Dodging the duty war

A new wave of value-added wood manufacturers has come up with ways to slip underneath the softwood tariff radar and get to the coveted U.S. market

Lyle Jenish
National Post
Thursday, October 24, 2002

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Rob Kruyt, National Post
Cutting supervisor Todd Garrett of T.F. Specialty Sawmill in Courtenay checks recently cut wood. The mill has been able to access the U.S. market by first looking to the Far East. It fabricates components for Japanese Buddhist temples that are often assembled in the United States.

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Rob Kruyt, National Post
Dali Lin, manager of T.F. Specialty Sawmill in Courtenay.
VICTORIA - From a Vancouver Island industry hamstrung by U.S softwood lumber tariffs, a growing force of value-added wood manufacturers has emerged.

While the battles over tariffs, bail-out packages and forest tenure rage, some have adopted a flanking strategy, avoiding the carnage and coming in under the softwood tariff radar to get to the precious U.S. market and all points beyond.

Vancouver Island value-added activities are focused on two areas: Specialty sawmills convert logs into high-grade lumber and specialized timber products; re-manufacturers convert rough lumber into value-added products such as cabinets, decking, doors and windows, fencing, flooring, mouldings and musical instrument components.

Halfway up the east coast of Vancouver Island, the Comox Valley has proved to be a particularly fertile area for value-added innovation.

In 1996 in Parksville, David Lapeyrouse founded Timbre Tonewood. At the company's sawing factory in surfer hip Ucluelet, solid soundboards for guitars and arch top violins, mandolins and dulcimers are sliced. Mr. Lapeyrouse, like Stradivari and Guarneri del Ges?, twigged to the fact it is the wood that accounts for acoustic brilliance.

Courtenay's T.F. Specialty Sawmill, an affiliate of Taiwan manufacturer Tah Feng, has been able to access the U.S. market by first looking to the Far East. Dali Lin, T.F. Specialty manager, said a company specialty is Japanese Buddhist temples. Thousands of intricate components are first fabricated in the Comox Valley, shipped to the Far East or south of the border, and assembled.

"Producing a temple requires 20 times the amount of manpower hours as another mill using the same amount of wood," Mr. Lin said.

Like Timbre Tonewood, T.F. Specialty is viable because of the exceptional quality of coastal wood: "clear" (knot-free and straight) wood providing integrity and resonance for soundboards and spiritual and esthetic clarity for temples.

According to Mr. Lin, T.F. Specialty's emphasis on exacting standards when custom cutting (which is not tariff exempt) has, to a certain degree, made the company impervious to the current tariff war.

Mr. Lin said when the tariffs were applied earlier this year approximately 90% of the company's U.S. customers immediately left and T.F. Specialty instead focused on Europe. He said over the last month, approximately 30% of the U.S. clients have returned. He said these largely fir and red cedar customers have since readily agreed to absorb the tariff.

For Mr. Lapeyrouse, currently on a sales trip to China, the island wood providing the desired density is Sitka spruce, Engelmann spruce and western red cedar. In 2002, the company of 22 expects to manufacture more than 400,000 guitar soundboards and produce billets for the manufacture of 400,000 guitar tops. The items are being exported to more than 20 countries, including the United States.

While the musical and spiritual wares of these companies are interesting, they are more the exception than the norm. The real art is found in the design and manufacture of products that will gain the coveted tariff exemption designation from the U.S. Commerce Department. This means products to which just the minimum amount of additional work and therefore value is added to ensure they are not considered a commodity. This includes dog-eared fencing, building studs milled to house electrical wiring and tongue-and-groove siding products.

Bill Downing, CEO of BC Wood Specialties Group, an advocacy association for British Columbia's value-added wood products industry, said many manufacturers are reluctant to discuss tariff navigation strategies.

"Most of that information is held very close to the vest. Those who have found a way around or a little loophole are not all that interested in publicizing it. They don't even tell me," Mr. Downing said.

However, trade rules are more dynamic than static and a tariff exemption can disappear as quickly as it was granted. Mr. Downing said Canadian building truss and wallboard manufacturers are just now coming under U.S. scrutiny.

But for Vancouver Island's smaller value-added manufacturers an International Trade Commission investigation is the least of their concerns.

Accessing adequate wood in terms of volume and quality is proving to be the biggest challenge. Especially since the big lumber companies who hold tenure and tree licences have scaled back cutting operations.

George Cousineau, immediate past president of the Vancouver Island Association of Wood Producers, said more Island value-added manufacturers would be in business if changes were made to forest tenure and wood supplies were opened up.

"The biggest problem on the Island -- and it hasn't changed for 50 years -- is access to fibre. The largest forest companies have a monopoly and they are not interested in relinquishing it," Mr. Cousineau explained. "Until there is more fibre on the open market for the value-added producers to bid on, the industry just isn't going to grow."

Mr. Downing said value-added manufacturers who have established partnerships with the primary producers do fine. "Those without a partnership have a hard time getting wood."

"I think there is huge opportunity on the Island," Mr. Cousineau said.

However, changes are required that would divert the highest grade logs to domestic value-added producers. "Better value could be derived from the timber. If the [government stumpage] price was directly tied to wood grades then the high grade logs would inevitably find the route to the high grade, value-added uses."

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