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Canadian Softwood Duties Could Impact Pallet Market as Investigation Continues
Canadian Lumber Battle: The U.S. softwood lumber industry has filed for trade protection with the U.S. government. This latest round in the lumber battle could have an even bigger impact on the pallet market than previous duty cases. Found out what it means for your lumber market.
By Chaille Brindley
Date Posted: 2/1/2017
Canadian Lumber Battle
The U.S. softwood lumber industry has filed for trade protection with the U.S. government. This latest round in the lumber battle could have an even bigger impact on the pallet market than previous duty cases.
A dispute between the United States and Canada over softwood lumber is nothing new. It has gone on for decades, and the issue subsided for years thanks to the last Softwood Lumber Agreement (SLA). But with the SLA’s expiration and the coming to power of a more protectionist president, it appears the situation is set for a hard fought battle in the current round of the issue.
The U.S. Softwood Lumber Coalitions has asked for both counterveiling and antidumping duties, and the U.S. government has decided to move ahead with its investigation after preliminary investigations found there was enough evidence that the U.S. industry had been harmed. What is unique this time is that the Coalition’s petition covers a lot more material, including components used to make pallets. And the threat of duties is already starting to have an impact on low-grade softwood lumber in the United States.
The investigation covers a wide swath of softwood lumber material. The Coalition listed a number of lumber products and categories that previously had exemptions from duties under the North American Trade Agreement (NAFTA). These exemptions had allowed the free flow of those products and materials from Canada without duties or quotas in the past.
Unassembled pallets (pallet kits) and notched stringers are included in the expanded scope of the U.S. petition, and the DOC has decided to go ahead with the full scope of the petition in its investigation phase. The DOC might decide to limit the scope of any trade action if it finds that duties are warranted.
The investigation includes coniferous wood, sawn, or chipped lengthwise, sliced or peeled, whether or not planed, whether or not sanded, or whether or not finger-jointed, of an actual thickness exceeding six millimeters. Also included is coniferous wood siding; flooring; coniferous drilled and notched lumber and angle cut lumber; and coniferous lumber stacked on edge and fastened together with nails, whether or not with plywood sheathing. The investigation also covers components or parts of semi-finished or unassembled finished products made from subject merchandise, such as stringers, square cut box-spring frame components, fence pickets, truss components, pallet components, flooring, and door and window frame parts.
Some of the top softwood lumber producers in the United States are involved with the petition, and this includes: Potlatch Corporation, Seneca Sawmill Company, Sierra Pacific Industries, Stimson Lumber Company and Weyerhaeuser Company. The primary opponent to the petition are domestic users of Canadian lumber, such as the homebuilding sector and others, including some pallet and packaging producers.
The U.S. International Trade Commission (ITC) has made its preliminary injury determination in favor of the Coalition’s petition. Now, the U.S. Department of Commerce (DOC) will continue to conduct its antidumping and countervailing duty investigations on imports of these products from Canada, with its countervailing duty determination due on or about April 25th, and its preliminary antidumping duty determination due to follow later.
The Coalition alleges that the dumping margin is 20.12% to 53.08% depending on the product and source of the imported goods. If the Coalition wins, it could force significant price increases for Canadian softwood imports. Depending on the scope of the final action, it could impact pallet kits and components that were exempt under previous duty actions. The market has responded by seeing some sudden wild price spikes.
Some pallet companies are trying to switch customers to hardwood. Others are looking to softwood from the United States. What is clear is that any decision to impose duties would have significant market impacts. And although the Canadian government will likely challenge in international courts any duty assessed, they would still have to put up the money ahead of time as bond, which would amount to a significant price increase for Canadian material.
This could be good news for the U.S. hardwood sector, which has lost some market share for pallets to softwood. And it also is positive for pallet rental companies, which have existing pools and longstanding contracts for its lumber sourcing. Also, domestic pallet producers with their own sawing capacity may benefit if they have lower cost sources of logs and don’t need Canadian material.
You have people in the pallet industry on both sides of this softwood lumber dispute. That is why neither of the two major trade associations in the United States for the pallet industry are taking a side on the softwood lumber petition.