Countervailing Duty Announced on Lumber Creates Conflict

on April 30, 2017

tariffAs expected, President Trump has announced a countervailing duty (CVD) on Canadian lumber companies, which directly affects the price of lumber materials in the US. While Canadians and some Americans are displeased with the tariff, the good news is that it isn’t quite as high as expected.

Last week, lumber industry experts prepared themselves for a CVD as high as 40%. Canadian lumber companies braced themselves not only for the tariff, but also a retroactive fee. Consequently, American companies purchasing lumber from these Canadian mills saw a steep hike in costs. With the CVD having been determined 3-24%, prices should steady once again so that buyers can know what to expect.

This isn’t the final decision that impacts the lumber trade between Canada and the US.  The preliminary deadline for determining the antidumping duty was postponed to June 23, 2017. This can also have a major impact on the price of lumber coming out of Canada. In addition to decisions left to be made in the US, Canadian Prime Minister Justin Tradeau states that he will take all legal action possible to fight the CVD, citing it as unfair.

There is a lot of speculation over whether Trump’s decision was a direct attack against Canada in response to a recent dispute over the dairy industry. A widely referenced trump quote that backs up this notion is a tweet he sent on Tuesday morning:

“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!”

As such, Trump’s expressed dissatisfaction with Canada’s dairy and lumber industries seem to tie into his interest in renegotiating  NAFTA, as neither is a part of the free-trade agreement. Whether this affects the future cost of lumber remains to be seen.

The US Lumber Coalition is responding positively to the tariff, claiming that the Canadian subsidies are unfair and harmful to the US lumber industry.  The National Association of Home Builders, on the other hand, feels that the tariff will compromise the affordability of homes for many Americans. Homes and box springs are two of the most cited uses for lumber in arguments that the tariff will have a negative impact on Americans.

Lumber is also a significant resource used in manufacturing, particularly in pallets and packaging.  As manufacturers evaluate necessary price increases and the subsequent effect on competitiveness, they may need to look at alternatives to their current pallet and packaging systems. Many suppliers offer alternatives for situations like these. Experts like Packnet can also evaluate how the impact of a proposed solution will affect a company long-term, providing manufacturers with a clear understanding of their choices. Packnet also keeps current with the rules and regulations within the lumber industry. They are valuable resource for any company who needs to work with a pallet or container vendor. You can contact them at 952-944-9124. Request a free assessment here.