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CHBA Summary Report on Tribunal Hearings on Drywall Duty

The Canadian International Trade Tribunal has just wrapped its two-week long public hearing, where CHBA and CHBA’s legal counsel participated actively, and the input from the many CHBA members active in recent months on this issue was very impactful.  The hearing had a dual role, thanks to the unprecedented acceleration of the public interest element of the process, and hence delved into both the questions of injury and threat of injury to domestic producers, and the impacts that drywall duties have on the public interest, including Canada’s economic, trade or commercial interests, competition, and consumers and businesses in Western Canada.

In its formal submissions, testimony and final arguments, CHBA detailed the negative impacts that the exorbitantly high duty has already had on those downstream from drywall producers – suppliers, contractors, home builders, renovators and consumers. Industry is losing already-thin profits on currently-in-place contracts, is questioning its ability to bid on projects moving forward, and is laying off employees or not calling sub-trades back for work that’s been delayed or cancelled. All of this is due to uncertainty in price and supply brought on by the imposition of the drywall duty, and it could mean a further dampening of housing activity.

The devastating effect on businesses and the inability of vulnerable housing markets to absorb any more cost increases was echoed by drywall suppliers, contractors, installers, and Members of Parliament, who have heard from members and HBAs in their constituencies.

CHBA has asked the Tribunal to compare the purpose and result of duties for domestic drywall producers with the impact on an industry that meant $45 billion in economic activity, 400,000 jobs and $24 billion in wages for Western Canada in 2015.

CHBA also asked the Tribunal to consider the position of consumers who can ill-afford more housing cost increases. While the majority of focus has been on businesses up and down the supply chain, it should not be taken for granted that consumers will or can accept a few extra thousand dollars cost. For some it will make affordability more difficult, and for others it will push them out of purchasing a home altogether.

On the closing day there was active discussion on possible remedies for industry participants who had been harmed by increased prices brought on by the imposition of the drywall duty. CHBA suggested to the Tribunal that those companies who had realized windfall profits due to the duty should be the first to compensate industry.

The Tribunal took the unusual step of telling parties at this stage of the proceeding that, if they found injury, they would reject CertainTeed’s request for delay and a further inquiry into the public interest and would immediately fulfill their obligation to the government to report on the impact to industry and their recommended remedy. They took a further unusual step to advise the industry that there will be no delay in the review process, and that the Tribunal will provide as much clarity to market as possible when it provides its final decision on January 4, 2017.

Dumping Margins

On December 5, Canada Border Services Agency set its final dumping margins at 94.6% to 324.1% (in all but one case higher than the original provisional levels). These numbers represent the level at which the CBSA believes that U.S. producers were dumping their gypsum board into the Western Canadian Regional market.

Establishing dumping margins is completely separate from the Trade Tribunal process.  If the Trade Tribunal finds injury, the dumping margins will be applied to imported gypsum at the border.  Based on the dumping margins, US exporters will be assigned individual minimum prices for their drywall; if they sell at or above these minimum prices (to their Canadian counterpart) then no anti-dumping duties will apply.  These values are set separately for each importer and would come into effect the day after an injury finding.

It is unclear if these revised dumping margins will affect prices between now and January 4. The uncertainty on how to quote for projects moving forward, along with all the negative impacts the dumping duties have had on industry, have been made very clear at the Tribunal by CHBA and industry members.

Next Steps

On January 4, 2017, the Tribunal will issue its final injury decision. This may mean duties stay the same or be eliminated retroactive to September 6th if the Tribunal finds no injury.

If the Tribunal decides no injury, than the duties will be immediately removed and monies collected by CBSA will be returned to importers. If this is the case, CHBA will ask the government to take action to ensure recompense for all downstream companies that incurred additional cost due to the duties being temporarily in place.

If the Tribunal finds injury, it must report to government on the impact the duties have on businesses, consumers and the economy, and provide options to mitigate that impact.

If the duties are upheld at the current or reduced levels, CHBA will pursue alternate action given the negative impact on the industry, consumers and the economy in Western Canada.