Ruling provides sliver of hope for forest industry.

One battle may have been won, but the softwood lumber war is far from over, as those closest to Canada's lumber industry will attest.

The latest victory came on Aug. 13 when a North American Free Trade Agreement (NAFTA) panel ruled on countervailing duties (CVD) imposed by the United States Department of Commerce (DOC). It stated the DOC had incorrectly and illegally determined the duties based on cross-border comparison for standing timber and has ordered a recalculation of the duties within 60 days since they failed to prove stumpage fees provided a benefit to the industry.

"I would think, cumulatively, that this will have to start to impact on the DOC to start using fact instead of fiction in determining these duties," says Ontario Forest Industry Association (OFIA) president Tim Millard.

This marks the third time this year an international body has ruled against duties imposed by the United States on Canadian softwood imports. On May 27, the World Trade Organization (WTO) issued an interim decision that the U.S. had failed to prove provincial stumpage fees provided a benefit to Canadian softwood producers. A final decision was expected August 29. On July 17, the NAFTA panel also ruled the DOC had incorrectly calculated its anti-dumping duties and ordered a re-calculation within 60 days.

Canada's lumber industry has been charged an average of 27 per cent on its exports to the United States. Figures quoted by the industry indicate that it has cost the industry an additional $1 billion in the last year. Other economic issues have eaten into forestry companies' bottom lines, including a strengthening Canadian dollar resulting in reduced export revenues and issues around wood supply.

While the latest decision has been hailed as a victory north of the border, it is also being looked at favourably south of the border.

"We're very pleased with the decision," says Scott Shotwell, executive director of the Coalition for Fair Lumber Imports in the U.S. "There have been a number of decisions that have been very favourable to our position."

What has pleased the U.S. lumber industry lobby group is the finding that Canadian provinces are providing a financial contribution to the industry through their various stumpage fees, says Shotwell.

It has had its effects south of the border, as well, says Shotwell, adding that comparatively there have been more temporary and full-time mill closures south of the border than north of it.

Millard says Canada has vowed to examine its stumpage fees compared to foreign markets, but is confident the examination will show the fees are at fair market value. The DOC has to be willing to act "in good faith" in calculating future charges. The hope is that there will be a reduction or elimination of future charges.

Carl Grenier, executive vice-president of the Free Trade Lumber Council, says not to expect to see any changes much before the early part of 2004.

"If they run to their usual performance, they will likely try to drag their feet and reinterpret this decision to their advantage so it will probably take another remand (appeal to NAFTA) before we get there," he says.

By ANDREW WAREING

Northern Ontario Business