Last week Burns Lake council decided to support a lumber remanufacturing company in Moricetown that’s been struggling with the countervailing duties (CVD) recently imposed by the U.S.
In a letter to the Village of Burns Lake, Kyahwood Forest Products says it will be “particularly hard hit” by the 19.88 per cent CVD announced last month.
“For one thing, the CVD is retroactive 90 days as of May 1, 2017,” explained Kyahwood manager Gary McKinnon. “In the past 90 days, Kyahwood shipments to the U.S. grossed $1,918,159, making the retro sum a whopping $381,330.”
Going forward, the U.S. expects all CVD to be prepaid. On average, Kyahwood payments would total $11,000 per rail shipment. Since Kyahwood ships an average of five cars for every two-week rotation, the average CVD prepaid would be $55,000, twice monthly.
“This will have a dramatic impact on the company’s cash flow,” said McKinnon.
In addition, starting in June, the U.S. will impose an anti-dumping tariff, which could also be retroactive to 90 days.
“The company must consider the possibility of closure due to the CVD and anti-dumping tariff, which would have painful ripple effects on the community,” said McKinnon. “Employees would be forced to rely on EI or social assistance, or would leave the village entirely for other jobs. And of course, local suppliers and the trucking industry would lose business.”
Kyahwood currently employees 58 staff, 98 per cent of which are aboriginal. McKinnon says the company supports many local businesses through its annual payroll of $2 million.
“Considering that operating supplies amount to another $5 million, these tariffs will have serious repercussions for this village,” he added.
Burns Lake will support the Moricetown company by writing a letter to support their grant applications, which will be intended to conduct a feasibility study to examine other markets for their wood.
Burns Lake councillor Susan Schienbein said it’s important to support neighbouring communities such as Moricetown because Burns Lake could potentially face a similar situation in the future.
Although Hampton Affiliates – company that owns Babine Forest Products and Decker Lake Forest Products – will also also have to pay countervailing duties of nearly 20 per cent on its shipments to the U.S., the company does not expected any layoffs in the near future.
The U.S. Department of Commerce argues that countervailing duties are required to offset what in its view is unfair subsidies that Canadian and provincial governments allegedly provide to lumber companies.
