COMMERCE HIKES DUTIES ON CANADIAN LUMBER

COMMERCE HIKES DUTIES ON CANADIAN LUMBER

The Commerce Department sharply increased penalty duties charged on imports of Canadian lumber, but the appeals process likely will delay any action for several months.

The United States now is collecting a 6.5 percent duty on Canadian lumber to offset government subsidies that the U.S. International Trade Commission determined are hurting American lumber companies.The Commerce action Friday - which ironically was prompted by Canada's challenge of the original duty - would increase that duty to 11.54 percent. Lumber prices, which already touched record highs earlier this year, would increase further, pushing up the cost of new homes.

The change will take effect only after it is accepted by a binational arbitration panel. The panel, formed under the 1988 U.S.-Canada free-trade agreement, found earlier this year that Commerce's original decision was flawed. The three-person panel can accept the new duty or send it back to the Commerce Department for further review.

Under the schedule for appeal and legal argument set by the free-trade pact, action by the panel will occur sometime around the end of the year, long after Canada elects a new government Oct. 25.

The lumber duty has been a rallying point for anti-American sentiment in Canada. Trade conflict with the United States is likely to hurt the incumbent Progressive Conservative Party of Prime Minister Kim Campbell, which supports the free-trade agreement.

Friday's ruling was hailed by U.S. lumber producers, who have fought for years against alleged Canadian subsidies. John Ragosta, counsel for the Coalition for Fair Lumber Imports, said, "This decision vindicates the coalition's position that Canadian lumber subsidies were much higher than originally calculated by the department.

"Commerce again rejected the voodoo economics proffered by Canadian parties purporting to show that even though Canadian lumber companies get timber at prices one quarter to one half its market value, there is not a subsidy," he added.

In May 1992, the Commerce Department found that two factors were depressing the price of Canadian lumber exported to the United States: unreasonably low harvesting fees charged to companies that cut timber on government-owned land and a restriction on log exports.

U.S. lumber producers point to complaints from environmental groups about Canada's timber pricing and management system. In the United States, the Natural Resource Defense Council has criticized Canada's low cutting fees, although most environmental groups support log export restrictions.