Canada Lumber Firms Eye Lower Tax
on Exports to US


VANCOUVER, April 8 (Reuters) - Western Canadian forestry firms hope the recent strengthening of lumber prices will bring a long-awaited reduction in tariffs they are paying on softwood lumber exports to the United States.

Data scheduled to be released on Friday is expected to show that prices are now high enough to cut the fees imposed under the U.S.-Canada softwood lumber agreement for the first time since the trade pact was signed in 2006.

The agreement required Canada to tax its own softwood exports to the United States at rates tied to the price of lumber, in an effort to reduce the amount of Canadian wood entering the U.S. market in periods of weak demand.

Sawmills in British Columbia, Canada's largest lumber exporting province, hope to see the 15 percent tax rate they are now paying reduced to 10 percent, said John Allan, head of the B.C. Council of Forest Industries.

Under the treaty's somewhat Byzantine formula, the maximum 15 percent tax rate is required when the lumber price over a four-week measurement period is below $315 per thousand board feet.

The trade publication Random Lengths' composite lumber price report is used by the treaty as a measurement guide. It has shown prices recently running at more than $320. Random Lengths will update its figures on Friday.

Last week's framing lumber composite price was $328 per thousand board fee, compared with $196 a year ago, according to Random Lengths.

Sawmills in Eastern and Central Canada, whose exports to the United Sates are subject to a combination of taxes and production quotas, are also expected to see their charges reduced, Allan said.

The softwood treaty was intended to resolve complaints by U.S. lumber producers that Canada unfairly subsidized lumber exports to the United States. Canada, which traditionally supplies about 30 of the U.S. market, has always denied the allegation.

The trade deal came into force just as lumber prices were dropping on slowing demand with the collapse of the U.S. housing construction market.

Allan believes recent stronger prices have more to do with reduced production than a significant long-term improvement in demand, and he hopes mills will continue to show production restraint to maintain the higher prices.

Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. economy still faces significant headwinds, including a housing sector that has yet to recover convincingly

Sawmills across Canada and the United States have shut down or reduced production since demand for housing lumber collapsed.

Major lumber producers in British Columbia include West Fraser Timber (WFT.TO), Canfor (CFP.TO), Tolko Industries, and International Forest Products (IFPa.TO). (Reporting Allan Dowd; editing by Rob Wilson)

Tax tied to prices, which have strengthened (Figures in U.S. dollars unless noted)
[Source:, April 2010]