The Canadian International Trade Tribunal (CITT) ruled this month that drywall products imported from the U.S. have injured the Canadian construction industry. But much lower tariffs and a break for those in fixed-priced contracts is being recommended.
According to the CITT, the imposition of high provisional duties to gypsum board imported from the United States for markets in Manitoba, British Columbia, Saskatchewan, Alberta, Yukon and the Northwest Territories, "in their full amount, is contrary to Canada’s economic, trade or commercial interests, and specifically that such an imposition would substantially reduce competition in those markets or cause significant harm to consumers of those goods or to businesses who use them."
Following the initial complaint last year, duties of up to 276 per cent were put on drywall products.
"They took a jar of marbles, turned it upside down and let it go all over the floor and we were left picking up the pieces," said Neal Pollock, of TDL Drywall Inc. Calgary, who is also a member of the Western Canada Alliance of Wall and Ceiling Contractors.
He, along with other members, participated in the tribunal proceedings.
While Pollock said he feels the system of imposing tariffs before an investigation seems backwards, he applauded the CITT for listening to industry concerns and performing an unprecedented expedited investigation process.
Pollock said the alliance believes the recommendations presented by the tribunal go a significant way to alleviating the harm of the high duties, like a refund mechanism to reimburse purchasers for the higher cost of gypsum board incurred during the provisional period. The alliance also welcomed the introduction of a reduced rate of final duties that it believes is necessary to maintain competition in the western Canadian market.
The recommendations suggest that duties should be eliminated for six months to help those with fixed-price contracts already in place and then be limited to 43 per cent of the export price. The tribunal also recommends that monies already collected be used to offset some of the increased costs paid by end users.
Options specifically for Fort McMurray rebuilding efforts are also provided.
Pollock said that while six months is helpful, it is not long enough to allow contractors to perform their fixed-price contracts, which can be anywhere from a few months to 24 months. The alliance will be seeking a longer period of temporary elimination without a volume cap.
"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."
In its report, the CITT also suggested the federal government create a special remission equal to the duties applicable to parts of Fort McMurray ravaged by wildfire. This idea has also been championed by Fort McMurray Mayor Melissa Blake.
The tribunal, its recommendations and the duties all stem from a dumping complaint filed by CertainTeed Gypsum Canada Inc. which operates six gypsum board manufacturing facilities located throughout Canada.
It is the only producer of gypsum board located in Western Canada with three manufacturing facilities located in Vancouver, Calgary and Winnipeg.
In June, the Canadian Border Services Agency (CBSA) initiated an investigation.
The Canadian Construction Association (CCA) stated that it was pleased the CITT recognized some of the problems the duties were creating and is proposing some solutions.
"The CCA is pleased that the panel has recognized that the imposition of a duty did create a hardship on our members working under fixed-price contracts and they have recommended a solution which we hope government adopts," said Bill Ferreira, CCA vice-president of government relations and public affairs.
Gord Stewart, president of the Independent Contractors and Businesses Association of B.C. (ICBA), said the drywall dispute is part of a larger issue of complaints from the east impacting the west.
"You have the CITT responding to complaints and they tend to come from Eastern Canada," Stewart said.
"B.C is a small, open-trading economy and a port city. Our market has evolved the way it has evolved and has built the supply chains that make sense."
Stewart said the ICBA does recognize the importance of protecting Canadian jobs and international trade decisions can be highly complex.
"The problem is that the decisions and complaints are largely made through an eastern Canadian lens," Stewart said.
"B.C. has to think about how we fit within this national trade and tariff policy because we are unique. The model seems ill-suited to a country with as many diverse regions as Canada."
Chris Gardner of the ICBA said another issue with the model is how it can be intimidating to smaller companies that are often most affected by duties.
"These processes are very dense, so small companies that are impacted, they don’t really have the resources to go and sit through hearing after hearing," Gardner said.
The Canadian Home Builders’ Association (CHBA) also applauded the recommendations but is waiting to hear more details on the decision later this month.
"How the 43 per cent duty is enacted will make all the difference — prices more in line with historical norms, price stability, and adequate supply of product will all be essential to ensuring Canada’s economic, trade and commercial interests are indeed met and harm to downstream users is sufficiently mitigated," said CHBA CEO Kevin Lee.
The association explained the duties on U.S. drywall have had a significant impact on the residential construction industry, which accounted for $45 billion in economic activity, 400,000 jobs and $24 billion in wages for Western Canada in 2015.
"Now is the time to focus on what the Canadian economy needs to see as the outcome to all this — including restoration of drywall supply certainty, as well as reasonable and predictable prices," said Lee.
"Given that the government wants to avoid negative economic impacts, the details will be key."
The CHBA also applauded the minister of finance and the government for speeding up the process and listening to stakeholders.
Manley McLachlan, advisor to the president of the BC Construction Association, said he is not surprised with the ruling.
"It appears to recognize the negative impact the imposition of the tariffs had on drywall contractors who were working on fixed price contracts with no price escalation conditions at the time of the implementation of the tariffs," he said.
"The ruling appears to propose remedies to provide some form of relief now and in future."