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Canada Challenging U.S. Countervailing Duties on Softwood Lumber

Posted December 14, 2020


On Friday, the Trudeau government announced that it has requested a panel review under Chapter 10 of the Canada-United States-Mexico Agreement regarding U.S. countervailing duties on imports of Canadian softwood lumber.
Graphic representing softwood lumber dispute, CA-US Flags, Money, Lumber

In a statement, Mary Ng, Minister of Small Business, Export Promotion and International Trade said that “Canada firmly believes that any duties imposed on Canadian exports of softwood lumber to the United States are unwarranted and unfair.” 

The duties assessed last month by the U.S. Commerce Department “have caused unjustified harm for Canadian workers and businesses, and are hampering economic recovery on both sides of the border—especially when our people are being affected by the health and economic impacts of COVID-19,” Ng stated. 

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Background


On March 28, 2019, Commerce initiated an administrative review of antidumping duty and countervailing duty investigations of imports of certain softwood lumber products from Canada at different periods during 2017-2018.

A final determination of rates was made on November 24, establishing a 7.42% CVD and a 1.57% AD rate (8.99% combined); certain Canadian exporters also received company-specific rates.

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What is Chapter 10?


Under the trade remedies set out in Chapter 10 of the USMCA, the U.S., Canada, and Mexico have the right to challenge each others’ anti-dumping and countervailing duty decisions in front of an expert panel with members from both countries involved in a dispute.

The U.S. Lumber Coalition — the American industry lobby group that for the past 25 years has been dedicated to fighting what it says are “Canada’s unfair lumber trade practices” — is a longstanding critic of this provision, both in the USMCA and before that when the dispute settlement mechanism was covered by Chapter 19 of the North American Free Trade Agreement. The group has repeatedly called for the elimination of NAFTA Chapter 19 and its successor Chapter 10 of the USMCA, claiming the extrajudicial provision is “unconstitutional” and that it “infringes on U.S. sovereignty.”   

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“All Legal Options”


Minister Ng concluded her statement vowing to “vigorously defend” Canada’s forestry sector “and the thousands of hard-working Canadians it employs,” indicating in this respect that Ottawa would “consider all of its legal options… including the possibility of bringing this challenge to the World Trade Organization for review under its dispute settlement mechanism.”

In August, the WTO ruled against the U.S. over duties imposed in 2017 on the grounds that Commerce had failed to prove 16 claims related to Canada’s lumber industry, resulting in unfair subsidy for Canadian producers.

However, until the current stalemate with the WTO’s inoperative appellate body is eventually resolved, any appeals in this regard would ineffectually be made “into the void” (as the U.S. already did in September).       

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Need More Information?


Should you have any questions about this issue, don’t hesitate to contact one of our knowledgeable trade experts.

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