in a fact sheet issued April 24 (here). Rates calculated in its preliminary determination range from 3.02% to 24.12%, depending on the Canadian producer or exporter. The imposition of duties marks the latest phase in a long-running dispute over Canadian softwood lumber that dates back to 1982. U.S. softwood lumber producers requested antidumping and countervailing duties on softwood lumber in late 2016 (see 1611280035), following expiration of the U.S.-Canada Softwood Lumber Agreement a year earlier (see 1510160010).

The U.S. routinely imposes antidumping and countervailing duties on Canadian products, most recently polyethylene terephthalate resin and supercalendered paper. Nonetheless, Commerce Secretary Wilbur Ross said it has been a “bad week” for the U.S.-Canada trade relationship (here). “Last Monday, it became apparent that Canada intends to effectively cut off the last dairy products being exported" from the U.S. (see 1704200023), Ross said. “Today, in a different matter, the Department of Commerce determined a need to impose countervailing duties of roughly one billion dollars on Canadian softwood lumber exports to us. This is not our idea of a properly functioning Free Trade Agreement." Softwood lumber is notable for the volume of trade, with imports from Canada reaching over $5.6 billion in 2016.

The Canadian government criticized the move, and vowed to fight imposition of duties in court if necessary. “The Government of Canada disagrees strongly with the U.S. Department of Commerce’s decision to impose an unfair and punitive duty. The accusations are baseless and unfounded,” the Canadian ministers of natural resources and foreign affairs said in a statement (here). “The Government of Canada will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation,” it said. “In ruling after ruling since 1983, international tribunals have disproved the unfounded subsidy and injury allegations from the U.S. industry. We have prevailed in the past and we will do so again.”

Despite reports of a “20 percent tariff” on softwood lumber, Commerce’s preliminary determination is routine and nothing new, said Simon Lester, a trade analyst at the Cato Institute, in a blog post (here). “Before anybody panics, keep in mind there was a preliminary determination on subsidized Canadian lumber back in August 2001, where DOC calculated a single country-wide subsidy rate of 19.31%," he said. "So, while there are a lot of possible upcoming trade actions by the Trump administration to worry about, this one seems to be the usual, routine kind of trade remedy action. Not that I support this sort of thing, of course, but it's part of the system.” Commerce must still make its final determination, and the International Trade Commission must find injury to U.S. producers, before a final CV duty order is imposed.

Suspension of liquidation and cash deposit requirements will generally take effect upon publication of Commerce’s preliminary determination in the Federal Register. However, Commerce found “critical circumstances” for some Canadian producers and exporters -- J.D. Irving and the “all others” companies -- that will consequently be subject to retroactive suspension of liquidation and cash deposit requirements for entries beginning 90 days prior to the publication date, the agency said (here). Commerce’s preliminary antidumping duty determination of softwood lumber is due June 23 (see 1704180018).