Tariffs imposed on Canada lumber

The Bush administration, contending that Canada is unfairly subsidizing its lumber industry, announced on Friday the imposition of a 19.3 percent penalty tariff on Canadian softwood lumber, saying it would make the trade sanction retroactive to mid-May. An economist for the National Association of Home Builders said the decision could add as much as $1,000 to the cost of building a new home, but members of Congress from lumber-producing states praised the administration for taking decisive action to protect domestic producers. Softwood lumber, commonly used for home construction, comes from fir, pine and other cone-bearing trees. In announcing the decision, Commerce Secretary Donald Evans said it had been reached "after careful consideration of the law and the facts on the record.''

Officials said the penalty tariffs are expected to take effect for new shipments on Aug. 20, the date they will be published in the Federal Register. The department ruled that because of a surge in imports this spring, the tariffs would also apply retroactively to mid-May. Canadian lumber imports could be hit with further penalties next month. The administration is scheduled to rule on Sept. 24 on a separate complaint from the U.S. industry that in addition to receiving unfair government subsidies, Canadian lumber mills are dumping wood in this country below fair market prices. The U.S. International Trade Commission ruled in May that the U.S. industry was facing harm from the Canadian imports. That ruling, as well as the Commerce Department (news - web sites) rulings to set actual tariff levels, will not become final until further review. The Commerce Department indicated it would issue its final ruling in the subsidy and dumping cases on Dec. 8.

"We are certainly not happy about this. We are hopeful that in the final ruling, this tariff level will be reduced,'' said Michael Carliner, chief economist for the homebuilders' association, referring to the added expense he expects to see in constructing homes. Canadian Trade Minister Pierre Pettigrew said that the action was unjustified because the government is not subsidizing Canada's lumber mills. Canadian officials would not say how they planned to appeal the ruling, although they have several options, including bringing a case before the World Trade Organization (news - web sites). "This is not going to be easy for Canadian workers and for American consumers,'' Pettigrew said. "But I stand by our industry's competitiveness and the need for free trade.'' The U.S. industry petitioned the government for relief after a five-year-old lumber agreement that had capped Canadian exports expired at the end of March. Members of Congress hailed Friday's decision. Sens. Olympia Snowe and Susan Collins, both Maine Republicans, and Sen. Max Baucus, D-Mont., said the administration needed to move forcefully to protect U.S. jobs.

Snowe and Collins said in a statement that because of the Canadian competition, the price of softwood lumber had dropped by more than a third over the past year and many lumber mills had been forced to close. "We hope that today's announcement will mark the beginning of the end of unfair Canadian lumber subsidies,'' the two senators said in a statement that urged both countries to return to the bargaining table. The dispute, which can be traced back more than 100 years, involves the amount of "stumpage'' fees that Canadian provinces charge companies for logging on government lands. The U.S. lumber industry has charged that the fees are set at extremely low levels that give the Canadian competition an unfair advantage. In their complaint, U.S. lumber groups asked the Bush administration to charge duties as high as 78:. Canadian producers have denied the accusations of unfair government subsidies. They contend that their lumber should be shipped into the United States duty-free, reflecting the fact that the United States, Canada and Mexico are all part of the North American Free Trade Agreement. In 1999, there were 807 softwood lumber producers in the United States, concentrated in the West. The United States imported 36% of its supply last year with 94% of those imports coming from Canada.