ISPA Position on
Canadian Softwood Lumber

Issue: Wooden bed-frame components made from Canadian softwood lumber should be exempt from extra customs duties imposed as a result of the softwood lumber trade dispute between the United States and Canada.

Importance:

The U.S.-Canada softwood lumber dispute has harmed U.S. mattress manufacturers and suppliers because it has created commercial uncertainties and imposed added costs regarding imports of wooden components from Canada used to make internal frames of box-springs and other foundations.  For ease of use and durability, mattress producers need bed-frame components that have a fine grain, small knots and are not prone to warping.  Canada is virtually the exclusive source of these parts.  U.S. wood is a poor substitute because it has larger knots and grain structure, and is more likely to warp when cut to the sizes required by the mattress industry. 

ISPA’s Position:

ISPA has consistently sought to have bed-frame components exempted from this dispute.  ISPA urges the U.S. government to comply with final rulings of appellate panels convened under the North American Free Trade Agreement (NAFTA) finding the extra U.S. customs duties on imports of softwood lumber from Canada are illegal by lifting the duties as to future imports and refunding such duties collected to date, with interest.  Alternatively, ISPA urges the U.S. government to exempt all wooden bed-frame components from these duties. 

Background:  

In the latest phase of a decades old dispute between the United States and Canada, U.S. authorities began investigations in 2001 to determine whether softwood lumber from Canada was benefiting from unfair subsidies or was being unfairly priced.  After finding that these unfair trade practices had occurred and that imports of Canadian lumber were threatening to injure U.S. lumber mills, U.S. authorities imposed special import duties (called countervailing and antidumping duties) on future imports of Canadian softwood lumber.  These combined duties have been as high as 27% since 2001, but at present are approximately 10%.

These findings were appealed to several NAFTA appellate panels which have consistently ruled that the duties imposed are illegal and should be removed.             

Detailed Positions:

Bed Frame Components Should Be Excluded from Extra Duties:  For the perimeter of the box-spring, mattress manufacturers use round-cornered bed-frame components.  Square-cornered components are used for the internal members of the bed-frame. 

Given the lack of good substitutes for Canadian bed-frame components, ISPA has urged the U.S. authorities to exclude imports of all wooden bed-frame components from Canada from the softwood lumber investigations.  The authorities have agreed with ISPA in part.

They have exempted all round-cornered components from the extra duties.  However, square-cornered components are subject to the duties unless they are imported as parts of “kits” containing sufficient quantities of both round and square parts packaged together to make a single bed-frame.  This alternative is commercially unattractive given the additional labor and freight costs required to pack and ship a kit.  In fact, the cost of packing and shipping a box-spring kit exceeds the cost of simply paying the current 10% duty rate.    

ISPA seeks to have all wooden bed-frame components exempted from the lumber duties, regardless of whether they are imported in kits or not.

No Threat of Injury to U.S. Softwood Lumber Producers:  A NAFTA appellate panel has ruled that the extra duties on softwood lumber from Canada are improper because the U.S. authorities erred in finding that the U.S. producers were injured by the unfairly traded imports.  This ruling means that the duties being collected are illegal.  Separately, another NAFTA panel considering an appeal of the countervailing duty findings has ruled that the countervailing duties are also illegal.  ISPA urges the U.S. government to comply with these decisions by discontinuing these extra duties on future imports and refunding duties collected to date.

ISPA Action:

In addition to ISPA’s individual efforts to exclude bed-frame components from the lumber dispute, we have partnered with a group called the American Consumers for Affordable Housing (ACAH), an alliance of associations representing home builders, lumber dealers and other consumers of softwood products.  ACAH is actively encouraging the U.S. government to comply with the NAFTA rulings discussed above.  ISPA staff and members continue to meet with several high-ranking U.S. and Canadian officials on this issue.  On February 14, 2006, ISPA submitted a written statement for a Senate subcommittee hearing on softwood lumber. 

Future Developments to Watch:

Court appeals challenging the constitutionality of the NAFTA appellate process have been filed.  The U.S. government has taken no action to implement the NAFTA rulings while the constitutional appeals are pending. 

The United States and Canadian governments have reached a tentative agreement to resolve the dispute that would last for at least seven to nine years.  The agreement was recently initialed by senior trade officials from both countries.  Under the terms of the agreement, the United States will remove existing U.S. import duties on softwood lumber imported from Canada, although it may be necessary for Canada to impose border taxes or quotas on lumber exported to the United States if lumber market prices fall below set limits or Canada’s share of the U.S. lumber market rises above 34%.  The agreement has not yet been finalized.