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Brink Group issues statement on softwood lumber negotiations

John Brink

BY JOHN A. BRINK

Founder, President and Chief Executive Officer Brink Group of Companies

The U.S. Lumber Coalition (‘USLC’) has alleged “gross under-pricing of timber as a result of Canadian governments providing non-competitive tenure” to its domestic producers. This has allegedly damaged the competitiveness of the lumber industry in the United States. In turn, the USLC is seeking to impose duties on lumber imported from Canada to offset the alleged harm caused to their industry.

Independent Secondary Remanufacturers

The scope of the current investigation has placed a target on independent secondary remanufacturers. ‘Independent Secondary Remanufacturers’ are an operation, free of any timber licenses that produce lumber products from lumber inputs purchased on the open markets, in direct competition with domestic and international buyers. Independent Secondary Remanufacturers have received no subsidies above the de minimus nor the benefits associated with the tenure system. Furthermore, they maintain arms-length relationships with those that do.

The Canada Revenue Agency, with reference to Section 25 of the Softwood Lumber Products Export Charge Act, 2006 provides criterion for which a party must meet to obtain “independent remanufacturer” status. This status rightfully provided independent secondary remanufacturers with the differential treatment they, at a minimum, deserve. The criteria that must be met to achieve “Independent Remanufacturer” status states that a party who is an Independent Remanufacturer:

a. Does not hold Crown tenure rights in that province; and

b. After the effective date, has not acquired standing timber directly from the provincial Crown in that province

c. … that they are not an associated person with any company that holds provincial Crown tenure rights or that has acquired standing timber directly from a province

Having met the above criterion and achieved “Independent Remanufacturer” status, such remanufacturers were provided with differential treatment to determine the export tax or duty amount. This gave such parties the ability to pay export tax or duties on the cost of the raw material (input value) utilized to produce the finished product, opposed to paying export tax or duties on the market value of the finished product. This treatment is referred to as “first mill”. The purpose of first mill was to protect, and not penalize, those that do not receive subsidies and benefits associated with the tenure system from paying unjust export taxes or duties. This prior action has established a precedent and valid argument for allowing first mill to remain in place. If first mill is not attained, it will be uneconomical to remanufacture lumber in Canada, ultimately destroying what presently remains of the industry.

Industry Competitiveness

With the facts stated above, it is easily determinable that there is a rigorous process already in place to certify that Independent Remanufacturers are free of any subsidies or benefits associated with the tenure system.

In addition, there is further evidence in the mechanics of how raw materials are purchased to corroborate the fact that the secondary manufacturing sector of Canada does not negatively impact the competitiveness of the lumber industry in the United States, as alleged.

The raw materials utilized to produce finger-joint lumber are primarily either trim-ends or low-grade lumber produced in the primary sawmill production process. Both raw material items are purchased in an open market that is accessible by the global economy. This is evidenced by the fact that a majority of low grade lumber is sold to the United States and China. Furthermore, the price that is determined at point of sale is based on market prices (in U.S. dollars) printed in a weekly, industry accepted report by a U.S. based company, known as Random Lengths Publications Inc. With this, it can be concluded that

Independent Remanufacturers, like the Brink Group, do not receive the subsidization and benefits that are allegedly damaging the lumber industry in the United States through the purchase of its raw materials.

In summary, there is not a valid and defendable argument supporting the allegation of subsidization with respect to the inputs utilized by Independent Remanufacturers because such inputs are transacted upon in an open market daily, in direct and fair competition with the United States remanufacturing industry.

Conclusion

In the words of US Coalition spokesperson, John Ragosta, independent remanufacturers are being caught in the dispute between the USLC and Canadian primary producers, and “are [similar] to unfortunate, innocent victims of a drive-by shooting”.

The Canadian position should be that further manufacturing (remanufacturing) should be encouraged in Canada. This sector individually creates more direct employment than the primary sector. The USLC has demanded that “Canadian provinces allow fully open market competition to determine the price of timber”. The factual evidence is transparent in demonstrating that the secondary manufacturing sector is a perfect example of open market trading. With this, by implementing a duty on remanufactured products exported by Canadian Independent Remanufacturers, at their expense, we will, in essence, be subsidizing the remanufacturing sector in the United States. In due fairness, the reasonable conclusion is to exclude Independent Remanufacturers from export duties. At a minimum, if this is not achievable, the Canadian position should be “First Mill” (similar to Lumber IV, which has established a precedent). Failure to achieve the inconsequential technicality of First Mill will ensure the collapse of the entire secondary manufacturing industry that remains in Canada. This will impact thousands of families across Canada through loss of employment. In simple terms, Independent Secondary Remanufacturers cannot operate with a duty on the finished value of the product. The margins do not exist for secondary manufacturing to be economical in such a scenario. The request for exemption, and at a minimum, First Mill, is a defendable, modest and righteous request of the United States of America and, at minimum, must be the starting position of Canada.

The Brink Group is comprised of three secondary manufacturing operations:

  • Brink Forest Products Ltd.
  • Pleasant Valley Remanufacturing Ltd.
  • Vanderhoof Specialty Wood Products Ltd.

Based out of Prince George, Brink Group’s primary operation, Brink Forest Products has been in business since 1975. Brink Forest Products is an independent secondary remanufacturer which, in its entire history, has never received any subsidies from Government (Provincial or Federal), nor has held any timber licenses or been affiliated with those that do. Under the leadership of its Founder, John A. Brink, the company has demonstrated significant growth over the last 42 years as a secondary manufacturer of dimensional finger-joint wood products; making it the largest producer of finger-jointed lumber in North America. The Brink Group is a firm believer in social responsibility. With this, it continues to make various contributions in the communities in which it operates; this includes three operations located in Prince George, Vanderhoof and Houston. Combined, the Brink Group directly employs over 350 people, of which 50 percent are female, first nations or a visible minority. Indirectly, the Brink Group impacts over 1,000 jobs in Northern British Columbia.

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