OTTAWA - Canada would cap its U.S. market share at 30 percent, in an effort to settle the softwood lumber trade dispute, with the U.S. supplying the remainder. But resolving what happens if it can't make up the balance may be keeping an agreement from being reached.

The U.S. Lumber Coalition has rejected the quota so far, Bloomberg News is reporting. And Canada's Ambassador to Washington David McNaughton told Canadian Press that discussions continue on whether other lumber suppliers from Europe or elsewhere would be invited to fulfill that gap. The U.S. wants to settle the agreement as it begins renegotiating NAFTA, on August 16.

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On July 25, a bi-partisan group of  U.S. Senators from lumber producing states - Senators Michael Bennet (D - CO), Mike Crapo (R - ID), Mike Enzi (R - WY), Johnny Isakson (R - GA), Debbie Stabenow (D - MI), Mark Warner (D - VA), and Ron Wyden (D - OR) of the Senate Finance Committee - urged Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer to negotiate a softwood lumber trade deal with Canada that sets a maximum market share quota for Canada

"As representatives serving many lumber producers," the group wrote, "we understand the importance of ensuring any future agreement addresses unfairly traded softwood lumber from Canada and meets the specific needs of the domestic industry. It is also critical trade policies support our economy and American jobs, including through enforcement of U.S. trade laws. Any long term agreement must stop the harmful effects of subsidized and unfairly traded Canadian lumber on fair competition with the U.S. producers.

"We urge you to negotiate a clean quota agreement, holding Canada to its June 2016 commitment to negotiate a new agreement that is 'designed to maintain Canadian exports at or below an agreed market share' and resist provisions that undermine a stable and a clearly enforceable system."

The National Association of Home Builders opposes the interim tariffs on lumber that have been levied as the agreement is reworked. This has caused an 18 percent rise in lumber prices for builders, who are seeking cheaper sources in Russia and Europe, according to a New York Times report. The U.S. imported US$5.7 billion in softwood lumber from Canada in 2016.

Richard Garneau, CEO of Resolute Forest Products in Montreal, told Bloomberg that the U.S. at best can supply 68 percent of the market. Resolute has extensive lumber capacity on both sides of the U.S.- Canada border, which affects its business continuously. In its August 3 earnings report filed with the U.S. Security & Exchange Commission, Resolute summarized the status of the softwood lumber dispute and its impact on its business:  

  • On November 25, 2016, countervailing and anti-dumping duty petitions were filed with the U.S. Department of Commerce (“Commerce”) and the U.S. International Trade Commission by certain U.S. softwood lumber producers and forest landowners, requesting that the U.S. government impose countervailing and anti-dumping duties on Canadian-origin softwood lumber products exported to the U.S. One of our subsidiaries was identified in the petition as being a Canadian exporting producer of softwood lumber products to the U.S. and was selected as a mandatory respondent to be investigated by Commerce in both the countervailing and anti-dumping duty investigations.
  • On April 24, 2017, Commerce announced its preliminary determinations in the countervailing duty investigation, and, as a result, since April 28, 2017, we have been required to pay cash deposits to the U.S. at a rate of 12.82% for estimated countervailing duties on our imports to the U.S. of softwood lumber products produced at our Canadian sawmills. Based on the 12.82% rate and our current operating parameters, cash deposits on our imports of the affected softwood lumber products to the U.S. could be as high as $50 million per year. Through June 30, 2017, our cash deposits totaled $4 million.
  • On June 26, 2017, Commerce announced its preliminary determinations in the anti-dumping duty investigation, and, as a result, since June 30, 2017, we have been required to pay cash deposits to the U.S. at a rate of 4.59% for estimated anti-dumping duties on our imports to the U.S. of softwood lumber products produced at our Canadian sawmills. Based on the 4.59% rate and our current operating parameters, cash deposits on our imports of the affected softwood lumber products to the U.S. could be as high as $20 million per year.
  • We are not presently able to determine the ultimate resolution of these matters, but we believe it is not probable that we will ultimately be assessed with significant duties on our Canadian-produced softwood lumber products that are exported to the U.S. 

Newly added to the negotiations is Kelly Craft, confirmed as U.S. Ambassador to Canada on August 4. Ambassador Kelly told the Senate the lumber agreement, along with a dairy products dispute and NAFTA, are at the top of her list of concerns.