by Bryce Baschuk

The World Trade Organization on Tuesday said the U.S. violated international trade rules in the way it calculated tariffs on Canadian imports of softwood lumber in a key dispute ruling published on the WTO website.

The decision also provided a boost to the U.S.’s use of a controversial methodology used when calculating anti-dumping duties on Canadian lumber. In the past, the WTO has struck down American use of the process, called zeroing, which typically results in higher duty margins.

The ruling marks the latest stage in a decades-long disagreement between the two nations, with the U.S. alleging its northern neighbor unfairly subsidizes lumber production. The WTO decision comes as Canada and the U.S. grapple with ratification of their new trade deal with Mexico, and over ongoing steel and aluminum tariffs.

Canadian Foreign Minister Chrystia Freeland has unsuccessfully urged U.S. Trade Representative Robert Lighthizer to roll back the steel and aluminum tariffs as part of the new U.S.-Canada-Mexico trade deal, and regularly raises the softwood issue with him. Canada is running out of time to ratify the deal before its next election and has said it won’t do so if the metals tariffs remain in place.

60 Days

The U.S. and Canada have 60 days to decide whether to appeal the WTO ruling. Canada has also targeted the U.S. duties under the North American Free Trade Agreement’s dispute settlement process.

If the WTO ruling stands on appeal the U.S. will be required to roll back some of its restrictions on Canadian lumber imports, which may undercut sales from American producers such as  Weyerhaeuser Co. and Georgia-Pacific LLC.

The U.S. imported $5.9 billion worth of softwood lumber from Canada in 2018, according to data complied by the Geneva-based International Trade Center.

The WTO dispute centers on a series of U.S. tariffs -- countervailing duties of up to 18% and anti-dumping duties of up to 7.28% -- on imports of Canadian softwood lumber products.

The Trump administration imposed the lumber tariffs on Canada in 2017 after the two countries failed to renew a 2015 accord.

--With assistance from Josh Wingrove.To contact the reporter on this story: Bryce Baschuk in Geneva at [email protected]

To contact the editors responsible for this story: Richard Bravo at [email protected] Zoe Schneeweiss

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