A Canadian forestry research center that spearheaded efforts to expand the use of mass timber in British Columbia and Quebec is accused by the U.S. lumber industry of receiving unfair federal and provincial subsidies.
The move is part of a new offensive in the long-running trade dispute over Canadian softwood lumber sold south of the border.
The FPInnovations research center is a private, non-profit organization working in laboratories in Vancouver, Quebec City and Pointe-Claire, Que. It aims to drive innovation and growth in the forest products sector, including by researching and promoting the use of solid wood, a type of building material composed of layers of wood bonded together for added strength. Its research benefits its members, a who’s who of Canadian forest companies.
In a complaint filed with the U.S. Department of Commerce last summer, a U.S. lumber industry group, COALITION (short for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations), alleged that FPInnovations is helping Canadian producers gain an unfair advantage over their American competitors .
The complaint, which references FPInnovations’ financial reporting for the 2021-22 fiscal year, says the Canadian government provided more than $21 million in funding to the research center. It is noted that FPInnovations also has partnerships with the governments of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotia, New Brunswick, the Northwest Territories and Newfoundland and Labrador.
For example, the BC government provided $5.8 million to FPInnovations in the 2021-22 fiscal year, while the Quebec government contributed $6.7 million.
The US plans to increase tariffs against Canadian softwood lumber producers
“Without such funding, FPI members would likely be required to self-fund this type of research and development,” COALITION said in its submission to the Department of Commerce.
A joint submission from the governments of Canada, Alberta and Saskatchewan counters that COALITION’s arguments are without merit. “New allegations of subsidies relating to alleged programs do not meet the standard required for the Department to initiate further investigation,” it said.
Last month, the Commerce Department decided to postpone a decision on whether to open an investigation into FPInnovations until the next regulatory review later this year. Decisions on three other COALITION lawsuits were also deferred: one on alleged claims unfair Government of Alberta subsidies for carbon capture, utilization and storage; and two about training programs, one in Alberta and the other in Saskatchewan.
“These four allegations are new to this part of the process and involve extremely complex issues,” the department said in a recent memorandum.
The Ministry of Commerce has decided to investigate a fifth allegation from the lobby group involving research and development tax credits in Saskatchewan.
COALITION is led by the US Lumber Coalition. Its members include Seattle-based Weyerhaeuser Co.
Canada-based forestry companies that are FPInnovations members include West Fraser Timber Co. Ltd. WFG-T, Canfor Corp. CFP-T, Tolko Industries Ltd., JD Irving Ltd. and Paper Excellence Group, which completed its purchase of Resolute Forest Products Inc. last year.
The Commerce Department has the authority to adjust U.S. lumber tariffs on Canadian softwood lumber after reviewing submissions from a number of interested parties. Over the past few decades, the United States has repeatedly imposed tariffs on Canadian softwood lumber in retaliation for what it sees as unjustified provincial subsidies. The dispute goes back to the early 1980s.
In the never-ending softwood lumber trade war between Canada and the USA
The last time Canada and the U.S. reached an agreement on softwood lumber trade was in 2006. That agreement expired in October 2015 with no replacement.
Most forests in Canada are on Crown land, where buyers pay “stumpage fees” to provincial governments for the right to log. The US claims the fees are too low and amount to a government subsidy.
The US has imposed countervailing tariffs in retaliation, focusing on the stumpage system. Anti-dumping duties were also imposed in response to Canadian lumber allegedly being sold below market value.
In the Commerce Department’s latest assessment, it said last month that combined countervailing and anti-dumping duty rates for most Canadian softwood lumber producers will rise to 13.86 percent by the fall, compared to the current 8.05 percent.
Eric Parnes, a lawyer for the Canadian government, said the idea of ​​plentiful timber in Canada is outdated.
“There has long been a perception that Canada’s forests are infinitely abundant and readily available to timber producers. Whatever the reality of that perception may have once been, it is no longer the case at all,” he told the U.S. International Trade Commission in October, according to a transcript.
The Canadian government is challenging the timber tariffs under the United States-Mexico-Canada Agreement, which allows Canada and the U.S. to set up trade panels to resolve disputes. Canada also complained about the softwood lumber dispute to the World Trade Organization in 2017.