The World Trade Organization Tuesday said the US violated international trade rules in the way it calculated tariffs on Canadian imports of softwood lumber in a key dispute ruling published on the WTO website. The decision also provided a boost to the US’s use of a controversial methodology used when calculating anti-dumping duties on Canadian lumber. In the past, the WTO has struck down American use of the process, called zeroing, which typically results in higher duty margins.
This ruling marks the latest stage in a decades-long disagreement between the two nations, with the US alleging its northern neighbor unfairly subsidizes lumber production.
North America Softwood Lumber Construction Framing Lumber Prices “Movers & Shakers” Two-Year History: 2017 – 2019
The US administration said the move was warranted after concluding that Canada had unfairly subsidised and dumped the product on the US market. Canada at the time described the tariffs as “unfair, unwarranted and deeply troubling”, and challenged the US use of the so-called Differential Pricing Methodology in investigating alleged dumping. A panel established by the WTO’s Dispute Settlement Body to rule on the matter agreed with Canada that in using that method of calculation, the US “acted inconsistently” with an international anti-dumping agreement. But it rejected a number of Canada’s other arguments, including a charge that the US use of a practice called “zeroing” violated international trade rules.
If the WTO ruling stands on appeal, the US will be required to roll back some of its restrictions on Canadian lumber imports. The US imported US$5.9 billion worth of softwood lumber from Canada in 2018, according to data complied by the Geneva-based International Trade Center. The WTO dispute centers on a series of US tariffs — countervailing duties of up to 18 percent and anti-dumping duties of up to 7.28 percent — on imports of Canadian softwood lumber products.
Benchmark Western Spruce-Pine-Fir 2×4 Softwood Lumber Prices vs US House Prices Index:
Both sides have up to 60 days to appeal Tuesday’s ruling, which would leave it up to the Appellate Body to determine the final outcome. Canada has also targeted the US duties under the North American Free Trade Agreement’s dispute settlement process. The CVD portion of the case has yet to be ruled upon