VANCOUVER – The United States re-ignited the softwood lumber dispute Tuesday by launching a legal challenge that targets British Columbia’s lumber industry.
The U.S. claims B.C. has been subsidizing lumber companies here by charging minimal stumpage rates for timber damaged by the mountain pine beetle.
The challenge was officially filed Tuesday at the London Court of International Arbitration, the body chosen by both Canada and the U.S. as the final appeal in any dispute over the 2006 Softwood Lumber Agreement.
Keta Kosman, publisher of the trade journal Madison’s Lumber Reporter, said the American challenge poses a serious threat to the B.C. forest sector.
“This is aimed at B.C. now; this is the big dog. This is the one they have wanted since signing the softwood agreement in 2006,” she said.
In a statement, U.S. trade representative Ron Kirk accused Canada of selling softwood timber from public lands to Canadian lumber exporters for prices below those agreed in the 2006 Softwood Lumber Agreement.
“Canada is in breach of its commitments,” said Kirk. “When we believe our trading partners are not living up to their obligations, we will not hesitate to enforce our rights under our trade agreements.”
Talks to solve the dispute without arbitration have failed, Kirk said in the release.
However, John Allan, president of the B.C. Council of Forest Industries, said the Americans appeared to have made up their mind to take action long before the last set of talks. Consultations requested by the Americans last fall lasted no more than one hour, he said.
Allan said the issue is over the price the government has been charging for beetle-damaged timber. The rate charged by the government for salvage wood is 25 cents a cubic metre. Those logs are either uselss for lumber or have been difficult to saw into lumber as they crack and split during manufacturing.
The B.C. industry has invested in new technology to resolve problems of splitting and has engaged in the controversial practice of kiln drying sample logs to reveal the presence of hidden cracks. A stumpage rate for all logs in the a particular load is then applied based on the condition of the sample.
The Americans have alleged that B.C. producers “cook” the logs to create splits in an otherwise sound sample log. That notion is false, Allan said.
“We reject any allegations of subsidy,” he said, noting that the mechanism for setting such rates had been grandfathered into the softwood agreement. B.C. has lived up to its obligations under the agreement, he said.
The powerful U.S. lumber lobby Coalition for Fair Lumber Imports applauded the Obama administration for targeting B.C.
Coalition chairman Steve Swanson, said in a release there has been an enormous increase in salvage timber being sold in B.C. for 25 cents a cubic metre. That price, he said “has saved B.C. Interior lumber producers hundreds of millions of dollars in fiber costs, compared to what they would have paid under the Although the USTR petition does not contain a dollar figure, Allan said the U.S. lumber lobby is claiming the subsidy has given B.C. companies a $400 million benefit.
The American move to take B.C. stumpage rates to arbitration comes as no surprise, said Pat Bell, minister of forests, mines and lands.
“We have been hearing rumblings, not particularly good ones,” he said hours before the Americans filed their petition. “It reinforces the importance of (lumber shipments to) Asia, in China in particular,” he said. Since last October, lumber sales to China and Japan have exceeded the value of lumber sales into the U.S.
In a later statement, Bell said “British Columbia has always honoured and continues to honour its commitments under the softwood lumber agreement. I am confident the arbitrators will find the same.”
Tuesday’s challenge marks the third time the U.S. has appealed to the London court for a ruling. The Americans were successful in an earlier challenge aimed at Quebec’s lumber shipments to the U.S. Canada was ordered to pay $68 million in duties. A second challenge has yet to be resolved.
ghamilton@vancouversun.com
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