Canada/Mexico stand firm; Canada files softwood appeal

OTTAWA Canada is turning to the North American Free Trade Agreement in its bid to stop U.S. duties on Canadian softwood lumber.

A letter from a Canadian lawyer was hand-delivered Tuesday to the American NAFTA secretariat in Washington, requesting a panel review “in regard to the final determination of the U.S. Department of Commerce in the countervailing duty investigation of softwood lumber from Canada.”

In a written statement, Foreign Affairs Minister Chrystia Freeland said Canada will “forcefully defend Canada’s softwood lumber industry.”

“The U.S. Department of Commerce’s decision on punitive countervailing and antidumping duties against Canada’s softwood lumber producers is unfair, unwarranted, and deeply troubling,” she said.

The challenge comes under section 19 of NAFTA, one of the sections in the crosshairs of U.S. President Donald Trump as the trilateral trade pact is renegotiated.

Canadian softwood lumber producers have already laid down about $500 million in countervailing and antidumping duties since the U.S. Department of Commerce ruled last spring Canada was unfairly subsidizing its softwood industry and selling wood into the U.S. at unfairly low rates.

The main issues stem from the fact that most Canadian softwood is on Crown land and producers pay stumpage fees, set by provincial governments, for the right to harvest the wood. The U.S. Lumber Coalition alleges these fees are deliberately set too low and represent an unfair subsidy to Canadian producers.

Canada vigorously denies these claims and has won several NAFTA challenges over similar softwood issues in the past.

Earlier this month, the U.S. government made final decisions about the amount of duty that would be charged on Canadian softwood, with the final total averaging about 21 per cent, down from almost 27 per cent in the initial decisions.

Canada and the U.S. have battled over softwood for decades and the disputes have been before both NAFTA and the World Trade Organization multiple times. Canada has won almost all of those challenges, and even in cases where Canada was found to be subsidizing its industry, NAFTA panels or the WTO have said the subsidy was so minimal it had no effect on U.S. producers.