Canada To Tax Lumber Exports In Bid To End Dispute With US

by Mike Godfrey, Tax-News.com, Washington

10 March 2005

Canada is proposing the imposition of a new tax on exports of softwood lumber to the United States, in an attempt to resolve a four-year trade dispute over subsidies given to certain Canadian sawmills.

Addressing parliament on Tuesday, Canadian Trade Minister Jim Peterson stated that the tax, which has been agreed by the country’s ten provinces, would replace the tariffs currently imposed by the United States Commerce Department, although the US would need to agree to refund the tariffs that it has already collected.

"I am very pleased that yesterday I was able to - in concert with all of the provinces and the three territories - reach a pan-Canadian view on what a potential settlement might look like," commented Mr Peterson.

According to the US, Canadian provinces give sawmills an unfair subsidy by not charging market rates to harvest timber on government land. In response, in May 2002 the US applied tariffs at an average rate of 27.2% on annual exports worth some $4.6 billion.

This rate was decreased to 21.2% last December after the Commerce Department recalculated the tariffs.

The proposed export tax will be removed when the Canadian provinces carry out changes in policy outlined in a potential agreement.

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