U.S. Consumer groups representing 95 percent of the domestic consumption of softwood lumber today criticized the Commerce Department for what it calls a "premature and totally inappropriate" decision to issue a preliminary determination that there are export subsidies on Canadian softwood lumber, and that it found critical circumstances that would warrant imposing retroactive duties.
A result of the decision will be the application of retroactive duties on Canadian lumber imports to the U.S. Commerce today said it had found evidence that imports from Canada increased enough to be a threat to domestic lumber mills, but U.S. consumer groups believe the import data has been inappropriately used. The trade action, along with other protectionist measures sought by the U.S. forestry sector through allegations of dumping of Canadian lumber into the U.S. market, could result in imposing a tariff on softwood lumber imports from Canada of 19.3 percent, which the consumer groups say will be passed on to U.S. consumers.
Susan Petniunas, spokesperson for the alliance of American Consumers for Affordable Homes (ACAH), a group of 15 major trade associations and companies opposing any new trade restraints or negotiations to restrict Canadian softwood lumber imports, said that the number assigned by Commerce, as well as the initial U.S. producers' request for the imposition of countervailing duties of 40 percent, are both "totally ludicrous."
"Clearly 19.3 percent is too much; the number should be zero," she added. "U.S. consumers deserve free trade without any new trade restraints. We are hopeful that a fair process at Commerce will end up considering consumer interests as more significant than those of a small number of U.S. protectionist companies that want to penalize consumers who ultimately pay the cost."
Petniunas also said: "It is unconscionable to even think that U.S. importers will absorb the tariffs. Everyone knows they get passed on to the consumer. And, the price of U.S. lumber also goes up accordingly, resulting in profits to the forestry companies. The ultimate victim is the U.S. consumer."
"We also believe that critical circumstances cannot be proven nor legally imposed," said Petniunas. "To have critical circumstances, Commerce must show that the imports have increased more than 15 percent, year over year. Our information, which comes from numbers released by the Department of Commerce itself, July 27, shows that that imports increased slightly over 11 percent. Everyone knows that lumber sales increase in the second quarter when more construction of new homes begins."
"We believe that a careful analysis will show that there is no factual basis, other than pure political pressure from a handful of U.S. forestry companies, for Commerce to impose what will amount to a hidden tax on all lumber used in homebuilding in the U.S. This penalizes consumers and hurts housing affordability," Petniunas added.
She also said consumer groups believe that the duty levels calculated in the preliminary determination and critical circumstance decisions will be eventually reversed because they are not warranted in this case. A final determination would be expected in late September. The antidumping preliminary decision is also expected in September, or in December if the cases are aligned. Consumers believe dumping allegations are unsustainable. U.S. producers have asked for 38 percent duties for dumping allegations which, if added to the 19.3 percent announced today, would put a tax of 75.3 percent on vital Canadian softwood lumber purchased in the U.S.
"If the laws are applied in conformity with WTO and NAFTA requirements, Commerce cannot find that increased imports or that export subsidies exist to warrant putting countervailing duties on the backs of consumers."
Under trade rules, determining critical circumstances is usually announced as part of a preliminary determination that Commerce has found that exports have increased, and that there is evidence of export subsidies and dumping. Critical circumstances would apply the duties retroactively 90 days from the date the preliminary determination of subsidization or dumping is published in the Federal Register.
"A major fact that is being missed in all of this is that the southern yellow pine that U.S. companies want to protect is not a substitute for spruce pine fir from Canada," Petniunas added. "How can you pose a threat to an industry when the products are so different in their characteristics and uses in housing construction?" More than a dozen consumer group representatives testified before the International Trade Commission in April that "a stick is not a stick," and that if they cannot get Canadian softwood, they will turn to other countries that produce spruce pine fir since one is not a substitute for the other. There are no restrictions on how much spruce pine fir can be imported from other countries; the restrictions have only applied to Canada.
In July, more than 100 Republican and Democratic members of the U.S. Congress jointly sent a letter to President George W. Bush, urging him to assure that the Administration will protect the interests of consumers and workers from potentially onerous duties being requested by U.S. lumber producers seeking to limit the amount of lumber imported from Canada. They called for an open and fair process by Commerce in making any determinations.
"It is essential that these cases be handled in a fair and transparent manner, with the interests of U.S. homebuyers and lumber users given due consideration as to other parties," the Members of Congress urged.
Duties being sought by some U.S. producers could raise the cost of a typical new home anywhere from $2,000 to $4,000. U.S. Census Bureau data have shown that a price hike of such magnitude could drive nearly 1.2 million households out of the housing market each year, depriving them of the American dream of home ownership. These costs significantly impact lower income, retiring senior citizens and first time homebuyers.
"Clearly, the economic health of this nation relies, in part, on a strong housing market, the letter continues. "Creating arbitrary trade restrictions could weaken consumer confidence and have far reaching effects on this sector of our economy."
Approximately six million U.S. workers are involved in lumber-using businesses, including home builders, remodelers, lumber dealers, and workers in industries such as wood pallet manufacturers, window frame and bed makers. More than 6 million workers are associated with the consumers of lumber and outnumber lumber-producing workers by 25 to 1 in the United States.
"If Commerce sees this as a jobs protection issue, it clearly has to look at the jobs associated with the consumers of lumber which is significantly greater throughout all 50 states," Petniunas said.