Ottawa called on to push for renewed softwood exclusion in U.S.

1 / 2
Ottawa called on to push for renewed softwood exclusion in U.S.

New Brunswick sawmills could be facing an all-or-nothing gamble in the softwood lumber case with the United States.

The Gallant government repeated its call Friday for Ottawa to negotiate the restoration of an exclusion for Maritime mills from American tariffs.

"That's where we want to put all of our effort and our energy," Trade Minister Roger Melanson said of the call for an absolute exclusion of all mills from the U.S. tariffs.

Other than J.D. Irving Ltd., all sawmills in the province are subject to a 20 per cent tariff, which is based on a formula and applies across Canada.

The only other route the mills have to escape that tariff would be to file for an expedited review later this year.

It's a costly regulatory process that would likely require hiring high-priced Washington trade lawyers, and Melanson quickly ruled out the province helping mills do that.

"That's not something we can do," he said. "We will not put ourselves in a position where we are perceived to be subsidizing the industry."

'Senior negotiator' to be named

Melanson said  the province will soon appoint its own "senior negotiator" to represent New Brunswick's interests in Washington and Ottawa.

An expedited review could only take place after the U.S. releases its final decision on the tariffs later this year. There's no way for mills to avoid paying it or to get the rate changed between now and then, according to Washington trade lawyer Yohai Baisburd.

Irving is the only New Brunswick company to avoid the higher tariff because it applied in January for a voluntary investigation by U.S. officials of its operations, including any subsidies it receives from governments.

Irving ended up with a far lower tariff of 3.02 per cent.

A determination memorandum from the U.S. Commerce Department lays out the rationale for that figure, listing various government programs that Irving used and assigning each of them a percentage value.

Stumpage fees on Crown land, which the U.S. considers a subsidy, are worth 1.62 per cent, for example. A program that lets Irving sell electricity from biomass to NB Power and buy it back at a lower price is worth 0.09 per cent.

But there's no similar breakdown for the 19.88 per cent tariff applied to all other sawmills in the province and in Canada because it's what's called an "all-others rate."

U.S. law says the "all-other" rate must be calculated by averaging the tariffs applied to mills that were investigated individually. In the softwood case, it was based on rates ranging from Irving's three per cent to a 24 per cent tariff on a British Columbia company.

Irving said this week it agrees with the Gallant government's position that the U.S. decision shows the industry is not subsidized in the province and the exclusion from tariffs should be restored.

But that's subject to Canada-U.S. negotiations and there's no guarantee the Trump administration will say yes to the exclusion.

Expensive proposition

If New Brunswick mills decide to seek an expedited review, it can only happen at the end of the investigation later this year.

The federal government's website says any company seeking an expedited review should consider hiring U.S. law firms that specialize in international trade, an expensive proposition.

"Depending on the complexity of the case, they can be expensive," said Baisburd, a trade lawyer in Washington.

"I wouldn't have the resources" to fight a case in Washington, sawmill owner Danny Stillwell told CBC News earlier this week. "Even some of the mid-sized mills wouldn't have the resources to take this to Commerce."

Harry Gill, the owner of Devon Lumber, which hosted Melanson's  news conference Friday, said he wasn't sure if he and other mill owners could afford it either.

"I don't know if we'll have to cross that road or not," he said. "We'll see."

Devon Lumber employs 40 people and ships 90 per cent of its wood to the U.S. Gill said the company's ability to survive the new tariff will depend on market prices.

Irving sought review in other case

Ironically, J.D. Irving Ltd. itself recently used the expedited-review process to escape an "all-others" tariff rate in an unrelated case.

Irving was facing a tariff of more than 18 per cent on its supercalendered paper exports to the U.S.

But it applied for an expedited review, which led to that rate being lowered by more than two-thirds, to 5.87 per cent.

J.D. Irving would not comment Friday on whether it would help other mills pay for an expedited review.

Some of the U.S. documents list Irving as part of a group of mills called the New Brunswick Lumber Producers and represented by a Washington law firm.

But Irving has also used its own Washington law firm and has benefited from support from powerful U.S. politicians.

Maine politicians speak up

Two influential U.S. senators from Maine, Republican Susan Collins and independent Angus King, both called U.S. Commerce Secretary Wilbur Ross last month to ask that Irving be investigated individually, public documents show.

Irving employs hundreds of people in its forestry operations in Maine and a staffer for King thanked Ross's office for taking the time to speak about "this important issue for Maine."

The U.S. industry has argued New Brunswick should no longer have an exclusion from tariffs because the share of wood from Crown forests going to sawmills has crossed a threshold that means companies here are benefiting from unfair subsidies.