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U.S. to raise tariffs for Canada's two largest lumber companies as trade fight persists

The US Commerce Department plans to raise tariffs on two of Canada's largest timber companies, while reducing tariffs on most other Canadian producers.

Based on the Commerce Department's preliminary assessment, joint countervailing and anti-dumping duties will increase for Vancouver-based West Fraser Timber Co Ltd and Canfor Corp CFP-T.

West Fraser, Canada's largest lumber producer, faces paying a new duty rate of 9.38 per cent, which could take effect as early as August or September, compared to its current tariff of 8.25 per cent. Canfor will see growth for Canadian softwood sold in the United States to 7.29 percent, compared to the current 5.87 percent.

"With these preliminary results, the US Department of Commerce has signaled its intention to maintain its unfair duties on Canadian softwood lumber imports. A disappointing decision for many on the side.

St. John-based JD Irving Ltd., which recently ranked as Canada's fifth largest lumber producer, is assessed a higher rate of 7.77 per cent, compared to the current 7.17 per cent.

While West Fraser, Canfor and Irving have been singled out for higher tariffs, most other producers in Canada will see their duty rates reduced from the current 8.59 per cent to 8.24 per cent.

Montreal-based Resolute Forest Products Ltd.'s current tariff is 14.86 per cent, but it will join the ranks of Canadian producers with a revised rate of 8.24 per cent. Paper Excellence Group, a private company controlled by Indonesia's wealthy Wijjah family, plans to acquire Resolute by mid-2023 for US$1.6 billion.

Amid battle over tariffs, Canadian lumber giants expand into US forests

The 2006 Canada-US softwood agreement expired in October 2015 without a replacement. In the latest round of a long-running trade dispute, Canadian producers have been paying US lumber tariffs since April 2017.

Latest rates are subject to verification by the Department of Commerce.

Most forests in Canada are on Crown land, with forestry companies paying "stumpage fees" to provincial governments for the right to log. The US Lumber Coalition argues that the US has a better system for soliciting competitive bids for private timber rights, based on market forces.

The coalition has repeatedly argued that Canada subsidizes lumber production and dumps softwood in the US below market value.

"Continued enforcement of US trade laws against unfairly traded Canadian lumber will increase long-term domestic production and availability of lumber produced by American workers to build American homes," coalition president Andrew Miller said in a statement Tuesday. "

Canada protests that its producers receive no subsidies, and are not dumping on the US market.

High Interest Rates, Slow Housing Market Driving Lumber Prices Down

"Canada has long been an essential supplier to the US market, and these unfair tariffs continue to act as a tax on US consumers, increasing manufacturing costs at a time of rising inflation," Ms Ng said.

The Canadian government is challenging the lumber tariffs in a process under the US-Mexico-Canada agreement that allows Canada and the US to set up trade panels to settle disputes. Also, Canada complained to the World Trade Organization in 2017 in a trade fight that dates back to the early 1980s.

The Commerce Department's latest move is based on an examination of data from 2021, when lumber traded for more than US$1,600 for 1,000 board feet in the spring during a period of volatile price swings. Consumers were initially eager for do-it-yourself projects, but demand for lumber faltered and prices fell in the second half of 2021 as COVID-19 pandemic restrictions eased.

Two-by-fours made from western spruce, pine and fir sold for US$374 for 1,000 board feet last week, compared with US$670 six months ago, according to Madison's Lumber Reporter, a Vancouver-based industry newspaper.

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