Drywall Duty in Western Canada
Drywall Tariffs Lowered, Compensation Program for Builders and Contractors Launched Due to CHBA and Industry Intervention
June 2017 - With the support of provincial and local Associations, and over 500 members, CHBA was successful in its representations to the Canadian International Trade Tribunal that exorbitant tariffs on U.S. drywall are not in Canada’s best interests. They agreed – and so did the federal government.
CHBA’s specific issues were:
Results of CHBA interventions were swift, as within weeks of the first announcement of the duties and subsequent CHBA engagement, the Minister of Finance, in an unprecedented action, directed the Canadian International Trade Tribunal to accelerate investigation into the downstream impacts of the duty. This had never been done before, and showed the efforts of the Association and members were attaining serious positive impact.
- Exorbitant duties quickly destabilized and could permanently damage businesses down the line from drywall producers/importers
- The duties were particularly damaging with no
phase‐in period to allow all affected parties to adjust (fixed-price
contracts and sales agreements)
- Impact on cost to rebuild in Fort McMurray
- Problem with the scope of CITT and CBSA – they
only considered the domestic market for drywall producers (which are
also the majority importers), not the impact on the end user
- Government had an obligation to consider the
bigger picture ‐ health of the largest economic engine, housing markets
and overall economy
A few weeks later, it was clear that the Tribunal found CHBA’s involvement and testimony significant. CHBA’s legal counsel noted the following: ““[W]e should recognize the CHBA's important contribution to this Inquiry ... The CHBA was the only party to argue that consumers were not willing to absorb all these costs. The CITT recognized that consumers would be forced to accept higher costs and that this would cause harm … and would slow the residential housing market. Consequently, the CHBA can take credit for demonstrating that its members will be harmed by anti-dumping duties over the long run and that this evidence led the CITT to recommend limiting anti-dumping duties.”
On February 27, the Minister of Finance announced a reduction in the duties on drywall from the U.S. coming into Western Canada. The Government stated that the reduction will have the same effect as the Tribunal’s recommendation to reduce the duties to 43% of the export price.
On May 1, the federal government launched its Drywall Support Program through Western Economic Diversification Canada. The relief program was for Western and Northern Canadian drywall contractors and builders who paid increased drywall costs due to the anti-dumping duty between September 6, 2016 and February 24, 2017, and residents of the Regional Municipality of Wood Buffalo whose homes were severely damaged or destroyed in the May 2016 wildfires.
$330 Million Saved
CHBA estimates that intervention on this issue from the Association and industry saved over $330 million (in new construction alone) in additional costs for Western Canadian builders, renovators, contractors and most importantly, their client homebuyers.
On September 6, 2016, the Canada Border Services Agency invoked the Special Import Measures Act, making a preliminary determination of alleged dumping with respect to gypsum board (drywall) originating from the United States and imposing provisional duties on drywall imported into Western Canada.
Media Release: Exorbitant Duty on Drywall Harms Business, Home Buyers (September 16, 2016)
Leading up to and following September 6, the Association and members were extremely active in combatting the exorbitant duties, contending that they were not in the public interest and would adversely impact consumers, the home building industry and the economy at large.
As a result of this action, on October 18, the Minister of Finance, in an unprecedented action, directed the Canadian International Trade Tribunal to accelerate investigation into the downstream impacts of the duty. This had never been done before, and showed the efforts of the Association and members were attaining serious positive impact.
Although the duties were imposed on U.S. imports into Western provinces and territories, drywall prices had quickly become a national issue. The residential construction industry had already seen ripple effects on price and warnings of supply restrictions in Ontario and in Eastern Canada. There was also talk of extending the duty to all of Canada.
Over 500 members responded to a CHBA survey to get detailed data on the impacts of the duty, providing excellent support for CHBA’s testimony and action with legal counsel at the two weeks of Tribunal hearings in Edmonton in late November and early December.
On January 4, 2017, the Tribunal issued its findings and recommendations, which showed once again that efforts by the Association and members yielded significant and important results:
Media Release: Drywall Duty Report Recognizes Negative Impact on Builders, Renovators, Consumers and the Canadian Economy (January 6, 2017)
- The Tribunal found that the imposition of the duties in full is contrary to Canada’s economic, trade or commercial interests, and specifically that such an imposition has or will substantially reduce competition in those markets, or cause significant harm to consumers of those goods or to businesses who use them, as CHBA had contended.
- Duties collected to date should be used to refund wholly or in part the higher costs paid by end users. This was in line with CHBA recommendations that those who had to pay more due to the provisional duties enacted in September should be reimbursed.
- Duties, when enacted, should be reduced to 43% (down from a high of 201%). Duties are on trans-border inter-company transfers, which are lower than even wholesale prices, so a 43% duty on the final export price does not equal a 43% cost increase.
- Grant remission to negate the duty for drywall for rebuilding Fort McMurray. Eliminating any impact on the reconstruction effort in Fort McMurray was a critical recommendation by CHBA.
CHBA was pleased that efforts of the Association and members had such an impact and yielded such extensive results, particularly in accelerated fashion, especially given the nature of the international tribunal process for which these types of changes for downstream interests are very uncommon, let alone in expeditious manner.
On February 27, the Minister of Finance announced a reduced in the anti-dumping duties on drywall from the U.S. coming into Western Canada, along with a compensation package for industry and consumers affected by “exceptional price increases”.
The Government established new minimum import prices for drywall imported from the U.S. for use in Western Canada that are 32.17% lower than the original tariffs. The government believes that this approach will result in the same level of duty reduction as recommended by the CITT, while addressing potential circumvention concerns.
In addition, the Government committed to using the approximately $12 million in anti-dumping duties collected to provide relief to builders and contractors who were unable to pass through elevated drywall costs, due to fixed-price building contracts.
Media Release: Drywall Decision Seeks to Remedy Excessive Duties Contrary To Canada’s Economic Interests (February 27, 2017)
On May 1, the government announced the launch of a relief program for Western and Northern Canadian drywall contractors and builders, and residents of the Regional Municipality of Wood Buffalo whose homes were severely damaged or destroyed in the May 2016 wildfires. Applications for reimbursement could be submitted from May 1 to May 31, 2017.