NAFTA Panel Issues Ruling on 2015–16 Countervailing Duties

On May 6th, a North American Free Trade Agreement (NAFTA) Chapter 19 Binational Panel largely upheld US countervailing duties (CVD) on Canadian softwood lumber products but remanded several aspects of the investigation for clarification and potential adjustments.

The Chapter 19 Panel released its review in the matter of Certain Softwood Lumber Products From Canada: Final Affirmative Countervailing Duty Determination which was issued on November 2nd, 2017. The NAFTA panel reviewing the US countervailing duties on Canadian softwood lumber largely affirmed the US Department of Commerce’s (DOC) final determination. However, the Panel did remand several aspects of the duty determination for further analysis or explanation. The NAFTA Panel gave the DOC 90 days to make a determination on remand consistent with the findings and instructions of the Panel’s Review.

We expect little change to the Final Determination published in 2017 based on the remand issues. More importantly, the Chapter 19 Panel’s ruling will not affect current duty rates. The NAFTA Panel was reviewing DOC’s original final affirmative countervailing duty determination, which was issued on November 2nd, 2017, and covered the period of October 1st, 2015–September 30th, 2016.

The current duty rates were set by the fourth Administrative Review, which was not addressed by the NAFTA Panel. Finally, the US is likely to challenge aspects of the Review, meaning additional appeals will take place before any changes are made to duty rates.

The Panel’s review is unlikely to have a significant effect on current duty rates and therefore lumber markets.