Drywall tariff causes construction cost hike

Canadian builders are getting hit by higher drywall prices due to preliminary tariffs imposed by the Canadian Border Services Agency (CBSA) earlier this month.

The decision stems from a complaint filed with the CBSA by CertainTeed Gypsum Canada Inc.

The company alleges that imports of gypsum board originating in, or exported from, the U.S., imported to British Columbia, Alberta, Saskatchewan and Manitoba, as well as the Yukon and Northwest Territories, are being dumped.

The complainant alleges that the dumping has caused injury and is threatening to cause injury to the Western Canadian industry producing similar goods.

In June, the CBSA initiated an investigation. CertainTeed Gypsum Canada Inc. operates six gypsum board manufacturing facilities located throughout Canada. According to the CBSA, it is the only producer of gypsum board located in Western Canada with three manufacturing facilities located in Vancouver, Calgary and Winnipeg.

On Sept. 6 the CBSA made a preliminary determination that the U.S. was dumping and has imposed tariffs from 105 per cent to as high as 276 per cent depending on the product type and manufacturer.

The tariffs were far higher than many expected and came without warning, state industry stakeholders.

"The tariff certainly caught the entire drywall industry off guard," said Derek Paquette, project director at Drystar Wall and Ceiling.

"The initial value of the tariff was simultaneously announced and implemented on Sept. 6 creating a lot of confusion and frustration for trade contractors. We weren’t sure what to communicate to our contractors because the information available was unclear. All we knew at that time was the percentage increases for manufacturer’s drywall crossing the border."

Paquette added the government has launched an inquiry that invites people in the industry to participate and express their concerns.

"We have no doubt that the industry will be well represented at these hearings. However, the process of implementation before consultation seems backwards," he said.

Canadian Home Builders’ Association of BC CEO Neil Moody echoed his comments, saying there was no warning or consultation with the players in the market.

He believes the decision is arbitrary and could favour one Canadian company that can’t meet all of the region’s demand, meaning prices of homes and properties for buyers could increase anywhere from $3,000 to $10,000.

With a final determination not scheduled until January, Moody said some smaller companies might not survive the wait.

He added that Alberta, already weathering an oil price slump, could be hit hardest. The Alberta Construction Association has already sent a letter to government officials citing three concerns. First, they argue cost increases may hurt suppliers and the industry in general if they are varying dramatically across the industry.

Second, if there is a shortage, this will create basic supply problems for the industry and cause schedule and cost overruns for current projects.

Finally, the association is worried that the cost increases would have to be passed on to the customer in succeeding contracts which may significantly impact government-funded infrastructure projects.

"We have seen big price increases in the last couple of weeks," said Nathan Stone with Odessa Group, a homebuilder in B.C. "Ultimately we will end up having to absorb that cost."

He doesn’t fault the CBSA which, he said, is following its process and narrow scope, but the decision is having unintended consequences.

Stone added now U.S. imports are cost prohibitive.

He said while the current scope and process may protect a small number of manufacturing jobs at one company, it is at the expense of thousands of new homebuyers.

"On a new house, if they have to eat $7,000 or $9,000 that is a huge portion of their profit margin," said Stone of smaller businesses. "This could end up causing some businesses to not be able to survive."

Jeff Triggs, executive director of the BC Wall and Ceiling Association, of which CertainTeed is a member, said many its members were caught off guard.

"I think the biggest issue is the drywall contractors and the end users impacted by this prelim duty," he said, adding that the percent of the duty was shocking. "People that have contracts fixed don’t have any time to adjust."