Disputes Over Softwood Lumber Rage on Following Tariff ReductionDecember 14th, 2020 by Drew Vass
Homebuilders and U.S.-based lumber producers find themselves at odds these days, after the U.S. Department of Commerce slashed duties on softwood lumber imported from Canada from 20% to 9%. The move follows a decades-long dispute in which U.S. lumber producers claim to be held at a disadvantage by Canadian producers, based on Canada’s policies for timber pricing. Tariffs of 20.8% were imposed in 2017, after which industry groups began urging for additional negotiations between the two countries.
Officials for the National Association of Home Builders (NAHB) praise the recent reduction, suggesting it’s “good news for American homebuilders and homebuyers,” adding, “more needs to be done.” Reduced tariffs arrive as a sign of relief, NAHB officials say, as the Random Lengths Framing Composite Price has decreased since mid-September, but remains up by more than 60% since mid-April, the association reports. Lumber prices peaked at above $950 per thousand board feet in September, they say, since receding to roughly $560 per thousand board feet, “which is still at an extremely high historical level,” they add. In an alternate take, officials for the U.S. Lumber Coalition, an alliance of softwood lumber producers and timberland holders, suggest that—even with the recent reduction to tariffs—the decision by Commerce, “confirmed once again that Canadian softwood lumber is heavily subsidized and dumped into the U.S. market.” The coalition now points to the next preliminary determination for a second administrative review expected in late January 2021, vowing to push for trade laws to be enforced “to the fullest extent possible.” Commerce published the Preliminary Results of its latest administrative review on February 7, 2020, twice punting the deadline for the final results, eventually landing on November 23, 2020.
“Unfortunately, it appears that a World Trade Organization (WTO) dispute settlement panel report from an earlier and separate phase of the case, which is currently under appeal, had a negative impact on the countervailing duty rate for the first administrative review,” says Zoltan van Heyningen, executive director for the U.S. Lumber Coalition.
Though the starting point for disputes over imports is difficult to pin down, the current era is linked to the expiration of a Softwood Lumber Agreement (SLA) in 2015, which previously imposed export charges and quota limitations when the price of U.S. softwood products fell below set levels. Following the expiration, a coalition of U.S. lumber producers filed trade remedy petitions, alleging that Canadian firms “dump” lumber into the U.S. market, while Canadian forestry policies subsidize the country’s lumber production. Pointing to affordability issues for new housing, domestic production that falls short of demand and increasing prices for lumber, officials for NAHB urged the Trump administration to resume talks between the two countries to find a long-term solution and settlement agreement. In addition to new agreements, the association urges higher targets for domestic production, reduced U.S. exports and seeking out new markets. According to a recent Virginia Tech USDA Forest Service Housing Commentary, in the U.S., new single-family construction consumes around 25% of all sawn wood, while remodeling consumes another 23%. Officials for the U.S. Lumber Coalition report that, since 2016, the U.S. has added 7.6 billion board feet of new production to the domestic supply chain.
NAHB officials acknowledge that tariff reductions are by no means an immediate remedy for rising lumber and home prices, but suggest that it will help to, “mitigate uncertainty and associated volatility that has plagued the marketplace, which could help ease upward price pressure on lumber prices.”
Officials for the U.S. Lumber Coalition point out that with the second review commencing in March 2020, duties are expected to rise and fall. Among the factors are legal considerations, market prices and volume of imports, they say. Meanwhile, “The U.S. lumber industry will continue to push for the trade laws to be enforced to the fullest extent possible in the second administrative review to allow U.S. manufacturers and workers the chance to prosper,” says Jason Brochu, U.S. Lumber Coalition co-chair and co-president of Pleasant River Lumber Company. Brochu’s company lies close to the line of dispute, headquartered in Dover-Foxcroft, Maine.