CRS Report: Congress Could Assert Itself on Canadian Softwood Lumber Trade
Congress may want to assert itself on trade in softwood lumber, whether by codifying higher tariffs to protect the U.S. lumber industry, or by pushing for a new softwood lumber agreement to end trade remedies. A Dec. 30 Congressional Research Service report also said that Congress could commission a report "on the benefits and costs of softwood lumber duties for the U.S. economy."
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The new report noted the U.S. imported about $7 billion in softwood timber and lumber products that would be covered by the 10% Section 232 lumber rate, and about 75%, or $5.2 billion worth, was Canadian. "There is some, but not complete, overlap between the list of softwood lumber products covered by AD/CVDs and Section 232 tariffs," the report added.
The 2024 antidumping and countervailing duties have not been set yet, but in 2023, the Commerce Department assessed a combined AD/CVD rate ranging between 26.47% to 47.59% on Canadian softwood lumber. The AD/CVD and Section 232 tariffs are both paid on the imports. For 11 years, there was trade peace under a softwood lumber agreement, which precluded trade remedy cases and allowed unfettered exports at certain price levels and quotas when prices fell below a certain point.
The report noted that alleged government subsidies in Canada on softwood lumber is "one of the most controversial and enduring disagreements in the U.S.-Canada trade relationship."
"Evidence on the issue -- specifically, that Canadian tenure fees are below market production costs -- is inconclusive, for several reasons," the report's authors wrote. Direct comparison of harvest volume is impossible, because of the way each country measures. "Second, U.S. and Canadian forests differ in species mix, and the trees’ size and quality, which affects the overall price for a given timber sale," and the obligations of timber companies for reforestation and road construction differ in the U.S. and Canada, as well as labor costs, "which in turn leads to structural differences in the costs to firms in the timber market."
The report noted that panels under NAFTA and the World Trade Organization have ruled in part for Canada, in part for the U.S. "Other USMCA disputes and a case at the Court of International Trade are ongoing."
The report noted that views in Congress vary on whether Canada is cheating in pricing its softwood lumber exports, and whether AD/CVD and other duties on softwood lumber are good, because they protect domestic producers, or bad, because they increase the cost of homebuilding and renovations.
In November, Maine's two senators wrote to the administration to complain that Maine mills were suffering due to the new 10% tariff, and said that after they began, Canada stopped importing Maine lumber products.
"Each day, our sawmills and pulp and paper mills move wood products across the United States-Canada border. Last year alone, Maine exported roughly two million tons of wood and imported 2.3 million tons, mostly to and from Canada," they wrote. They did not ask for an end to the tariff, but rather, payments to the industry, similar to those for other agricultural producers hurt by trade wars.
The report said, "Congress has constitutional authority over foreign commerce and tariffs, and a key issue for the 119th Congress is whether, and to what extent, to exercise that authority and oversight over U.S. trade policy, including tariffs on Canadian softwood lumber imports.
"Congress also has an oversight role related to the scheduled 2026 USMCA joint review, and Members could consider whether to use that venue to express their views on Canadian softwood lumber tariffs and Canadian policies related to lumber."