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IWPA calls on Canada-USA to Negotiate an End to Softwood Lumber Duties

BC’s Independent Wood Processors Association (IWPA) calls on Canadian and American governments to begin bi-lateral negotiations to resolve the softwood lumber dispute punishing consumers and value-added wood manufacturers.

“Only bilateral government negotiations will resolve this trade dispute. These punishing duties create uncertainty which discourages investment and disrupts supply lines resulting in higher lumber prices,” said Andy Rielly, IWPA Chair. “With all-time high prices, supply shortages, and increased building costs—The US Commerce Department’s ruling has more than doubled the duties on softwood lumber shipped into the US.”

Independent wood processors and other Canadian value-added wood manufacturers without forest tenure are unfairly captured by this ongoing land ownership dispute. Independent wood processors purchase their raw materials on the open market at about the same price consumers pay at hardware stores. Value-added wood producers already end up paying the duty twice: manufacturers input costs are based on the USA commodity prices that imbed the softwood duty, and when the value-added product is exported the duty is applied to the higher price.

“This dispute only benefits a few Canadian and USA corporations while punishing consumers and value-added producers.” said Brian Menzies, IWPA Executive Director. “Today, the border line has become blurred since Canadian tenured forest companies have been on a buying spree purchasing USA sawmills.”

“It is time that the political leadership acknowledge that this dispute benefits a few at a great expense to many consumers, and those working in value-added manufacturing on both sides of the border,” said Menzies.

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The Loss of a Lumber Industry Legend

Theodore Hector Hansen

October 28, 1935 – March 27, 2021

It is with great sadness we announce the passing of Theodore (Ted) Hector Hansen on March 27, 2021.

At the time of his passing, Ted was surrounded by his loving wife of 64 years, Nadeane, and his four sons, Robb, Dean, Mark, and Matt.

Ted is predeceased by his parents, Blanche and Howard, and his daughter Julie. He is survived by Nadeane, his sons Robb (Betty-Sue), Dean (Jacquie), Mark (Margaret), and Matt (Juliet), his beloved 10 grandchildren Matthew (Kristen), Thomas (Becky), Mitchell (Steph), Theodore (Ally), Chloe, Jack, Neil, Kevin, Jake (Rebecca), and Kathryn, his four great grandchildren, Callie, Johnathan, Sophie, and Emma, and many extended family.

Ted was born in Kamloops, B.C. on October 28, 1935, and raised on the family farm in Little Fort, B.C. He rode a horse to elementary school in Little Fort, and eventually graduated from high school in Kamloops, B.C. He went on to graduate from the University of British Columbia with a Physical Education degree in 1957, the same year he married Nadeane.

Ted was an exceptional athlete growing up, excelling in many sports, in particular softball, in which he continued to enjoy playing into his 80’s at our annual Easter family reunions in Little Fort. After a brief time teaching following his graduation from UBC, as well as time in the Canadian Air Force, Ted was recruited into the wholesale lumber industry.

Ted thrived as a salesman in lumber, with his outgoing personality, incredible sense of humour, and reputation as a man of his word. Ted’s career in lumber resulted in multiple moves for his young family through the 1960’s and early 1970’s, including time in Prince George, B.C., Portland, Oregon, and Tacoma, Washington, before finally settling in Vancouver, B.C. in 1972 as the founding President of Olympic Industries.

After retiring from the lumber industry, Ted and Nadeane moved to Whistler, B.C. in 1995 where Ted embarked on a second career in real estate with ReMax, although his true objective was to volunteer as a mountain host with Blackcomb Mountain, which he did for 20 years. Ted was an avid golfer his entire life. It was a love/hate relationship, with every round ending with immediate discussion about where and when to play next. After golf, there might have been a game of crib, or a Canucks game with a tall Guinness.

When Ted wasn’t skiing or golfing, you could find him fly fishing at Taweel Lake. “The Lake” was, and has remained, a second home to the entire family for multiple generations. Ted’s early years at Taweel were spent as a fish boy at the camp, driving the Jeep road, and embarking on the lifelong pursuit of the legendary “Walter”, said to be lurking the depths of Taweel Lake. Ted’s true love was for his family. It was the overriding purpose of his life and the focus of every decision he ever made.

His love and commitment to family has been passed along to following generations, and his devotion as a loving husband, father, and grandfather will be his true legacy for eternity. He will be forever loved and remembered in the hearts of his family and friends. The family gives special thanks for the care and compassion Ted received over the past five months from the staff at Berkley Care Centre in North Vancouver, B.C. A celebration of his life will be planned when family members and friends are able to attend. Condolences may be expressed at the family’s on line obituary at: www.mem.com

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Western & Steel Workers End 8-Month Strike

An eight-month strike that has devastated communities in northern Vancouver Island has finally come to an end, with the union ratifying a new agreement with Western Forest Products.

About 3,000 employees and contractors at Western Forest Products facilities in several Vancouver Island communities have been off the job since July 1, 2019.

Read More: https://globalnews.ca/news/6556647/western-forest-products-strike-over/

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The Premier's Vision

The Independent Wood Processors Association (IWPA www.iwpabc.com) represents BC’s community based value-added enterprises. We are in complete agreement with the Premier that we need to replace lost sawmill jobs with jobs that add more value to the lumber that comes out of our sawmills.

BC’s family owned non-tenured wood processors have the ability to do that, but only if we can get access to a share of the BC Public’s resource and get access to the US market. Unfortunately, neither of these requirements have been met for the last 15 years and the result is that 54 of the 107 member companies that we had prior to the Forest Renewal Act (FRA) of 2003, have gone out of business.

FRA 2003 allowed the big public companies to consolidate control of the resource; eliminated the Small Business Forest Enterprise Program (SBFEP) that allowed non-tenured companies to competitively bid for a share of the timber resource; replaced the SBFEP with BC Timber sales; introduced the non-responsive Market Pricing System (MPS); slashed the already meager Category 2 value added program by 2/3rds; and it led to our subsequent disqualification from bidding for BCTS timber unless we paid a 15% export tax on the cost of adding value in BC. I am sure the Act was well intentioned, but the FRA 2003 has not served the Province well.

We believe there is a fix, but the big tenure holders aren’t going to like it. Making the Premier’s vision of the future into a reality is going to require guts and resolve on the part of the BC Government.

First, they need to break up the control of our resource with a ‘use it or lose it’ policy with respect to Tenure, and they need to restore and auction a substantial share of the resource for non-tenured wood processors to bid for. The big tenured companies claim that they must have Tenure to operate. But the 50 or 60 sawmills that they have collectively acquired in the United States don’t have any Tenure. Why do they need to keep their security of Tenure for the curtailed BC mills but not for the operating US mills pray tell?

Did you know that the 5 biggest tenured companies now control about 30 million m3 of our resource for their exclusive non-competitive use? Did you know that BC’s dozens of non-tenured value-added companies now have a province wide total resource share of only 1.1 million m3 for which we compete?

Next, the non-responsive Market Pricing System that we are currently defending at NAFTA and WTO, has to go. It’s not that it isn’t defensible. It’s that it simply doesn’t work for us here in BC.

These changes, and others, have to be made prior to entering into a new Softwood Lumber Agreement with the USA. The last Agreement froze BC Forest Policy “as is” and prohibited any significant changes for 9 years.

And then there is the problem of the Americans not liking that BC’s stumpage rates are set using a formula instead of through competition. They repeatedly find that using a formula to price tenured timber amounts to a subsidy and they slap duties on all our wood products. Even on the value-added products of non-tenured companies that remanufacture lumber purchased on the open market in direct competition with the Americans.

The value-added sector that the Premier wishes to grow, is presently trying to compete in the US market while paying a 20% Duty on the wood, and a 20% Duty on the cost of employing British Columbians to add value to it. As was the case when Canada imposed a 15% export tax on our products from 2006 until 2015, these Duties are designed to make us uncompetitive in the US market and they are effective in doing so.

And now, in addition to high levels of log exports, some of BC’s big tenured companies are sending the lumber they cut from BC’s forests to the USA and employing Americans to do the value-added work that we used to do in BC.

Interfor has been doing it for years in Sumas, Washington. Western Forest Products has recently purchased a large remanufacturing facility in Arlington, Washington. Western has begun sending down 110,000,000 bf a year and employing Americans to add value to it. The first of what is inevitably going be the permanent closure of several more BC value-added plants, occurred in September when Western diverted their supply to their new American value-added facility.

The BC Government needs to stop and reverse this practice. The IWPA has no problem with BC companies operating in the USA, but if they wish to do so, they should feed those plants with US grown fibre, not BC’s.

These changes will get us back to where we were, but there still remains another obstacle that could make the Premier’s vision an impossibility.

Unless we abandon the Tenure system, there are 3 likely outcomes to the current softwood lumber dispute with the USA.

One, the Duties remain on permanently. Result … value added in BC will continue to decline. The purpose of the US imposed 20% Duty is to make us uncompetitive in the USA by raising the price of Canadian lumber products in the US market. It works.

Two, we eventually win the case at NAFTA after a couple more years of paying Duty. Result … a brief period of free trade until a new US Coalition Petition reimposes Duties and we can start all over again.

Three, we reach an Agreement with the Americans. Result … it’s not that simple. An Agreement can be Border Tax based or Quota based, and they each have very different outcomes for BC’s non-tenured value-added wood processors.

BC’s big 5 tenured companies want a Border Tax based Agreement. The only difference between US Duties and a Border Tax is that the proceeds of the former go to the US Treasury and the later to the Canadian Federal Government. Either way, Duties or Border Taxes are fatal for the Premier’s value-added vision and for many of BC’s surviving value-added firms.

If you were wondering why the big 5 would want to pay a Border Tax instead of have a Duty free Quota, it’s because they have purchased over 50 US sawmills in the last 15 years.

One of them currently leads the pack with 70% of its softwood lumber production in the USA and 30% in BC. Half of the BC production goes to China Duty free. So, they pay the 20% Duty on the remaining 15% but get to raise the price by 20% on the 70% produced in the US. The result is that they are more profitable under Duties or Border Taxes than they are under free trade. A good strategy for their shareholders, but not so good for BC.

Fortunately, the US Coalition is expected to insist on a Quota-based deal or no deal at all. A Border Tax based Agreement requires that the Coalition freeze BC Forest policy “as is” and then monitor it to ensure it remains “as is”. But a Quota based Agreement does not require freezing or monitoring because changes to BC Forest Policy cannot increase the volume of lumber shipped to the USA. But even if the Coalition prevails, BC’s value-added firms would not necessarily be out of the woods, so to speak. It depends on how the Quota is allocated within BC.

The 1996 Quota based Agreement distributed Quota pro-rata based upon a company’s history of US shipments. That method of allocation capped BC’s value- added production at a level that was somewhat lower than it was the day before the Quotas took effect. In 2019, the situation is worse. The US now requires cash deposits from the Importer of Record (IOR) and most of BC’s family owned and operated value-added companies can’t afford to make these deposits. Hence, BC’svalue-added firms would get very little, if any, quota.

But there is a way to allocate BC’s Quota that would be beneficial to all. We call it the “Growth Pool”.

It goes like this. Canada gets a Quota and the Provinces duke it out for their share. Once BC has its share, the BC Gov allocates it only to tenured producers but requires them to leave a portion of it in Victoria … the Growth Pool. Non-tenured companies purchase lumber from the tenured sawmills, add the value, and use Quota from the Growth Pool to ship their value-added products across the line.

As a result, we can grow value-added in BC and BC’s tenured sawmills can cut more lumber per unit of Quota.

Here is why. If a sawmill ships 1000 board feet of lumber across the line, they use 1000 board feet of BC’s Quota. But if they sell 1000 board feet of lumber to a BC value added company (we pay the same price by the way), we trim off and chip the waste and rejects to sell to pulp mills, pellet plants, and bio-energy companies and we sell some of our resulting value added products in Canada and overseas. By the time we are done with that 1000 board feet, there will only be about 750 board feet left to ship to the USA. We will therefore only use about 750 bf of BC’s precious Quota from the Growth Pool instead of the tenured company using 1000 bf of its Quota.

Why waste Quota shipping trim loss, fall down products, and our jobs to the USA?

So, let’s get a Quota based Agreement, allocate it as above, and the result will be more logging jobs, more trucking jobs, more sawmill jobs, more remanufacturing jobs, and more Government Revenue. And these benefits will increase in direct proportion to the amount of wood to which we add value to in BC.

And the Premier’s vision can become a reality.

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Vancouver Sun: A new softwood lumber tax will likely kill what is left of Value Added in BC

(A new softwood) tax would really hurt us and you know it’s going to be higher than last time.

Group calls for quota on exports to United States
A group of British Columbia independent value-added wood producers are prodding Canadian negotiators in a controversial direction as the deadline to come up with a new Canada-U.S. lumber trade agreement looms.
Russ Cameron, the president of the Independent Wood Processors Association, argues Canada should concede to a desire in the United States for a quota on Canadian lumber shipments before the grace period in the softwood lumber agreement expires in October.
Parties have until Oct. 15 to strike a deal before a grace period in the last softwood lumber agreement expires, opening up the possibility of another trade dispute. The industry in the U.S. has not wavered in its position that the Crown management of timber lands in some provinces — B.C. in particular — subsidizes lumber producers.
The Independent Wood Processors Association of B.C. is on board with the American position that a replacement deal should include a quota on Canadian lumber shipments to the U.S. That’s a case the group’s president, Russ Cameron, has made to B.C.’s top negotiator in the talks.
That, however, is a non-starter for the B.C. Lumber Trade Council, the main industry lobby group, which says quotas distort the market.
At the very least, Cameron argued, a lumber trade agreement should make Canada’s big lumber producers, and not his members, bear the cost of any new export taxes included in a deal. The producers own cutting rights to timber supplies, but the association’s members aren’t so lucky.
“A (new) border tax would really hurt us,” Cameron said, “and you know it’s going to be higher than last time because the (U.S. industry) doesn’t want one, so if they ever did agree to one, we’ve got to make it attractive.”
The Canada-U.S. softwood lumber deal expired last October, triggering a one-year standstill agreement during which neither side would take trade action against the other.
Export taxes imposed under the 2006 softwood lumber agreement, designed to kick in when commodity prices for lumber were low, wound up being tied up in the finished products of value-added producers, which Cameron said was crushing for IWPA members.
Cameron said his association’s members have a tough time acquiring raw materials because they don’t own timber rights, which are mostly controlled by a handful of B.C. companies. That leaves them reliant on the tenureholding producers to buy lumber.
In a last-minute lobbying effort, Cameron sent a letter last week to a long list of B.C. mayors, MLAs, MPs and senators, including B.C. Forest Minister Steve Thomson, to press his group’s case.
“We’re still pushing that (any) tax should be paid by the guys benefiting from the tenure (ownership of timber-cutting rights),” Cameron said. “They’re obviously willing to pay the tax to keep (tenure rights), but there’s no way we can afford to do it.”
Cameron also believes IWPA members would get a better deal out of a quota system, which would give them a prescribed share of timber supplies and provide an incentive for major producers to sell them timber rather than using up more of their own quota.
A lumber quota with the U.S., however, would weaken Canada’s trade position with other countries, according to Susan Yurkovich, president of the B.C. Lumber Trade Council.
“I respect Russ Cameron’s position, (but) I disagree with it,” said Yurkovich, who is also CEO of the Council of Forest Industries, which represents the interests of B.C.’s interior lumber producers.
If other trading partners know Canadian producers have hit their cap on shipments to the U.S., that would hurt the industry’s ability to negotiate a fair price, Yurkovich said.
“So (a quota has) a distorting effect on the market,” she said.
Yurkovich also argued B.C. would be doubly punished by a quota because it has put the effort into opening up markets in the Asia Pacific region, China in particular.
She said quotas would likely be based on past shipments to the U.S. — numbers that were recently smaller than usual because the industry was serving that new demand across the Pacific.
In late July, a group of U.S. senators backed the American industry’s position on limiting Canada’s access with a quota. However, observers believe the amount of market access American negotiators have offered Canada is less than its producers have historically had, analyst Kevin Mason said.
Mason, managing director of the firm ERA Forest Products Research, said Canada’s share of the U.S. market has varied over the last three decades from as low as about 26 per cent during the depths of the U.S. housing crisis to as high as 33 per cent during better times.
However, Mason said his understanding is that the American starting position on a quota is a market share of 25 per cent.
“(Canadian shipments) have pretty much never been that low,” Mason said.
Yurkovich argued trade negotiations are the wrong place for the IWPA to be pressing governments on making changes to their policies on tenure rights to timber.
“I think they are two separate issues … This is about access to the U.S. market,” she said, adding that the B.C. Lumber Trade Council is hopeful the sides can arrive at a managed trade deal.
In an emailed statement, Thomson said B.C. will release a plan for the value-added forestry sector in the near future.

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A New Softwood Lumber Agreement – Is it the end of Value Added in BC or an Opportunity?

Dear BC Mayors, MLA’s, MP’s, and Senators,

The Independent Wood Processors Association (IWPA) would like you to be aware that British Columbia has lost over half of its value added wood processors in the last dozen years.

This was not due to the collapse of the US housing market. Americans who were unable to sell and build, fixed up their existing homes, so spending on specialty products in the “improvements” market was unaffected.

The primary reasons given for these business failures were the effects of the Forest Policy changes of 2003 and the Softwood Lumber Agreement of 2006.

The Forest Policy changes allowed Canfor, West Fraser, Interfor, Tolko, and Western Forest Products to consolidate control of 2/3rds of the BC Public’s non-competitive timber resource. This consolidation has impaired the function of markets and made it increasingly difficult for BC’s non-tenured value added sector to access a share of the BC public’s wood resource.

Then the Softwood Lumber Agreement of 2006 imposed a Border Tax on our US bound products. The tax was designed to make our products uncompetitive in our primary market and it did that very well. For six years, Canada applied a 15% tax to our US bound products if we employed British Columbians to add value to wood in BC.

These two factors have been primarily responsible for the demise of 54 of the 107 members that the IWPA had in 2002. And while BC has been losing its value added sector, Canfor, West Fraser, and Interfor have purchased 39 sawmills in the USA.

Maybe it’s time BC realized that there are no more job growth prospects in the production of commodity lumber products. Maybe it’s time we negotiated a Softwood Lumber Agreement that will allow the value added sector to survive, grow, and maximize the socio-economic benefit per cubic meter harvested.

The fact is, that as long as BC is pricing the public’s non-competitive timber by formula instead of by competition, we will have a problem with the Americans. We know by now that there will be an American imposed price to be paid to offset the benefits of tenure, and we know that BC’s big lumber companies are willing to pay that price to keep those benefits.

But the time has come for the tenured processors to pay that entire price. Those of us who compete for 100% of our wood supply can no longer afford to pay part of the price on their behalf. We do not have the benefits that we are paying to preserve, and because we live here, we can’t pack up and move our businesses to the USA.

The IWPA needs your support and needs the BC Government to tell Ottawa to negotiate a new SLA that has the tenured producers pay the entire cost of retaining the benefits of their tenures.

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