Duties on drywall are looking like a much bigger matter than just inches.
The Canada Border Services Agency (CBSA) announced on July 21 it is launching an investigation into whether some 54-inch gypsum board originating in or exported from the United States for consumption in Western Canada is being sold at unfair prices, or “dumped” in Canada.
The investigation began after CertainTeed Gypsum Canada Inc. of Mississauga, Ont. alleged the dumped goods have caused “material retardation to the domestic industry in Western Canada.”
CertainTeed operates manufacturing facilities across Canada, including in Delta, B.C, Calgary, Alta. and Winnipeg in Western Canada.
“U.S. dumping of 54-inch drywall in Western Canada is distorting the Western Canadian drywall market, and preventing new investments and jobs. We believe we have a very strong case that will restore free and fair trade and create new jobs in Western Canada,” said CertainTeed CEO Matt Walker.
The CBSA and the Canadian International Trade Tribunal (CITT) will both be involved in the investigation with the CITT holding a preliminary inquiry to determine whether the imports harm Canadian producers, with a decision by Aug. 20.
At the same time, the CBSA will investigate whether the imports are being sold in Canada at unfair prices and will make a preliminary decision by Sept. 19.
CertainTeed previously raised concerns about 48-inch-wide boards in the summer of 2016, and in January 2017 the CITT validated the complaint. The CBSA then imposed final duties on U.S. importers who were found to be dumping 48-inch drywall boards into Western Canada at levels of 94.6 per cent to 324.1 per cent.
But since 54-inch drywall was not a “subject good” in the original case involving 48-inch drywall, no duties from that case can apply to the 54-inch boards.
Costs at all levels would have to be handed down so homeowners have to pay more
— Neil Moody
Canadian Home Builders’ Association
“CertainTeed Gypsum Canada therefore continues to face some injury from U.S. dumping of 48-inch wide drywall, but at mitigated levels, and now faces increasing and unmitigated levels of dumping of 54-inch wide drywall,” Walker explained.
“This is resulting in continuing unfair market pricing of drywall in the western Canadian market, where domestic Canadian manufacturing faces the significant economic challenge to rebuild and recover from years of dumping injury.”
While CertainTeed is in favour of duties on drywall products, their view is not shared by everyone in the industry.
“For many years, it is our experience that Canadians support free and fair trade and do not support dumping behaviour. Some drywall distributors and their customers can benefit by the ability to purchase drywall at below fair market prices. Some were active in contesting the last complaint in the previous case which is on the record,” Walker said.
Among those contesting the previous compliant were the Canadian Home Builders’ Association (CHBA), the Western Canada Alliance of Wall and Ceiling Contractors, and several gypsum producers and importers, both U.S- based with Canadian affiliates and solely Canadian firms.
During the 2016 complaint, some importers of the U.S. material said there would be a negative cost impact from fixed-price drywall contracts and the federal government took precautionary measures such as a relief fund called the Drywall Support Program through Western Economic Diversification Canada for contractors who could provide evidence of financial impact by duties on fixed price contracts. Increased prices for Fort McMurray, Alta. homeowners rebuilding after the massive wildfires were also cited as a cause for the reduction in duties.
This time higher costs will be felt by homeowners across the housing continuum, CHBA CEO Neil Moody said.
“It will affect all areas of housing, and directly affects affordability. Costs at all levels would have to be handed down so homeowners have to pay more. In terms of taxes, provincial coffers would be hit, affecting the overall economy,” Moody said.
Moreover, he said, very little 54-inch drywall board is produced in Western Canada, with most of the product originating in the United States
“It really doesn’t make sense, and particularly in Western Canada, we’ll feel the brunt of it,” he claimed.
While CertainTeed said in a press release the total value of the validated claims by contesting parties was a “tiny fraction” of the claims made in tribunal testimony, the CHBA estimated over $330 million in additional costs for western Canadian builders, renovators and contractors had been saved through these measures.
The currently brewing trade war between the United States and Canada should not influence this particular case, Walker said.
“Our case is separate and will be handled through the normal and well established Canadian legal trade remedy process. Our case is strong and will stand on its own merits,” he said.
Moody said the drywall dispute is its own issue but stands a chance of being lumped in with the current U.S.-Canada trade debate.
“It could be on the coattails on all other discussions taking place, but all that happens is it costs more for homebuilders on both sides of the border,” Moody said.
You’d think the exchange rate on materials imported into Canada would be enough to take care of price differentials. My gut reaction is that Certainteed is looking for a nanny state protection so they can raise prices with impunity to cover inefficiencies in their own operations. Governments decry housing affordability and then enact policy that jacks up building costs, forcing builders to raise prices of go bankrupt.