Canada-U.S. Blog Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Expect Softwood Lumber Breakthrough During NAFTA Modernization Round 3

Posted in Antidumping, Canada's Federal Government, NAFTA, NAFTA Renegotiations, Softwood Lumber, Trade Agreeements, Trade Remedies, U.S. Federal Government

Let’s set out the target date of importance: Round 3 of the NAFTA Modernization/Renegotiation meetings will take place in Ottawa, Canada between September 23-27, 2017. Round 1 took place in Washington D.C. between August 16-20, 2017 and Round 2 will take place in Mexico City between September 1-5 in Mexico City, Mexico.

Under U.S. law, the U.S. cannot collect countervailing duties after August 26, 2017 – today (because 120 days have elapsed since the preliminary determination of subsidization). This is the next important date on the softwood lumber calendar.  The main thrust of the softwood lumber dispute is alleged subsidy programs by provincial governments.  The significant financial impact of the softwood lumber dispute is from the countervailing duties.

As you may recall, the United States Department of Commerce (“U.S. DOC”) announced on April 24, 2017 imposition preliminary countervailing duties on allegedly subsidized Canadian softwood lumber. These are the higher rates of preliminary duties.  The level of preliminary countervailing duties range from 24.12% to 3.02%:

  • Canfor will be subject to duties of 20.26%;
  • Resolute at 12.82%;
  • Tolko at 19.50%;
  • West Fraser at 24.12%.  J.D. Irving at 3.02%; and
  • All other Canadian imports at 19.88%.

Since April 28, 2017, the United States Customs and Border Protection has been collecting cash deposits equivalent to the applicable preliminary countervailing duty rate for all softwood lumber products captured within the scope of the U.S. investigations.

The U.S. Tariff Act provides that preliminary countervailing duties cannot be in place for more than 120 calendar days after the imposition commences.  As a result, the period of time during which preliminary countervailing duties can be collected under the U.S. Tariff Act statutorily ends as of 11:59 p.m. on August 26, 2017.  A gap period starts today during which countervailing duties cannot be collected under U.S. law. However, if the United States International Trade Commission makes a final determination of injury, then the collection of definitive countervailing duties would start to be collected.

The antidumping duties were in a lower range and are not the driver of the softwood lumber dispute.  On June 26, 2017, the U.S. Department of Commerce announced its preliminary anti-dumping determination with respect to imports of softwood lumber from Canada. The level of preliminary antidumping duties ranged from 7.72% to 4.59%:

  • Canfor will be subject to duties of 7.72%;
  • Resolute at 4.59%;
  • Tolko at 7.53%;
  • West Fraser at 6.76%;
  • J.D. Irving at 6.87%; and
  • All other Canadian imports at 6.87%.

The United States Customs and Border Protection has been collecting cash deposits equivalent to the applicable preliminary countervailing duty rate for all softwood lumber products captured within the scope of the U.S. investigations as of 12:00 a.m. on June 30, 2017 (including retroactive duties). he U.S. Tariff Act provides that anti-dumping duties cannot be in place for more than 120 calendar days, but the U.S. Department of Commerce can extend this deadline to 180 calendar days.  As a result, U.S. Customs and Border Protection may collect preliminary antidumping duties until 11:59 p.m. on October 28, 2017 (but this deadline may be extended) until 11:59 p.m. on December 27, 2017.

On June 26, 2017, The U.S. DOC announced that an exclusion for products originating from Nova Scotia, Newfoundland and Labrador, and Prince Edward Island is appropriate in both the anti-dumping and countervailing duty investigations.  The decision with respect to countervailing duties should be announced August 26, 2017.

So, to summarize, of the NAFTA Modernization/Renegotiation meetings will take place in Ottawa, Canada between September 23-27, 2017 and final countervailing duty rates of softwood lumber (and exemptions for Nova Scotia, Newfoundland and Labrador and Prince Edward Island) should be announced August 26, 2017. There could be an announcement of a new Softwood Lumber Agreement in Canada one month after the final determination of countervailing duties.  The United States may put a solution on the table in return for a concession from Canada.  The timing works nicely.

The Softwood Lumber negotiating team should be working hard over the next month to finalize a softwood lumber agreement.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com. Alternatively, visit www.lexsage.com