Canada Rejects US Lumber Tax Plans

by Robert Lee, Tax-News.com, London

26 March 2002

According to reports, the Canadian Government has rejected a US proposal to impose a 19.3% tax on Canadian lumber exports over the next five years.

The proposal was an attempt to bring the long-running dispute between the two countries to an end before Thursday. However, as an agreement on the issue was not reached before last week's deadline, a scheduled US ruling on countervailing and anti-dumping duties against Canadian softwood lumber will now take effect, with the result that duties are double the 19.3%.

The dispute, which began decades ago, is centred around US claims that its neighbour unfairly subsidizes Canadian softwood, and then exports the lumber at cheap prices to the US. However, the Canadian forestry sector, which supplies around a third of the US market, has traditionally counter-claimed that Washington is being protectionist.

Following a two week session of intensive negotiations on the issue, the Canadian and US Governments remain deadlocked, and there appears to be no end in sight.

Speaking to the Reuters news service under condition of anonymity last week, several sources reported that the US proposal - which included provisions to ensure that an anti-dumping case against Canadian lumber be continued - may have inflamed the situation still further, with Canadian officials reacting angrily to the US offer.

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