Western Drywallers: “Our members were betrayed!”

Drywallers in Canada’s West are not happy. The Canadian Finance Minister only partially implemented a Canadian International Trade Tribunal (CITT) ruling made in February regarding drywall tariffs for Western Canada, notably failing to enact a duty-free holiday this spring as compensation to  installers penalized by the extreme tariffs imposed by the Canadian Border Services Agency in September 2016 . Out of frustration, the Western Canada Alliance of Wall and Ceiling Contractors has hired Dan Ujczo, an experienced international trade and customs lawyer based on Columbus, OH to air their grievances in front of the U.S. Trade Review (USTR) concerning NAFTA this week. It’s a bold step, and will bring Canada’s true attitude towards fair and open trade in front of an American administration eager for ways to protect its own interests.

UPDATE (June 25): U.S. adds more duties to Canadian software imports
The addition of an anti-dumping tax of 7.72% brings total duties to between 17.41% and 30.88%

In an exclusive interview, John Bleasby speaks with Dan Ujczo about the motivation and strategy behind the Alliance’s position as he prepares for his presentation on Thursday June 29.

It seems like a bold step to take a complaint about the actions or inactions of the Canadian government to Washington. What are the Alliance’s objectives?
It’s the last thing we intended to do. However, we believe this fits squarely in the discussion of what is happening with NAFTA modernization. The fact is, Alliance members got caught up in a dispute between the U.S. and a French drywall manufacturer operating in Canada. I’m not going to quibble with the actions of the Canadian International Trade Tribunal. They found that the U.S. companies were dumping drywall product; that’s for reasonable minds to agree or disagree. However, drywallers were blindsided by this dispute.

What is the nature of your disagreement with Finance Canada and Minister Morneau?
The CITT found that the 200 per cent tariffs imposed by the Canadian Border Services Agency in September 2016 were against the public interest, reviewed the duties, reduced them to 43 per cent, and ordered a duty holiday that would expire at the end of July. They went to the Finance Minister and said “Please Minister Morneau, implement this order.”

How did Finance Canada react?
The duties were dropped to 43 per cent. However, we didn’t get the duty-free holiday during the building season, which was critical. The drywallers had fixed contracts. There was nothing they could do, no remedies, because they had already agreed to purchase the drywall with duties of anywhere between 43 and 200 per cent. The Alliance met multiple times with members of the Canadian government and Minster Morneau, and said, “We don’t want to get caught up in this big long discussion.” But their response was, “We’ve got NAFTA modernization discussions going on.” Our members feel betrayed by the Canadian government. The Canadian government put us in this position. We had no other resort than to raise this as part of the massive softwood lumber discussion.

The Canadian government’s action on drywall duties is “red meat for the Trump administration” according to Alliance lawyer Dan Ujczo

Will drywall be used as a pawn in a larger dispute with the U.S.?
The last thing we wanted to do is inject another Canada-U.S. dispute. We pleaded with the Canadian government, “Get this off the table. Get us out of your way so you can really focus on modernizing NAFTA.” Instead, they’re holding us as chip in the NAFTA negotiations. I don’t think that was their original intent. It’s like they were thinking, “Should we give you your duty-free holiday at the same time the U.S. is putting on 20 per cent and maybe even 30 or 35 per cent duties on softwood lumber? How can we do that at the same time?” They’ve painted themselves in a corner and maybe outsmarted themselves. Unfortunately, it may come back to bite them. They’ve created another NAFTA issue when they didn’t need one. They should have just followed the CITT order.

Was the drywall tariff rebate program of this past May successful?
There are mixed reviews. Apparently there’s still money left in the rebate account than thought, which suggests that companies saw the rebate process as cumbersome. Also, I think that because only part of the CITT order was implemented and not the other, there’s a sense of uncertainty. Installers want to know how to plan not only for this building season but for the next one and beyond.

Canadian Contractor has observed that although duties were reduced to 43 per cent, drywall prices have not dropped back anywhere close to pre-tariff levels. Why?
Some of the price increases were due to the distribution channels working through inventories. That’s why the holiday was critical for fixed-price contracts. We know in the fall and into January there would be higher-cost inventory, plus the building season is a little slower then. There was enough inventory that market prices wouldn’t react quickly to the new duties.

Canadian Contractor’s time-line chart for U.S.-made drywall prices across the country from Sept 2017 to June 2017 indicates little reduction in Western Canada since 43 per cent duties replaced extreme tariffs in February (gray bar)

Have new sources of supply opened up to avoid the duties on U.S. product?
We’re now starting to see Mexican drywall pop up in Western Canada. That’s the other thing. In the eyes of the Trump administration, you’ve hit American drywall with high duties and created a monopoly for a French-owned company operating in Western Canada, and now you’re letting the Mexicans come in. That is red meat for the Trump administration, not only with softwood lumber, but whether Canada is really committed to a free and open market. Whenever President Trump can be seen as the hero of the working American man or woman who has been victimized, he will run with that opportunity.

Do you think the Canadian marketplace for imported drywall and related products is sufficiently competitive to allow fair pricing in the future? Or will importers and manufacturers keep prices high despite the duty reduction since the high tariff period?
You’ve hit the nail on the head. As important as the issue of the drywall board is in itself, everybody along the line, from the importer to the wholesaler to the distributor, will be charging a premium and taking their mark-ups on this. So what you’re going to see throughout the building value chain are price increases. The price of gypsum may get readjusted but we’re to seeing other related products go up.

A U.S. trade ruling on further duties for Canadian softwood lumber is expected at the end of this week. Canadian Contractor will be back in touch with Dan Ujczo for his observations at that time.

Canadian Contractor has posted several stories chronicling the saga of Western Canadian drywall duties and tariffs.
Type ‘Western Canadian Drywall’ into our search bar and review them all.

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