Question Period Note: The U.S. trade action against certain Canadian softwood lumber products.

Trade remedy proceedings and negotiations regarding certain Canadian softwood lumber (SWL) products.

• Canada is extremely disappointed that the U.S. decided to nearly double the combined anti-dumping (AD) and countervailing (CVD) duty rate for most of Canadian industry.

• U.S. duties on Canadian SWL are unjustified and cause harm to communities that depend on forestry.
• Canada will continue to vigorously defend the interests of its SWL industry, including through litigation under Chapter 19 of NAFTA, Chapter 10 of CUSMA and before the WTO.

• Canada believes that all provinces should be exempted from U.S. duties. Canada supports and has advocated for the exclusion of Atlantic provinces, as well as a removal of duties for every affected province.

• Canada continues to believe that an agreement that brings stability to the SWL industry is in the best interests of both countries. The government raises this issue with U.S. counterparts at every opportunity.

The U.S. is by far Canada's largest SWL export destination (almost 85% of exports by volume in 2020). The top exporting province to the U.S. is BC, followed by QC (over $4 and $1.5 billion, respectively).

The 2006 Canada-U.S. Softwood Lumber Agreement expired in Oct. 2015. Canada continues to believe that a negotiated agreement is in both countries' best interests. At every opportunity, Canada reminds the U.S. that we are ready to negotiate a mutually acceptable agreement once the U.S. demonstrates a willingness to discuss the issue meaningfully.

In late November 2021, the combined U.S. duty rate applicable to most Canadian SWL companies nearly doubled, reaching 17.90%.

SWL products certified as having been produced from logs in NL, NS, or PEI are excluded from the scope of the AD and CVD orders. In past SWL disputes, all four Atlantic provinces were excluded from CVD duties, but were subject to AD duties.

Canada is challenging U.S. duties under NAFTA Ch. 19, CUSMA Ch. 10 and before the WTO. The U.S. Department of Commerce's (Commerce) final CVD and AD determinations are subject to both NAFTA Ch. 19 challenges and WTO challenges. The WTO AD panel found that the U.S. improperly calculated dumping margins, though Canada appealed in June 2019 certain findings that were inconsistent with past panel and/or Appellate Body (AB) reports. The WTO CVD panel found overwhelmingly in Canada's favour, namely that U.S. CVD duties on Canadian SWL are inconsistent with the U.S.' WTO obligations. However, the U.S. appealed the Panel's report in September 2020. Timelines for both AB proceedings are unclear due to the WTO AB's current lack of quorum.

Finally, Canada is challenging the final results of Commerce's first Administrative Reviews (AR) under Ch. 10 of CUSMA. ARs are annual reviews that Commerce conducts of its AD and CVD orders. The AR process establishes duty assessment rates for shipments during the period of review, as well as the new duty deposit rates going forward until the next annual AR is completed. The final results of the second ARs, released on November 24, 2021, nearly doubled the duty rate applicable to most companies (17.90% from 8.99%).

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