Drywall Duties CITT Rulings Released

The Canadian International Trade Tribunal (CITT) ruled in January that dumping caused harm to the domestic drywall industry in Western Canada, which means duties on American drywall imports must stay in place, at least for now. Its longer-term recommendation to the federal government is to temporarily eliminate duties for six months to allow contractors to complete fix-priced contracts—a time frame not everyone agrees is sufficient.

The CITT’s ruling comes after an investigation into allegations of dumping made by Canada’s only Western Canadian drywall manufacturer, CertainTeed, that the underpriced imports were causing significant harm to that company’s business and market share.

The duties, which amount to as much as 276 per cent, have resulted in 30 to 50 per cent price increases that are burdening commercial and residential construction industries, particularly in areas like Fort McMurray, which is undergoing heavy reconstruction efforts after last year’s wildfires.

While the duties remain in place in the interim, the CITT’s ruling included a statement that the preliminary duty “in its full amount” did not support Canada’s trade and economic interests, in particular, in its effect on businesses and consumers.

Contractors are still in limbo considering the far-reaching implications of the tariffs on their businesses and contracts in progress. The “temporary elimination” of duties would mean refunding them for a six-month time frame or until a certain import volume was reached, and the final duties should top off at 43 per cent of the export price, says the CITT recommendation.

The Western Canada Alliance of Wall and Ceiling Contractors (Alliance) released a statement saying the recommended stay is helpful, but not enough to allow contractors to complete their fixed-term contracts.

“The recommendation that final duties be temporarily eliminated for a six-month period is helpful, but is not long enough to allow contractors to perform their fixed price contracts going forward,” said Neal Pollock, of TDL Drywall Inc., Calgary and a member of the Alliance. “The Alliance will be seeking a longer period of temporary elimination without a volume cap.”

The ruling included recommendations to the federal government to grant a special remission that equals dumping duties on imported drywall used to rebuild Fort MacMurray. Fort McMurray’s mayor Melissa Blake also appealed to the federal government for relief grants to offset the duty expenses.

The Alliance recognized Finance Minister Bill Morneau’s efforts to have the CITT acknowledge the downstream effects of high duties on imported drywall.

“If it were not for the creative and thoughtful efforts by the Minister and his staff, we would not have had the opportunity to be heard by the Tribunal on the downstream harm caused to our industry by the imposition of the stark and harmful price increases which took effect overnight following the imposition of preliminary duties,” said a statement by Pollock.

The Alliance took part in the Tribunal, which considered the price impact on small and medium sized contractors in Western Canada.

BCWCA executive director Jeff Triggs says the association is hopeful resolution and clarity will come soon and encourages contractors to keep current duty prices under consideration.

“While the CITT did make some recommendations to the Finance Minister on potential relief for drywall contractors with fixed rate contracts, it is important to note that the higher duties are still in effect,” he said. “The Finance Department will likely wait for the CITT’s Statement of Reasons, which is due within 15 days of the January 4 decision, before making any decisions on the recommendations.”

The Alliance looks forward to reviewing the Tribunal’s reasons and strongly encourages the government to immediately implement the recommendations, said the statement. “To maintain our industry’s economic viability, Western Canada’s construction industry must be predictable and stable,” said Pollock. “We cannot be hit by significant overnight product cost increases that will put our livelihoods at risk.”

A statement from CertainTeed said the findings were a welcome validation of the company’s claim that Western Canadian manufacturing “has suffered material injury from large volumes of US drywall imports sold at low prices with huge dumping margins.”

CertainTeed “remains concerned” about permanent or long-term reduction in duty amounts in the absence of “full and complete information,” but supports short-term relief for contractors who established fixed-price contracts prior to September 6, 2016.

CertainTeed Gypsum Canada, however, “remains concerned with implementation of such relief,” said Matthew Walker, general manager, CertainTeed Gypsum Canada in a statement. “Any Provisional Duty remission or temporary Final Duty remission should only be paid to and for the benefit of contractors, and not US importers who are dumping,” he said. “CertainTeed Gypsum Canada does not support any temporary remission that would condone continued injurious dumping in Western Canada.”

CITT released its Statement of Reasons on January 19. These may preclude additional measures to alleviate financial pressure on contractors and consumers affected by the dumping duties.

“The BC Wall & Ceiling Association is looking forward to the final resolution of this issue so that moving forward, our members will be able to accurately bid on jobs, and be back to business as usual,” said Triggs.

View the CITT Statement of Reasons at http://www.citt.gc.ca/en/node/7827.