What is a countervailing duty?

• A countervailing duty is a duty assessed by the U.S. Department of Commerce on Canadian exports of softwood lumber to the U.S. The U.S. Department of Commerce argues that in their view the duty is required to offset unfair subsidies that Canadian and provincial governments allegedly provide to lumber companies.
• British Columbia disagrees with this view. In the last two lumber disputes, Canada won appeals of each countervailing duty order that the U.S. Department of Commerce imposed and each injury determination by the U.S. International Trade Commission. B.C. is confident that Canada will win again on appeal of this unfair ruling.

What is an anti-dumping duty?

• An anti-dumping duty is a duty assessed by the U.S. Department of Commerce on Canadian exports of lumber to the U.S. The U.S. argues that the duty is required to offset unfair selling practices by Canadian lumber companies that are allegedly selling lumber into the U.S. at a price below their costs or sales value in Canada.
• British Columbia disagrees with this view.

What is the breakdown of the rates?

• The U.S. Department of Commerce investigated five companies and assessed final countervailing duties (CVD) and anti-dumping duties (ADD) as follows:
  • Canfor:          13.24% (CVD)    8.89% (ADD)
  • Irving:            3.34% (CVD)     
  • Resolute:       14.7% (CVD)      3.2% (ADD)
  • Tolko:             14.85% (CVD)    7.22% (ADD)
  • West Fraser:  18.19% (CVD)    5.57% (ADD)
  • All Others:     14.25% (CVD)    6.58% (ADD)
• The duty rate assessed on all other companies is 20.83%.  This includes a final CVD rate of 14.25%, which is the weighted average of the duty rates assessed on the five companies, and a final AD rate of 6.58%, which is the weighted average of the four chosen companies (Canfor, Resolute, Tolko, and West Fraser).

When do the final duty rates come into effect?

• In the countervailing duty case, companies have not been required to pay duties since Aug. 26, 2017.  Payment of countervailing duties will resume at the final duty rates following the publication of an affirmative ruling on injury by the International Trade Commission (ITC), which is expected in December 2017.
• The final anti-dumping (AD) duties will continue to be payable until Dec. 27. Absent a final ruling on injury by the International Trade Commission, there could be a short gap period where AD duties are not payable between Dec. 27 and the publication date of the International Trade Commission final ruling. The final duties will then resume.

Why the time difference on when the final rates apply?

• The countervailing duty and anti-dumping cases are independent investigations and governed by different regulatory requirements and timelines. 

What is the status of the critical circumstances finding?

• While the U.S. Department of Commerce found that critical circumstances did not apply in the countervailing duty case, they found that critical circumstances did apply for all companies in the anti-dumping duty case, except for Canfor. However, the International Trade Commission (ITC) final decision on critical circumstance will determine if retroactive duties will be applied. The ITC final determination is expected in early December.

What does “critical circumstances” mean?

• In its preliminary determination in April, 2017, the U.S. Department of Commerce found “critical circumstances” (significant increase in Canadian lumber exports over a given time period). As a result, companies would be required to pay preliminary countervailing duties retroactively (90 days prior to the preliminary determination being published in the U.S. Federal Register, which happened April 28) if the International Trade Commission also makes a finding of critical circumstances.

What is the process for companies to collect refunds on the difference between the preliminary and final duty rates?

• Since the final rates are lower than the preliminary rates, the U.S. Department of Commerce will issue instructions to U.S. Customs to refund the difference. U.S. Customs has six months to provide the refunds.

What is the current timeline for litigation?

• Nov. 25, 2016 – U.S. industry (COALITION) filed a petition with the U.S. Department of Commerce asking them to investigate Canadian softwood lumber products.
• Dec. 15, 2016 – U.S. Department of Commerce initiated its investigation.
• Jan. 6, 2017 – The U.S. International Trade Commission preliminarily found that Canadian softwood lumber products were “injuring” American companies. As a result, the U.S. Department of Commerce continued its investigation.
• April 24, 2017 – U.S. Department of Commerce issued preliminary countervailing (subsidy) determination.
• April 28, 2017 – Preliminary countervailing determination published in U.S. Federal Register. Canadian companies start paying cash deposits on lumber shipments to U.S. until Aug. 25, 2017. Given the preliminary finding of “critical circumstances” all Canadian companies, except for Canfor, Resolute, Tolko and West Fraser are subject to duty liability on lumber shipments made since about Jan. 28, 2017.
• June 23, 2017 – U.S. Department of Commerce issued preliminary anti-dumping determination.
• June 26, 2017 – Canadian companies were required to pay cash deposits at the anti-dumping duty rate. Given the preliminary finding of “critical circumstances” all Canadian companies, except for Canfor, Resolute, Tolko and West Fraser will be subject to anti-dumping duty liability on lumber shipments made since about April 1, 2017.
• Aug 26, 2017 – Cash deposits for the countervailing duty are no longer required until the ITC final determination is published, which is currently expected in December.
• Dec. 27, 2017– Cash deposits for anti-dumping duty no longer required until the ITC final determination is published, which is currently expected in December.
• Late December/early January – Final countervailing and anti-dumping orders published.
• Late December/early January – Canada commences appeal process.

What is the status of exclusions request for cedar, other high value products, lumber harvested from private lands and companies without tenure?

• The U.S. Department of Commerce has not granted any of these scope exclusions.  These products will be subject to the duties established by the final determination.

What are the avenues for appeal?

• Appeals can be made to WTO and either NAFTA or the U.S. Court of International Trade. Avenues for appeal will be explored after the final determinations are issued by the U.S. Department of Commerce.

What’s the current status of negotiations for a new agreement? Are any talks scheduled?

• While there are no formal talks are currently scheduled, Government remains active in engaging key officials and stakeholders in both Canada and the U.S.
• Since July, Premier John Horgan has:
  • met with Prime Minister Justin Trudeau to discuss status of the negotiations.
  • travelled to Washington DC with our U.S. Trade Envoy David Emerson to meet with various senior U.S. officials including U.S. Department of Commerce Secretary Ross and U.S. Trade Representative Robert Lighthizer.
  • had several discussions with Minister Chrystia Freeland on the status of ongoing negotiations and to reiterate B.C.’s interests and positions.
• Since July, U.S. Trade Envoy David Emerson has:
  • Travelled to Ottawa to meet with senior officials from Global Affairs Canada, the Prime Minister’s Office and the Privy Council Office.
  • Participated in a live discussion broadcast hosted by Canada’s Ambassador to the U.S. David MacNaughton along with all Softwood Special Envoys from other provinces.
  • Travelled to Portland, Oregon to meet with Oregon Senator Jeff Merkley and other senior officials as part of an outreach program organized by the Canadian Consulate in Seattle.

Workers and Communities

Will the assessment of duties lead to more mills closing and/or mills closing sooner?

• The B.C. government expects there will be mill closures or curtailments over the next five years as companies rationalize their operations due to the decline in timber supply as a result of the mountain pine beetle infestation and this summer’s wildfires.
• Government is working closely with communities to ensure they have the necessary supports to mitigate the impacts from the mountain pine beetle infestation, softwood lumber duties and wildfires.
• As well, on June 1, the federal government announced $867 million to assist workers and communities across Canada that may be affected by the softwood lumber tariffs. The announced funding was based on recommendations from the Federal-Provincial Task Force on Softwood Lumber made up of provincial ministers responsible for forestry and chaired by the federal Minister of Natural Resources.