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Senator Craig Introduces Canadian Lumber Trade BIll

Location: Washington, DC

S. 219. A bill to amend the Tariff Act of 1930 to clarify the adjustments to be made in determining export price and constructed export price; to the Committee on Finance.

Mr. CRAIG. Mr. President, I come to the Chamber this morning, with a number of my colleagues, to discuss what is a critical issue in timber country across the United States, where men and women go to work every day in our sawmills only to find the mill has been shut down and the lights have been turned out.

As a result, that has been a problem which has grown for some time because of the Canadians, their style of production at this moment, and the huge volume of timber they are pouring into this country. It is a market condition that will continue to shut down many of our mills, some that will never turn on their lights again, some that will never again employ men and women in the small towns where most of those mills are across the country.

Today, some of my colleagues and I are introducing legislation to work cooperatively with the administration in trying to resolve this through negotiation. This legislation is being offered on behalf of myself, Senator Baucus, Senator Crapo, my colleague from Idaho, who is in the Chamber, Senator Sessions, Senator Snowe, Senator Collins, Senator Cochran, Senator Burns, and Senator Lincoln.

In introducing this legislation today, we are amending the Tariff Act of 1930 to clarify what is an appropriate deduction from the price of merchandise. We believe the deduction of the countervailing duty should be included in the calculation in determining whether or not and to what extent there have been sales dumped at less than fair market value in the United States.

Some time ago, we established a countervailing duty against Canadian products coming into this market. This is in response to that and the way it is calculated.

While the Department of Commerce has worked diligently on the softwood lumber case, the Canadian industry and Government continue to effectively avoid the countervailing duty and antidumping orders. The most recent move by the Canadian Government to avoid the countervailing duty is to declare a significant region of interior British Columbia bug kill timber. This particular green lumber—or timber in this case—is being sold at salvage prices and has flooded the amount of available timber already in the market.

The price for this timber is now as low as a dollar per thousand board feet, while the competitive market value is over $100 per thousand board feet—in other words, on the stump at the time of the sale.

I remind my colleagues a majority of this determined bug kill has not yet been affected by bugs. It is simply a decision made by the Canadian Government in this instance. Yet they are selling it at prices that are as if it had been affected by disease.
Next, British Columbia has revised their forest practice code to reduce costs to the lumber manufacturers by decreasing forestry standards and placing logging corporations in charge of enforcement actions. That is like the U.S. Forest Service turning to the logging companies and saying the logging companies can enforce all of the environmental laws, as well as the laws under which we govern and manage our forests. We will turn that authority over to the logging companies.

What does this do to Canadian timber companies? It literally saves them millions of dollars in operating expenses.

These recent and blatant moves by the Canadians reveal their true desires to continue to flood the U.S. markets and their unwillingness to find a resolution that provides both security for U.S. and Canadian jobs.

Our proposal specifies that countervailing duties are to be treated as a cost of production, a clarification of the Trade Act that all duties should be considered a cost of production incurred on shipments to the United States. The deduction of countervailing duty would assist in determining whether or not and to what extent there have been sales dumped at less than fair market value in the United States.

Dumping is when a company sells a product into the United States for less than its cost of production. The Department of Commerce currently does not consider countervailing duties, which offset subsidies, as a cost of production when calculating the amount of dumping and requisite antidumping duties. The Department's policy of ignoring countervailing duties when calculating antidumping duties undervalues the actual amount of the dumping.

Fair value typically is the sales price of the merchandise in the country-of-origin market. The antidumping analysis compares fair value of a good from another country to the fair value of a good from the United States to determine if the good from another country was dumped at an unfair price in the U.S. market.

For example, in the U.S.-Canadian softwood lumber dispute, the Department of Commerce determined that the Canadian provinces subsidize their industry by providing lumber mills timber at prices that are 33 to 50 percent below market value. It also found that Canadian companies were selling lumber in the United States at below their subsidized cost of production, requiring an antidumping duty of 8.79 percent.

The antidumping duty currently undervalues the Canadian dumping practices by comparing a subsidized cost of production to the price of lumber rather than comparing the cost of production plus the countervailing duty to the price of lumber. It is all in the math, and in this kind of math it is quite obvious that Canadians are taking tremendous advantage of the marketplace. As I said earlier, the lights in the sawmills across America are going out.

Such a change in the Department's policy, we believe—those of us who have authored this legislation—is consistent with the practices of the European community and of Canada. It is time the Department of Commerce correct this accounting error, and it is time for the Canadian Government and their industry leaders to come to the table to negotiate a free and fair market price for both U.S. and Canadian lumber products.

I believe this Congress will not tolerate the kind of dumping activity that is going on in the market today, which appears to be at this moment not only blatant but an attempt to grab even a larger market share in this country.

For years, I have worked on this issue, and I clearly recognize the importance in the overall market of Canadian lumber in our market to meet our housing demands, but to do so and to expand that market base at a cost to U.S. jobs and U.S. producers is not fair, nor is it balanced. That is why we have introduced this legislation today.

Several other colleagues who are cosponsors in the legislation plan to come to the floor during this period of morning business to speak to this issue. I am extremely pleased to be joined by Senator Baucus, Senator Lott, and Senator Snowe. I mention those three specifically because they are on the Finance Committee. This is legislation that will be referred to the Finance Committee.

As my colleague from Idaho so clearly said, this is a simple correction in the law. It is a practice followed by other countries in Europe and Canada itself. Clearly, it would change the dynamics of how we deal with Canada, but it would also show the Canadians that we are not going to stand idly by and allow what is so blatant and so intentional in both the pricing of their stumpage and, therefore, the cost of entry into our market. Blatant dumping in the market for the purpose of gaining market share and putting some of our businesses out of business should not be tolerated.

We have all heard over the years the phrase "mill town." It is so true today, still, in those areas of our country that are adjacent to private and public forests, that it is the sawmill that often is the larger employer in the community, providing excellent jobs at high pay to the men and women who live within that community. When that mill goes down and those citizens are out of work, there is no alternative, there are no other jobs, or there are limited jobs in the community. That community oftentimes is anywhere from 20 to 100 to 150 miles from the next community.

So that wage earner oftentimes is faced with a very tough choice he or she may have to make. That is not just to go search for another job but oftentimes to pick up their family and move from that small community they had chosen to live in and to raise their families. Why? Because a singular employee in this instance was either shut down or put out of business. Why? Because of predatory practices on the part of our friends to the north. And I say "friends" because I believe that. But certainly in this segment of their economy, they are choosing to enter the most lucrative timber market in the world—ours—with a thriving, aggressive homebuilding industry and an economy in the homebuilding industry that is very strong today, to supply that product.

I recognize the sheer demand for dimensional lumber in this market is much greater than both United States producers from private and public lands can supply, and Canadians can and have had and will have a substantial portion of our market. But now, to do so intentionally so the big boys can get bigger in Canada, putting oftentimes out of business the smaller producer here in the United States, is something we should not stand idly by and tolerate.

Mr. President, I see I am being joined in the Chamber by my colleague from Mississippi. Senator Lott is a cosponsor of the legislation we have just introduced dealing with the Tariff Act of 1930. Mississippi has a thriving timber industry that is a major contributor to their State's economy, and especially to rural Mississippi's workforce. So I will be happy to yield to Senator Lott for him to discuss this issue, of course, or any other issue he might wish to discuss.

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