Ottawa orders review of drywall tariffs in Western Canada

The Liberal government has taken the unusual step of asking the Canadian International Trade Tribunal for a public interest review of recently imposed duties on drywall imported from the U.S. to Western Canada.

Move comes after outcry over impact on construction industry in hard-hit Alberta

A burned out barbecue is shown in the Abasands neighbourhood in Fort McMurray. There are questions emerging about what tariffs on drywall could mean for rebuilding in the hard-hit Alberta city. (Jonathan Hayward/Canadian Press)

The Liberal government has taken the unusual step of asking the Canadian International Trade Tribunal for a public interest review of recently imposed duties on drywall imported from the U.S. to Western Canada.

The move comes after an outcry from the construction industry over fears the tariffs would drive small and medium-sized drywall companies out of business, drive up the costs of building homes for consumers and delay the rebuilding efforts in Fort McMurray.

"These are exceptional circumstances and they are having a real impact on middle class families across the West and especially in Fort McMurray," said Daniel Lauzon, the director of communications for Finance Minister Bill Morneau. "The bottom line is that we want to protect jobs in Western Canada and make sure families can move back into their homes and get on with their lives."

Last month, in a preliminary ruling, the Canada Border Services Agency announced it would impose a provisional tariff on most drywall, also known as gypsumboard, coming from the United States. The CBSA said it found evidence the drywall was being "dumped," meaning the products are being sold into Canada at below normal prices.

The duties imposed ranged between 105 per cent up to 276 per cent, sending shock waves through the construction industry, particularly for drywallers who often sign fixed contracts with builders and will now have to absorb the increased costs.

A man walks past a stack of drywall that was manufactured in 2008, at the closed National Gypsum drywall factory in Lorain, Ohio, April 19, 2012. The federal government has imposed a tariff of up to 267 per cent on drywall or gypsum board used in housing construction after a preliminary ruling that the U.S. board was being dumped into Western Canada. (Jae C. Hong/Associated Press)

A final decision on duties is coming in January, after the CITT and the CBSA do independent investigations and hold a hearing of stakeholders in December. But those investigations look solely as to whether there has been dumping, what that margin of dumping has been and whether the domestic drywall industry has been injured. They do not look at the broader implications.

A public interest review — to look at the impacts of the duties on the local economy and consumers — would not normally happen until after January's decision and only at the request of interested parties. But seeing the "unintended consequences" of the tariffs could mean further job losses in hard-hit Alberta, the Liberal cabinet made the unusual step to request the CITT do such a review now. And by asking for the report to be ready for the government in time for the final decision in January, it is expediting the process by several months.

'Encouraged' but concerns remain

The Canadian Home Builders Association calls the public interest review "encouraging," but it continues to ask Finance Minister Bill Morneau to suspend the temporary tariffs while the review is being conducted.

"We're actually concerned about the number of small and medium-sized businesses that could go out of business while this review is ongoing," said Jason Burggraaf, the CHBA's government relations and policy advisor. "A suspension would still be the first option in terms of mitigating the immediate impact on businesses and on homebuyers."

Burggraaf says the request for a suspension has so far gone unanswered.

The CBHA said the tariffs have led to a growing shortage of drywall in Western Canada, inevitably driving up the cost and delaying construction, particularly in Fort McMurray which was ravaged by fire last May.

The ordering of a review is too little, too late for Conservative international trade critic Gerry Ritz, who called it a "hollow victory."

"They're closing the barn door after the horse is gone," Ritz said in an interview with CBC News. "Basically they've taken the whole construction industry in Western Canada and put it on hold for these 90 days."

The government says the review is aimed at resolving the issue quickly and that it gives the CITT the go ahead to "put the interest of western Canadians front and centre."

CBSA began its preliminary investigation following a complaint about dumping from CertainTeed Gypsum Canada in April. The company is the largest Canadian drywall manufacturer in Western Canada. Another unique aspect of this case is that one of the businesses it is accusing of dumping is CertainTeed Gypsum and Ceiling Manufacturing Inc., its American cousin.