Canada challenging U.S. softwood tariffs under the new NAFTA agreement

The federal government is launching a challenge under the new NAFTA agreement against U.S. softwood lumber duties, International trade Minister Mary Ng has announced.

Minister Mary Ng said the government filed noticed of the challenge under Chapter 10 of the Canada, U.S. Mexico Agreement, (CUSMA).

"Canada reaffirms its call for the United States to stop imposing unwarranted duties on Canadian softwood lumber products," Ng said in a statement.

The U.S. Department of Commerce announced in November that it would be imposing an average duty of 17.9 per cent on softwood lumber imported from Canada; twice the previous 8.99 per cent rate.

In May, the U.S. government said it planned to hike the rate to 18.32 per cent, but after further analysis over the summer the agency decided to ratchet down that plan, while still doubling the levy.

The U.S. says Canadian lumber producers dump their product into the U.S. at a lower price than American lumber companies can because they are subsidized. The U.S. puts a tariff on all softwood lumber from Canada to raise its price at the retail level, which encourages consumers to buy American wood.

Canada has long rejected those allegations, and various trade tribunals on the matter have decided in Canada's favour.

"Rulings on this issue have consistently found Canada to be a fair trading partner, and Canada is confident that rulings will continue to find Canada to be one," Ng said in her statement.

Canada exports about $8 billion worth of softwood lumber to the world every year, according to official government data. The U.S. is the largest single buyer.

Not all Canadian lumber will face the same duty, as the U.S. alleges different companies are subsidized to different levels. The final rates are as follows:

All other Canadian lumber producers will see a baseline tariff of 17.9 per cent.

This is the second time Canada has invoked Chapter 10 of CUSMA. Last year the government filed a similar challenge against the 8.99 per cent duty.

Chapter 10 allows for one of the three countries to request a binational trade panel to rule on a trade dispute, rather than turning to international bodies like the World Trade Organization (WTO).

Canada won a WTO case on softwood lumber In August 2020, but the U.S. appealed — and because the Americans continue to block appointments to the WTO's appellate body, that case was effectively stalled.