New Brunswick’s largest forestry company plans to challenge a U.S. government decision that has moved it from first to worst in a long-running trade dispute over wood.
J.D. Irving Ltd. had been subject to some of the lowest duties and tariffs on softwood exports to the United States until last week.
But the latest ruling by the U.S. Commerce Department has lowered the rates for almost all Canadian mills — except Irving’s.
The rates are “unfair and will be appealed,” said Jerome Pelletier, a JDI vice-president and chair of the New Brunswick Lumber Producers, representing eight companies in the province.
Last year Irving was subject to combined duties of 15 per cent on its wood, compared to 17.9 per cent for all other New Brunswick mills as well as most across Canada.
That was because the company successfully persuaded the U.S. to investigate it separately from the rest of the industry.
The U.S. government reviews the rates every year, with a preliminary assessment early in the year and a final decision in the fall.
In a preliminary decision in January based on 2020 export numbers, Irving’s rate was to go down to 7.09 per cent, compared to 11.64 per cent for other mills.
But last week’s final ruling on the 2020 data instead cut the rate for other mills to 8.59 per cent and set the Irving rate at 14 per cent.
That means while Irving’s rate is one percentage point lower than last year, it’s now significantly higher than other mills in the sector.
Anti-dumping duty behind high rate
It’s because one portion of the total rate, the anti-dumping duty, has gone way up for Irving while remaining the same for other companies.
JDI spokesperson Anne McInerney explained that Irving did not apply to be part of the review of 2020 anti-dumping rates “because we expected to be able to maintain the 2019 anti-dumping rate. … We have filed an appeal.”
The U.S. first included New Brunswick mills in its softwood lumber duties in 2017 after concluding that prices on provincial wood were not based on an open market.
The growing role of government-owned Crown land in the provincial wood supply distorted the price paid for private wood, the U.S. found.
Wood from the rest of Atlantic Canada remains exempt from the duties and in his statement, Pelletier called for New Brunswick to be included in that exemption as it was until 2017.
“We also continue to believe that a negotiated settlement between the Canadian and U.S. governments is the appropriate solution,” he said.
Federal Trade Minister Many Ng said in a statement Ottawa plans to challenge the duties under the Canada-U.S.-Mexico trade agreement.
In last week’s U.S. ruling, officials said they remained “unpersuaded” by arguments filed by Irving and the New Brunswick government that prices were not distorted.
The province “does not provide new information that refutes Commerce’s argument that oligopsonistic conditions exist in New Brunswick,” the Commerce Department said in an issues and decision memorandum released Aug. 3.
An “oligopsony” is a market where a small number of large buyers can influence the price paid for a commodity.
Wood from Crown land still represented about half the wood in the market, the memo said.
U.S. lumber producers have long complained that Canadian wood is unfairly subsidized by governments, making it less expensive to U.S. buyers.
Duties charged to U.S. customers are designed to raise the cost of Canadian wood and render the U.S. product more competitive.
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