Hey homebuilders, Canadian lumber tariffs could jump nearly 30%

Mortgage

U.S. Secretary of Commerce Wilbur Ross announced a new proposed Canadian lumber tariff in addition to the tariff the Trump administration recently announced on Canadian softwood lumber imported into the U.S.

So why is this important? Softwood lumber is made from trees that have cones, such as spruce, pine and fir. It’s primarily used in home construction, and the U.S. is also Canada’s biggest export market.

According to the National Association of Home Builders, the steep increase would have a drastic financial impact on homebuilders and homebuyers.

Ross announced the affirmative preliminary determination in the antidumping duty (AD) investigation of softwood lumber from Canada, determining that exporters from Canada have sold softwood lumber the United States at 7.72% to 4.59% less than fair value based on factual evidence provided by the interested parties. 

So to balance this out, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of softwood lumber from Canada based on these preliminary rates.

The department added that these preliminary AD rates are in addition to the preliminary countervailing duty (CVD) rates that the Commerce Department assessed on softwood lumber in April.  When combined, the applicable duty rates range from 30.88% to 17.41%.

“The United States is committed to free and fair trade, as seen today with the preliminary decision to exclude softwood lumber from the Canadian Atlantic Provinces in the ongoing antidumping and countervailing duty cases,” said Ross. “While I remain optimistic that we will be able to reach a negotiated solution on softwood lumber, until we do, we will continue to vigorously apply the AD and CVD laws to stand up for American companies and their workers.”

NAHB, however, isn’t as optimistic on the impact of the potential tariffs, stating that it’s basically another tax on American homebuilders and homebuyers that will jeopardize affordable housing in America.

“Adding this new tariff to the proposed 20% countervailing lumber duty that the Trump administration slapped on imports of lumber this spring means that total tariffs would be a whopping 27%,” explained NAHB Chairman Granger MacDonald. “Given that lumber is a major component in new-home construction, the combined duties will harm housing affordability and price countless American households out of the housing market.”

The first 20% tariff announced back in April from Ross came as a possible solution to a long-standing lumber battle between the U.S. and Canada.

Jen Skerritt published an informative QA on what the two countries are fighting about back in April.

“The U.S. lumber industry alleges Canadian wood is heavily subsidized and that imports are harming American mills and workers. Canadians argue the U.S. depends on its lumber for home construction and won’t be able to meet demand without its neighbor to the north. It’s a rift that goes back decades,” Skerritt said.

But this new tariff, to NAHB, isn’t the answer. “The U.S. relies on Canada for approximately one-third of its lumber needs because of the limited domestic timber supply available for harvesting. Policymakers need to take steps to significantly reduce red tape that prevents the U.S. Forest Service from better managing its timber lands and increase the delivery of domestic timber products into the market,” said MacDonald.

“A robust housing market is essential to stimulate job and economic growth. With the U.S. housing sector regaining its footing, imposing arbitrary protectionist restrictions to subsidize domestic lumber producers will blunt this forward momentum and make homeownership more expensive for hard-working families,” said MacDonald. “Clearly, this is not the way to resolve the U.S.-Canada lumber trade dispute or to boost the American economy.”

The proposed antidumping duty order isn’t guaranteed to go into effect though. From here, the U.S. International Trade Commissions is conducting a parallel investigation to determine if the American producers have been harmed by the softwood lumber imports from Canada. 

The Commerce Department noted that if its final determination is affirmative, and the ITC makes an affirmative final injury determination, the Commerce Department will issue an antidumping order. 

However, if the ITC does not find that U.S. producers have been harmed, then the investigation will end, and no duties will be collected.

The Department of Commerce is currently scheduled to announce its final AD determination on Sept. 7, 2017.

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