A lumber yard near Vancouver, B.C., on July 6, 2022.JENNIFER GAUTHIER/The Globe and Mail
Canadian producers of softwood lumber are facing challenges to gain greater access to timber in British Columbia as they cope with new U.S. tariffs stacked on top of existing duties.
Tree harvesting has plunged in recent years on Crown land in B.C., to an estimated 31 million cubic metres last year from 60 million cubic metres in 2018.
Vancouver-based forestry analyst Russ Taylor said the B.C. government finds itself in a bind on the forestry file, after Tuesday’s implementation of 25-per-cent tariffs, which are in addition to the current duty rate of 14.4 per cent for Canadian softwood shipped south of the border.
“The government’s forest policy in the last five years has gone from conservation of the forests and to almost preservation – locking up the timber rather making it available to the industry,” Mr. Taylor said in an interview on Wednesday.
He said there isn’t any enforcement of Premier David Eby’s mandate letter to Forests Minister Ravi Parmar, which sets out general goals to bolster the lumber sector.
The January letter asks Mr. Parmar to “work with all partners, including Indigenous governments, toward ensuring a sustainable land base to enable harvest of 45 million cubic metres per year, while fulfilling our commitment to protect old growth.”
But Mr. Taylor said the B.C. budget tabled on Tuesday forecasts that tree harvesting would dip to 29 million cubic metres in the 2027-28 fiscal year, and there remains no timetable for when the harvest might eventually rise to 45 million cubic metres annually.
Kim Haakstad, president of the BC Council of Forest Industries, said she recognizes that there isn’t any simple solution, but that the lumber sector needs greater access to timber supplies.
“As Premier Eby and Minister Parmar have acknowledged, the forest sector will be particularly hard hit by the new tariffs at a time when the industry is already facing significant challenges,” she said in a statement.
The softwood dispute dates back to the early 1980s. In the latest round of the trade fight, the U.S. started imposing duties on Canadian lumber in 2017. Over the past eight years, Canadian producers have paid deposits of more than US$7-billion for U.S. duties.
By contrast, the new tariffs could be paid by mostly “U.S. importers of record,” and would amount to taxes rather than deposits that qualify for possible refunds, industry analysts say.
“We know access to timber is critical for the people, communities and businesses that rely on B.C.’s forests for their livelihoods,” the B.C. Forests Ministry said in a statement on Wednesday. “We’re committed to a future that B.C.’s forest-dependent communities can count on, and this includes a balance between conservation and harvesting, and a renewed focus on higher-value wood products manufacturing.”
Canadian producers recently accounted for 24 per cent of total U.S. lumber consumption, compared with nearly 33 per cent in 2016. Production has increased at U.S. sawmills, including those owned by companies with head offices in Canada, such as Vancouver-based West Fraser Timber Co. Ltd.
“We are monitoring how markets respond to tariffs and are working with our federal and provincial governments to support them in their efforts to find solutions,” West Fraser said in a statement on Wednesday.
Most forests in Canada are on Crown land, where buyers pay “stumpage fees” to provincial governments for the right to log.
The U.S. has alleged that the fees are too low, and that they amount to government subsidies. The U.S. has levied countervailing duties in retaliation, focused on the stumpage system. Washington has also imposed anti-dumping duties in response to Canadian softwood allegedly being sold at below market value.
On Monday, the U.S. Department of Commerce said it plans to hike the anti-dumping duty rate this summer for most Canadian lumber producers to 20.07 per cent, compared with the current 7.66 per cent.
Whether it’s duties or tariffs, the levies will eventually filter down to buyers, said John Brink, founder of the Brink Group of Companies, which has three manufacturing plants in B.C. that produce valued-added lumber.
“The customer ultimately will pay for the levies one way or the other,” Mr. Brink said in an interview on Wednesday.
Derek Nighbor, president of the Forest Products Association of Canada, said the new tariffs will damage the integrated supply chain for the forestry industry on both sides of the border.
The U.S. National Association of Home Builders has warned that tariffs will have an inflationary effect on residential construction.
But the U.S. Lumber Coalition counters that the impact on consumers has been exaggerated, arguing that the cost of softwood is a tiny part of the total costs for a new house, including land value.