SBCA Requests DOC Hearing on Softwood Lumber Trade Dispute

The Structural Building Components Association (SBCA) is currently undertaking efforts to ensure the U.S. Department of Commerce (DOC), policymakers, members of the component manufacturing industry and the public clearly understand how component manufacturers (CM), their suppliers and their customers are harmed by the current softwood lumber trade dispute between the U.S. and Canada.

One such effort is the letter below that SBCA sent to the DOC’s Assistant Secretary for Enforcement and Compliance requesting a formal hearing discuss how softwood lumber trade tariffs and import quotas distort a normally functioning free market. This is bad for U.S.-based CMs who require Canadian softwood lumber because U.S. producers cannot or will not meet the total supply they need to meet the current demand for their products.

At right are SBCA’s observations regarding the Canadian softwood lumber trade dispute. Click on the image to view an easier-to-read version.

May 25, 2017

Assistant Secretary for Enforcement and Compliance

U.S. Department of Commerce (DOC)

1401 Constitution Avenue, NW

Washington, DC 20230

To the Honorable Assistant Secretary,

Pursuant to 19 CFR 351.310(c) and Federal Register Volume 82, Number 81, SBCA is a party that is interested in requesting a hearing regarding the determinations made with respect to Antidumping and Countervailing Duty Investigations of Certain Softwood Lumber Products from Canada: Preliminary Determinations of Critical Circumstances, signed April 12, 2017. 

Please find a brief introduction of the Structural Building Components Association (SBCA) in appendix A. The goal and objective of this letter is to provide background for a hearing discussion. A key concept that the SBCA membership would like the DOC to be more deeply familiar with is how the lumber trade issues defined in Federal Register Volume 82, Number 81 affect, in a very negative way, companies in the US that buy both US and Canadian lumber and create manufactured products such as wood trusses, wood wall panels and related structural framing.

I have been Executive Director since 1992 and have experienced the lumber dispute between Canada and the US for the third time now. The recurring theme, in each of these CVD/AD actions, is that wood truss and wood wall panel manufacturers are left out of the CVD/AD determination discussions and are harmed unilaterally, which can affect a sizable percentage of the 80,000 jobs SBCA member companies provide.

Why does the structural building component industry get harmed? Simply because a CVD/AD determination, and the resulting tariffs and/or quotas, distort a normally functioning free market for lumber. US truss and wall panel manufacturers need lumber from Canada because the US cannot and will not supply all of the truss and wall panel industry’s lumber needs.

The direct result of CVD/AD distortions is that truss and wall panel manufacturing jobs move to Canada. This is because Canadian truss and wall panel manufacturers; 1) can buy the same lumber at non-CVD/AD costs, 2) have comparable to lower labor costs, and 3) have exchange rate benefits. Each of these attributes make it very profitable for Canadian wood truss and wall panel companies to ship wood trusses and wood wall panels into US markets. In the past, we have seen Canadian truss and wall panel manufacturers ship products into markets as far south as LA and Atlanta. This sends US truss and wall panel manufacturing jobs to Canada.

Lumber market distortions, due to an imposed tariff/quota via a CVD/AD determination, has unintended consequences that always create winners and losers:

Losers:

1. All buyers of lumber, where lumber is a significant cost of the final product produced. For truss and wall panel manufacturers, lumber is roughly 50% of cost of goods sold and labor is 20%.
2. All US buyers of lumber with manufacturing in the US that compete with “manufactured in Canada companies” where the buyer is in a US market.
3. This obviously includes all roof/floor truss and wall panel manufacturers, building material suppliers, homebuilders, GCs, framers and so forth.

Winners:

1. The US lumber producers. Their goal is to ensure a distorted market that has less lumber supply overall. This generates an economics 101 change in the market supply/demand equation that favors more profit for their businesses.
2. Lumber traders always win when the market has uncertainty and there are government regulations based distortions.
   
   1. Less supply means greater cost volatility, which means that anyone that trades on that volatility can be a major winner if they are holding lumber inventory at a low price when the market is moving up or hedge well when the market is moving down.

Pursuant to [Federal Register Volume 82, Number 81 (Friday, April 28, 2017)] [Notices], here is the specific information requested to be provided:

1. The party's name, address, and telephone number: Kirk Grundahl, Executive Director, Structural Building Components Association (SBCA), 6300 Enterprise, Madison WI  53719, 608-217-3713
2. The number of participants: Three (3) the SBCA executive director and two (2) SBCA truss/wall panel manufacturer members directly affected by Canadian truss and wall panel imports.
3. Whether any participant is a foreign national: No
4. A list of the issues to be discussed: The contents of this letter, Appendix A and B background information, the effect of a lumber CVD/AD on US jobs and the wood truss and wall panel manufacturer’s business model/financial structure.

Thank you very much for your consideration of the information and concepts contained herein. We would appreciate your confirmation of receipt of this letter requesting a hearing and look forward to getting a hearing scheduled and placed on our calendar. 

Respectfully yours,

Kirk Grundahl, P.E.
Executive Director
 

Appendix A

SBCA is a national trade association of companies that produce and sell innovative engineered floor, wall and roof structural components and related building envelope oriented products. Currently SBCA’s membership includes 436 companies and 950 manufacturing locations in the US, along with the support of a variety of suppliers. SBCA represents approximately 90% of the more than $8 billion (best estimate in 2015) in building components sold in these markets. This represents roughly 80,000 jobs, which does not include all the supply side and buy side jobs that are created because wood truss and wood wall panel manufacturers exist.

Our industry also deploys many professional engineers and works closely with building departments across the country to implement new and innovative products, such as trusses, that use generally accepted engineering practice concepts for acceptance into the market.

Professional engineering and the building code are intended to foster a spirit of innovation. This creates and expands new opportunities for US manufacturers given that the building code is intended to encourage creative engineering and promote the use of innovative materials, systems, or building designs, such as wood truss and wall panel designs.

Unfortunately, there are times when artificial constraints, such as lumber CVD/AD determinations, are put in the way of implementing the use of innovative products through generally accepted engineering practice due to an altered supply demand relationship.

Appendix B

SBCA Related Articles

1. October 31, 2016 -- Understanding the SLA and What Will Happen Next
   
   1. The most recent softwood lumber agreement (SLA) between the U.S. and Canada expired a little over one year ago. Here's what will happen next.
2. Februrary 21, 2017 -- Lumber History Repeats Itself, and It's Gotten Ugly
   
   1. Lumber prices have risen 26 percent over the past three weeks, but the most important thing component manufacturers (CM) should do is DON’T PANIC. This article explains briefly why.
3. Februrary 27, 2017 -- Lumber Market has Gone Emotional – Nothing Good Comes of This
   
   1. Lumber prices have risen again. Last week typically followed random lengths print levels were nearing all-time highs. It has also been said that some lumber purchases are costed above print.
4. March 13, 2017 -- Future Lumber Supply May be Greater Concern than SLA
   
   1. Lumber supply will likely continue to evolve in the near future, so it will be important for all lumber purchasers to keep their eyes open for new developments.
5. April 10, 2017 -- Why Lumber Costs Continue to Rise and What to Do
   
   1. The following article provides some insight into the causes behind the sudden spike in cost, what may be happen in the near future, and what CMs should consider going forward.
6. May 1, 2017 -- Sorting Through Media Reports on Softwood Lumber Tariff
   
   1. The softwood lumber trade dispute between the U.S. and Canada received a significant amount of national media attention over the past week.