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Trade war stumps lumber fleets

GUELPH, Ont. - Once again, the Canadian lumber industry is holding its breath as its government battles the U.S. over the heavy-handed tariff on softwood lumber.What would normally have been a no-hold...





GUELPH, Ont. – Once again, the Canadian lumber industry is holding its breath as its government battles the U.S. over the heavy-handed tariff on softwood lumber.

What would normally have been a no-holds-barred rumble has been turned into a delicate two-step, with both nations primarily focused on the war against terrorism.

Canadian ad campaigns to educate U.S. buyers about the negative impact of the tariffs have been yanked from all media sources in an effort not to appear insensitive during the time of crisis. But while Canadian lobby efforts have been curtailed, those south of the border have not relented for an instant.

In fact, the U.S. has delivered yet another blow, announcing the 19.3-cent tariff imposed in August will apply not only to raw Canadian softwood but to everything manufactured from the wood, as well. The latest move will add approximately $200 million to the $1 billion the duty has already cost Canadian producers.

Meanwhile, those involved in the industry are striving to find a long-term solution within the spirit of continental free trade.

American officials initially feared a ‘wall of wood’ would flood the market when the previous five-year agreement expired during the spring. While that didn’t materialize right away, it appears to be taking place now.

Unpredictable

With the latest round of tariffs aimed at Canadian producers kicking in on Oct. 15, at Truck News press time business was unpredictable for those companies hauling softwood to the U.S.

“It’s been peaks and valleys,” says Ray Haight, president and chief operating officer of MacKinnon Transport. “We went from five or six loads up to 12 to 14 prior to the end of the agreement and then back down to five when the deal ended … On Sept. 24 we had 50 go out.”

MacKinnon’s Guelph, Ont. yard serves as a central depot for products from 14 Northern Ontario mills. B-Trains flying the colors of about a dozen smaller carriers deliver more than 80,000lb of softwood per trip; which is off-loaded and stockpiled upon its arrival.

MacKinnon then loads U.S.-friendly configurations and the lumber finishes its long trek south of the border.

Gord Fish, who is normally in charge of the 220-truck fleet’s new warehouse, has been pulled back out into the yard and is front and center in the race against the mid-October deadline.

“The volumes have been very busy,” he explains. “We’re handling at least twice as much as usual.”

Bob Foote, the carrier’s yard coordinator says the events of Sept. 11 threw a wrench into the industry.

“Two weeks ago the push started, but then the border jammed,” he says. The resulting backup in MacKinnon’s yard is now about 300 forklift loads of shrink-wrapped lumber.

“It varies based on the length of the lumber, but on average it takes 10 lifts to make a U.S. truckload,” he adds.

While nobody is certain what will happen following Oct. 16, Haight expects to see traffic return to the five or six load mark. While a larger fleet like MacKinnon has the flexibility to handle these sorts of spikes in lumber volumes, for the smaller companies it can mean chaos.

Small players, big cast

Approximately 15 per cent of Canadian owner/operators earn their miles hauling forestry products. Their stories are many, but very similar: most are nervous and all just want this to be over with – once and for all.

Chumway Express owners Graham and Pam Savord are bracing themselves for the expected and inevitable turmoil.

Even though it’s the Savords’ first round in the ring with the U.S. over softwood tariffs (Chumway was only born in 1997), they’re well aware it could be a potentially crippling battle.

“Our primary service is transporting lumber to the south and exporting to the U.S., as well as hauling lumber locally which is loaded onto rail cars to be transported to the U.S. and southern Ontario/Quebec,” explains Graham. Chumway Express does 30 to 40 trips a month in Ontario, and fills approximately 10 rail cars a week.

Savord planned to update company equipment this fall, but that’s been nixed with softwood on the limp.

“It kind of puts a hold on everything, as far as updating equipment or not knowing what’s going to happen in another month,” he says.

Although business has slowed a little bit – especially with the U.S. shipments – Pam says the worst is yet to come.

“We haven’t felt a major impact yet, we don’t know when that will happen or if it will,” she says.

In her opinion, the Americans are barking up the wrong tree. With the last three efforts to impose a lumber tariff failing, she hopes the Canadian government and the lumber lobby will once again find a way to solve the issue – but this time, she hopes they come up with something a little more permanent than five years.

Canadian officials have contended the Americans compared the fees to U.S. prices rather than looking at Canadian market conditions.

“The U.S. is arguing that Canadian lumber industries are being unfairly subsidized on stumpage fees,” Pam says.

“The stumpage fees are fees the provinces charge forestry companies for cutting timber on crown land and the U.S. believes that these fees are too low and therefore are looked at as a subsidy. This is not the real issue.”

Pam believes the truth lies with a small group of industrial organizations in the U.S. who want a bigger share of the domestic market and are willing to let their countrymen take the brunt of the resulting increase in lumber prices.

The U.S. National Association of Homebuilders agrees, claiming home buyers will pay an extra $1,000 for the price of a house because of the tax on Canadian timber.

Layoffs possible

The Savords admit if the outcome has a large effect on Chumway Express, the small family of staff could face the chilling possibility of layoffs, but that’s a last resort.

“I was in the dump business for 12 years. We could look around and find something else (to haul) if it boils down to that,” explains Graham. He doesn’t believe his workers are losing any sleep over the softwood issue yet, but he can see some sleepless nights in his own future.

Since 1982, this marks the fourth tilt Canada and the U.S. have had over the lumber biz. In 1994 both countries agreed to implement a consultative process rather than endure another trade dispute.

Canada agreed to this, primarily because the U.S. agreed to refund a significant part of the duties collected in the third duty case, approximately $500 million. The U.S. Lumber Coalition also agreed to drop a constitutional challenge against the Free Trade Agreement arbitration panel process.

Finally, the consultations led to the negotiation of a five-year Softwood Lumber Agreement in April 1996. The agreement limited U.S. lumber exports from B.C., Alberta, Ontario and Quebec to 14.7 billion board feet annually with escalating fees payable on shipments over that volume. The U.S. later raised an unsuccessful challenge against B.C.’s 1998 stumpage rate reduction.

This time around, there are tens of thousands of jobs at stake in an industry that employs about 300,000 people and generates $10 billion yearly in Canada. As of the end of September, B.C. has suffered 14,000 layoffs with potential for thousands more to come if the duties continue.

Among the changes being sought by the U.S. is the ability for Americans to come to Canada and bid up prices to match their own. B.C. Premier, Gordon Campbell says southeastern lumber producers simply want to restrict Canadian market share.

“We are going to revise stumpage and move toward a more market-based system,” he says.


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