Exclude Pallet Kits from the scope of the investigation into Softwood Lumber from Canada
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This is an open petition directed at the "Committee Overseeing Action for Lumber International Trade Investigations" (COALITION), the United States Department of Commerce (DOC) and the United States International Trade Commission (ITC) with reference to case nos. A-122-857/C-122-858 (Softwood Lumber from Canada). This petition has been initiated to give a voice to American companies and individuals who would be negatively impacted should the US Department of Commerce decide to include "unassembled finished pallets" (pallet kits) from Canada in the scope of their ongoing investigations into certain softwood lumber products from Canada. The purpose of this petition is to convince the COALITION, DOC and ITC that "unassembled finished pallets" (pallet kits) should be left out of the current scope of the investigation as they were in every previous Softwood lumber dispute.
On December 16th, 2016 the Department of Commerce (US) announced the initiation of antidumping duty and countervailing duty investigations of imports of certain softwood lumber products from Canada. For the first time in the history of the US/Canadian trade dispute, the scope of the investigation has been proposed to include “components or parts of semi-finished or unassembled finished products made from subject merchandise that would otherwise meet the definition of the scope above”. Since then, the Government of Canada has made two separate proposals (Jan. 9, Apr. 3) to clarify and exclude "unassembled finished pallets" (pallet kits) from the scope of the investigation, both have been rejected by the COALITION.
In the Lumber IV investigations (2001-2006), the Department of Commerce from its preliminary determination forward clarified that finished pallets and pallet kits properly classified under HTSUS 4415.20 were excluded from or outside the scope of the antidumping and countervailing duty investigations.
In the most recent developments (Apr 3), the COALITION has agreed exclude many other unassembled, finished products as well as “Finished Assembled Pallets”, however their continued position is that “Unassembled Pallets” are not finished articles. According to U.S. Customs Regulations, and specifically GRI -General Rule of Interpretation 2(a), they are. GRI 2(a) states that “Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled. Accordingly, “unassembled” or “disassembled” pallets may be classified in HTSUS subheading 4415.20 as “pallets” and therefore should be excluded from the scope of these investigations and exempt from any countervailing or anti-dumping duties that the US applies to softwood lumber from Canada.
Countervailing duties (CVD) on Canadian softwood lumber will be announced April 24th and will likely be effective May 1st. It is estimated that level of the CVD will be between 30-40%. The COALITION and the US Department of Commerce need to hear from the hundreds of pallet manufacturers that would be adversely impacted should they continue to try to include pallet kits from Canada in the scope of their investigation. Currently they are only hearing from manufacturers of US pallet kits who want to be able to create more barriers of entry for Canadian producers of pallet kits. There are two major problems: 1) the US manufacturers do not have anywhere close to the supply that the pallet industry needs 2) if pallet kits from Canada are tariffed at 30-40%, the price of pallets will rise to levels that the market is unable to sustain. More harm will be done than good if pallet kits are included in this investigation, and it will result in many companies being forced to close their doors and thousands of jobs will be lost.
Pallet kits are produced from low grade industrial lumber (#3 and Economy/#4). This industrial lumber is a by-product of sawmill production of Construction grade and framing lumber and its availability is inherently limited. Supply of industrial lumber from United States sawmills is also extremely limited and further restriction (ie. Including unassembled pallet kits in the scope) will lead to significant shortage in supply US pallet manufacturers losing market share to pallet rental/pooling companies and alternative products (corrugated cardboard pallets/plastic pallets).
In summary, the pallet manufacturing industry in the United States needs Canadian Softwood Lumber. I urge you to sign this petition and to also reach out to your local representatives. The Department of Commerce needs to hear the perspective of the pallet manufacturing industry, and not just from the handful of sawmills that would benefit from an absence of competition from Canada. Time is of the essence as the countervailing duty preliminary determination is set for April 24.
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