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CertainTeed seeks more drywall tariff protection in Western Canada

Company targets 54-inch drywall board even though it doesn't manufacture it in Western Canada


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June 28, 2018 by John Bleasby

Eighteen months ago, CertainTeed Canada convinced the Canadian Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT) to impose tariffs up to 324 per cent on U.S. drywall board entering Western Canada. Now it’s at it again, claiming U.S. manufacturers are dumping 54-inch wide boards into markets from Manitoba to B.C., thereby preventing CertainTeed from manufacturing that product in Western Canada. CertainTeed Canada/CertainTeed Gypsum Canada are owned and controlled by the French multi-national corporation Saint-Gobain S.A..

In a 1,700-word company release, Matt Walker, Chief Executive Officer of CertainTeed Canada, said, “US 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.” The company is going after this particular 54-inch product since it was not named specifically in the January 2017 ruling.

CertainTeed seeks regional tariff protection for products they don’t make there
Mr. Walker’s suggestion that punitive tariffs, “will restore free and fair trade” is interesting. High tariffs are usually regarded as protectionist measures. What is also curious about CertainTeed’s new claim is that the company is requesting tariff protection for a product it does not produce in the subject area. According inquiries made by Canadian Contractor, CertainTeed manufactures their Easi-Lite 54-inch gypsum board in Eastern Canada, but not in Western Canada. Normally, one might expect that a company would first manufacture a product before asking for protection from competition. It remains to be seen if the CBSA and CITT will buy CertainTeed’s argument. Both will issue their decisions by August 20, 2018 and September 19, 2018 respectively.

Drywall prices have soared since the 2017 tariff imposition
In CertainTeed’s view, 2017’s high tariffs have been great for its business and could do the same if applied to 54-inch wide boards. It says the punitive tariffs on U.S. boards, “had a positive impact on Western Canadian 48-inch wide drywall manufacturing. CertainTeed has been able to rehire plant shifts that were cut over recent years due to the dumping injury, and further increased hiring of Union operators and staff at CertainTeed’s three Western drywall plants and improved job security for the existing employees.”

The numbers speak for themselves. Western Canada has paid a high price to protect CertainTeed’s regional operations (Canadian Contractor chart)

The “positive impact “ of rehiring and job security to which CertainTeed refers may have boosted the company’s bottom line in Canada, however it has come at a very steep price for purchasers of drywall, particularly in Western Canada. Canadian Contractor has been tracking gypsum board pricing across Canada since early 2017. Our methodology has been to log the price of a standard 4×8 foot, half inch-inch drywall sheet in four same-store retail outlets in New Brunswick, Ontario, Alberta and British Columbia. Here is what we’ve found (see chart)

CertainTeed brushes away the impact of a 42 per cent price increase
Yet in its release, CertainTeed goes on to suggest that the impact of the high tariffs has been minimal and that “claims by contesting parties… that duties would result in material negative public interest… ‘hundreds of millions of dollars’ of cost impact from fixed price drywall contracts, drywall supply unavailability and a massive increase in costs of residential homes… were unfounded.” As evidence, it cites the low application rate to a governmental Relief Fund set up to help mitigate any documented damage to contractors stung by fixed priced contracts. In fact, the low 2.0 per cent claim rate was likely more an issue of a complicated application system coupled with difficulties for smaller contractors to retrieve data and calculate the degree of suffering incurred. However, given the evidence presented in our own research, it would be difficult to accept that a 40+ per cent increase in prices has not been without damage to individual contractors and end customers in Western Canada.

After succeeding in having Western Canadian import tariffs up to 341 percent imposed on 48-inch wide U.S. drywall, CertainTeed Canada is going after 54-inch wide boards, even though they don’t manufacture them in Western Canada.

We asked questions but CertainTeed declined to answer
CertainTeed Canada was less than forthcoming beyond its press release when it came to answering questions about their tariff protection claims, mirroring its behavior in early 2017. Canadian Contractor was unable to reach CEO Matt Walker by phone for further comment. The media contact named in the company release turned out to be based at CertainTeed’s East Coast U.S. office, not in Canada. That contact told Canadian Contractor that CertainTeed Canada would not be providing interviews, and that any questions must be submitted in writing to the U.S. operation, from where they would be forwarded to “experts’ in the subject for a response.

Here’s what we asked CertainTeed to clarify
1. How much cheaper is the “dumped” U.S. 54-inch drywall product than CertainTeed’s? What specific level of tariff protection is the company requesting?
2.What dollar value investment would the suggested 54-inch manufacturing equipment involve, and what increased levels of employment in the company’s Western Canadian plants would result?
3. If CertainTeed’s argument is accepted and tariffs are imposed on U.S. product, when would CertainTeed begin to manufacture the 54-inch boards in Western Canada — One month? A year?

Rob Scott, Manager, Marketing Communications, CertainTeed Gypsum, responded these questions from Canadian Contractor this way: “Several of your questions are sensitive in nature and we would not be able to share these facts and figures publicly.”

Timing is everything
With the Trump administration on the trade warpath against countries restricting imports of U.S. products, and NAFTA negotiations at a difficult stage, Canadian Contractor also asked if the company had considered the political sensitivity of its tariff protection request? There was no response to that question either.

Despite the wordy release and vague allusions to investment and employment made by Mr. Walker, it remains to be seen how the Western Canadian construction industry will react to this attempt by a foreign-owned company to seek regional tariff protection for products they don’t yet manufacture.

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JBleasby@canadiancontractor.ca

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