March22

Déjà vu All Over Again

by Tony Shepley,

This past year has seen some major market upheaval because of the re-introduction of Countervailing Duties on softwood lumber from Canada. Please note the use of the word re-introduction. This isn’t our first time, just our next time with duties. Common questions about duties are “Why”, “When”, “Where” and “What For”?

The “Why” of this round of duties is the US government’s feeling that Canada is subsidizing its timber industry by charging less than market rates for stumpage (the right to harvest trees) on Canadian government owned land, thereby allowing Canadian lumber mills to “dump” product on the US market at unreasonably low cost. This particular Duty of 2017 is called the Countervailing Duty/Anti Dumping and is known by the initials CVD/AD in the industry and in Washington. Last week the existing CVD/AD was modified to include wood shingles (red cedar, white cedar and Alaskan Yellow Cedar). With no prior notice, effective 3/15/18 all wood shingles coming from Canada were immediately assessed a 20.83% duty. This included loads of shingles in transit, and materials that had been bought as early as January in anticipation of Spring business. The “When” included no advance warning and no ability to prepare for this duty. The Duty was simply imposed as it was announced, which puts all the pressure on consumers and sellers to make do on their own. A sudden shock like this creates panic and uncertainty.

The “Where” is an interesting point. Where are cedar shingles produced? Almost all cedar shingle mills are located in Canada. White Cedar shingle mills in the US are few and far between. Google “US white cedar shingle mills” and you get a grand total of 2. Both are small enough operations that you could likely fit their operation in your garage. They are tiny producers. Red cedar mills are mostly located in British Columbia with a real concentration of quality mills in the Vancouver Island area. In other words, there are only a handful of American shingle producers and nowhere near enough of them to satisfy the American market. Another interesting part of “Where” is where we source logs for cedar shingles. Industry estimates are that as high a number as 60% of raw logs used for cedar shingles are brought into Canada from the US.

So, if there aren’t nearly enough mills in the US to satisfy US demand for cedar shingles and a sizeable  percentage of the logs used to make the shingles actually come from US forests, “What For?” becomes the key question. What is the duty for? Whom is it supposed to be protecting? If we are bringing logs from the US into Canada, doesn’t that shoot holes in the theory that the Canadian government is subsidizing the Canadian shingle industry? The bottom line is that the duty offers protection to a very small number of US shingle producers, at the expense of every US consumer who buys cedar shingles. The duty creates inflation and drives building costs higher.

Every time a duty is put in place, there is confusion and fear. As often as not, duties are challenged and sometimes overturned by the World Trade Organization, which regulates and monitor trade between nations. Although we see no good reason for this current Countervailing Duty to include cedar shingles, for now it does. We are working through the National Lumber and Building Material Dealers (NLBMDA), the Cedar Shake and Shingle Bureau (CSSB), and the National Association of Home Builders (NAHB) to challenge this cedar shingle inclusion on the grounds stated above. If you would like to help this effort, please do so by registering your protest with:

The US Department of Commerce

International Trade Administration

1401 Constitution Ave, NW

Washington, DC 20230

2302-482-2000

 

 

 

 

 

 

 

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