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U.S. - Canada Softwood Lumber Trade Agreement

An announcement was made on April 24th, 2017 regarding the U.S and Canada's lumber trade agreement. Below is a summary from LBM Advantage of the Department of Commerce Preliminary Countervailing Duty Finding. Canada's unfair lumber subsidies have for decades harmed the U.S. lumber industry, threatening our workers with mounting unemployment, and denying tree farmers a market for their timber crops. About half of Canada's subsidized lumber production is shipped to the U.S. market, and since the expiration of the Softwood Lumber Trade Agreement, Canadian shipments have risen to now account for approximately one third of U.S. total consumption. Left unchecked, Canadian non-market based trade practices would yield ever increasing market share for Canadian product, displacing U.S. producers, workers, and landowners, and even allowing Canadian mills to take over U.S. assets. Border measures against subsidized and dumped Canadian lumber imports are essential - otherwise differences between the U.S. mostly private and Canadian mostly public timber sales systems give Canadian producers an unfair cost advantage that injures U.S. producers and their workers. The 2006 U.S. - Canada Softwood Lumber Agreement expired in 2015. The United States sought to engage Canada on substantive negotiations for three years, but Canada refused to come to the table without a number of preconditions, thus hindering any opportunities for progress. All the while, Canadian exporters disrupted the lumber market by significantly increasing their market share in the United States. With no new trade agreement attained by late 2016, the domestic lumber industry had no choice but to exercise its legal rights and file anti dumping and countervailing duty cases under the U.S. trade laws. On April 24, the Department of Commerce announced a preliminary determination that Canada subsidizes softwood lumber production, distorting the U.S. softwood lumber market to the detriment of U.S. sawmills, their employees and communities. The Department of Commerce found the following rate of subsidization: - Canfor, 20.26% - J.D. Irving, 3.02% - Resolute, 12.82% - Tolko, 19.5% - West Fraser, 24.12% - All other products/exporters, 19.88%

The Department of Commerce is still considering U.S. industry claims that Canadian lumber is also dumped on the U.S. market. Dumping duties are added to countervailing duties imposed to offset subsidies. A preliminary anti dumping ruling is scheduled for June 23, 2017.

With Commerce's affirmative determinations, U.S. Customs and Border Protection will require importers to pay cash deposits or post bonds equal to the estimated amounts of unfair subsidies (and, after June 23, of dumping, if found). The U.S. lumber industry's overarching goal is to restore an environment in which it can invest and grow to its natural size without being impaired by unfairly traded imports. Canada has almost a third of the U.S. lumber market, much of which could be supplied instead by U.S. timberland and sawmill workers. In 2005, U.S. sawmills shipped 40.5 billion board-feet of lumber, 26% more than in 2016. But subsidized imports have stifled U.S. capacity investment, which would return if Canada subsidies were addressed. This will allow the domestic industry to better supply the American market and help restore the thousands of jobs lost to unfair trade.

Paul Tarca

Head of Purchasing

Concord Lumber Corporation

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