SLA LEVY COULD DROP
In a monthly commodity price report, Canada’s Scotiabank has said recent increases in lumber prices could result in a reduction of the export tax levied on Canadian lumber producers under the Softwood Lumber Agreement (SLA) with the United States. It would be the first time the controversial tax has been lowered.
Right now, lumber from B.C. and Alberta destined for the U.S. is subject to a 15 per cent tax. If the Random Lengths Framing Lumber Composite Price (a weighted average of 15 key items) remains above US$315 per thousand board feet for four weeks or more, that tax rate would fall to 10 per cent according to the Scotiabank report. For the week ending February 19, the average price was US$317 per thousand.
Although lumber prices appear to be rising due to changes in supply related to production curtailments at Canadian and U.S. sawmills, Canadian producers have no guarantee that the prices will remain above US$315 long enough for the lower tax rate to kick in. In fact, for the week ending February 26, the average price dropped below the trigger point to US$311.
“At no time since the implementation of the softwood lumber agreement has the tax dropped below 15 per cent,” said Patricia Mohr, a Scotiabank economist and commodities specialist, while adding the recent rise in prices is better news than the industry and analysts expected as U.S. housing starts are only up slightly.
If the average lumber prices start to climb again and go above US$335 per thousand, the tax would be reduced to 5 per cent, while if the prices go north of US$355 per thousand, the tax would be zero.
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