Tariffs generate wide range of reaction
Slapping tariffs on Canadian lumber has been described as an anti-consumer measure that could throw a dash of cold water on a slow-burning housing-market recovery. But will it?
The National Association of Home Builders, whose interests are often in-line with those of lumber dealers, is one of the sharpest critics of the plan to impose steep duties (averaging about 20%) on Canadian Softwood lumber.
“The NAHB is deeply disappointed in this short-sighted action by the U.S. Department of Commerce that will ultimately do nothing to resolve issues causing the U.S.-Canadian lumber trade dispute but will negatively harm American consumers and housing affordability,” Granger MacDonald, the group's chairman, said in a statement.
And the group has done its math: a tariff of 19.9% would lead to a 6.4% increase in U.S. home prices, or an average of $1,236 for a single family home.
That’s a highly inflated figure, says the U.S. Lumber Coalition, which petitioned for the action. The group claims unfair competition from producers it says are subsidized by the Canadian government.
The tariffs, announced late Monday, will “begin the process of creating a level playing field for the future and allow for U.S. manufacturers to make essential investments and expand the domestic lumber industry to its natural market and protect and grow the jobs that are so essential to our workers and our communities,” said the Coalition’s legal chair Cameron Krauss in a prepared statement. Krauss is also senior VP of legal affairs of Seneca Sawmill in Eugene, Oregon.
Canadian producers have about 28% to 34% of the market in the U.S, according to the NLBMDA, which has made a renewal of the Softwood Lumber Agreement between the U.S. and Canada a legislative priority. In its 2017 National Policy Agenda, the NLBMDA opposes “excessive tariffs and other restrictions that decrease product availability and increase costs to U.S. consumers.”
In response to this week’s tariffs, the NLBMDA said it supports a new Softwood Lumber Agreement “that helps meet domestic demand for softwood lumber, does not put American lumber producers at a competitive disadvantage, unnecessarily restrict the availability of products, or increase the cost of housing to the detriment of prospective home buyers and consumers.”
While the impact of the price of lumber on the housing market is in doubt, so is the impact of the tariffs on the price of lumber. Markets have been adjusting in recent weeks in anticipation of increased duties. One account put prices as up 25% in the last eight weeks. Another pointed to increases of 30% to 40% over the same time a year ago.
In 2016, imports of softwood lumber from Canada were valued at an estimated $5.66 billion, according to Commerce Department figures.
“This is still a work in progress and nobody knows where it will end,” said Kodiak Building Partners Chairman Paul Hylbert. It’s likely, he guesses, that the hard line approach with Canada will lead to serious negotiations. In the meantime, “the biggest danger is for production builders and their dealer suppliers as they have contracted with homebuyers for ordered homes at a fixed price and will be hurt by this abrupt price movement.”
At buying group LBM Advantage, CEO Steve Sallah also expressed concern on behalf of the buying group’s dealer members for the potential run-up in prices. But the biggest concern for the dealers, he said, is the supply of wood. “We need the Canadian fiber to supply U.S. building,” he said. “And a tariff is seen as better than a quota, which could seal off supply at some random date in the future.”
Ken Dunham, executive director of the West Coast Lumber & Building Material Association, described the situation as complicated. One silver lining to the tariffs could be a revival of smaller saw mills – businesses that were rendered uncompetitive by low-priced foreign lumber.
At the world's largest home improvement retailer, there appears to be small concern over the matter. According to Home Depot's Director of Communications Stephen Holmes, the vast majority of the company's lumber is sourced domestically.
Several distributors and retailers declined to comment on the issue. One industry executive, who asked not to be identified, said that some lumber dealers might be too polite to say it, but higher prices of lumber could allow higher margins for the dealers.
“Time will tell whether [the tariffs are] good bad,” said the executive. “But I think that people need to keep in mind that the cost of lumber is just one of many factors in residential housing, and not the top cost item.”
Further complicating the issue is whether the Canadian government is in fact subsidizing softwood lumber to the letter of the law.
In a recent issue brief from the NLBMDA, the association pointed out that the Canadian government disputes the legality of tariffs. It’s defense rests on the idea that timber is provided to a wide range of industries, and is therefore ineligible under U.S. law for a countervailing subsidy. While this defense has all the making of a technicality, it has held up three times in international court, according to the NLBMDA background sheet.
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NLBMDA seeks relief for short term truck rentals
When dealers need to rent trucks for the short term to meet higher than expected demand, the NLBMDA believes these trucks shouldn’t have to meet the electronic logging device requirements.
The NLBMD submitted comments in support of a petition filed by the Truck Renting and Leasing Association for an exemption from the ELD Mandate for short-term truck rentals.
Here’s how the NLBMDA described its position:
NLBMDA supports this petition because of the undue burden the ELD Mandate would impose on dealers and others who will occasionally need to use short-term rentals to meet higher than expected demand or replace vehicles temporarily out of service.
The majority of NLBMDA members are small, family-owned lumber and building material (LBM) operations, serving the same communities for several generations. NLBMDA itself recently celebrated its 100th year as a trade association for the LBM sector. Many of our members will use short-term rentals of 30 days or less to meet high demand periods or instances where a vehicle in their fleet has been taken out of operation for repairs and service. The short-term rental option represents a very cost effective way to avoid the significant capital costs of having fleet assets that are only marginally productive.
Because short-term rentals are not exempt from the ELD rule, our members who otherwise would be exempt will face unnecessary regulatory uncertainty that can be easily avoided without jeopardizing the underlying regulatory goals and objectives of the ELD rule. For example, the driver of a short-term rental who exceeds the mileage or daily on-duty time limits of the short-haul exemptions, or does not return to their normal work reporting location at the end of the duty period more than 8 times in any 30 day period, will be subject to the ELD requirements.
For those NLBMDA members who will have to meet the ELD requirements, their operating system may not allow seamless transfer of data when using a different system installed in a short-term rental. This includes the ability of one system to transfer a driver's duty status for the current 24-hour period and the prior seven days. It is also not clear whether short-term rental companies will provide dedicated units in their vehicles or rely on customers to have access to so-called Bring-Your-Own-Device (BYOD) system.
NLBMDA believes it is incumbent on the Federal Motor Carrier Safety Administration (FMCSA) to take these technology challenges into account when considering regulatory alternatives that avoid unnecessary burdens on the regulated community. Until the various ELD technologies find a means to allow users to record and retrieve data seamlessly, we believe an exemption is supported by the basic principles of rulemaking.
NLBMDA believes that a motor carrier should be able to easily determine if its operations are covered by the ELD requirements. If the carrier otherwise meets the 150 air-mile or 100 air-mile short-haul exemption, or any other applicable exemption, the necessity of using short-term rentals should not create the possibility that the carrier be pushed into another regulatory status. Likewise, if a carrier is subject to the ELD requirements and invests in the necessary equipment, operating system and driver training, the carrier should not be subject to the technology challenges or compliance uncertainties created by the interoperability issues described above.
Builders FirstSource adds ninth director
Builders FirstSouce, the Dallas-based pro dealer that sits atop the HBSDealer Top 200 ProDealer list, increased the number of its directors to nine.
The company reported that on April 10, the board appointed David A. Barr to fill the newly created directorship as an independent director.
Barr, age 53, was previously a director of the corporation from February 2006 to July 2016. He has served as a managing director of Warburg Pincus, LLC since January 2001. Barr was a managing director at Butler Capital and focused on leveraged buy-out transactions for more than 10 years prior to joining Warburg Pincus in 2000. He also previously worked at Goldman Sachs.
Barr received a B.A. in economics from Wesleyan University and an M.B.A. from Harvard Business School. He has served on the boards of numerous companies and currently serves on the boards of directors of Consolidated Precision Products, TriMark, and Universal Services of America.