Quebec company says J.D. Irving used access to influence softwood duties

Forestry giant JD. Irving Ltd. has been accused of using personal access to one of former U.S. president Donald Trump's cabinet secretaries to secure favourable treatment from the United States in the ongoing softwood lumber dispute.

Montreal-based Resolute Forest Products said in filings with the U.S. Commerce Department that co-CEO Jim Irving spoke by phone with former secretary Wilbur Ross in  August 2020.

"Following the meeting between Messrs. Ross and Irving, J.D. Irving Ltd. was accepted immediately as the fourth company to be individually reviewed" in the trade investigation, Resolute said in a case brief filed in July.

As a result of the latest review, Irving wood will be subject to a 3.41 per cent countervailing duty, compared to 6.31 for most Canadian firms. Duties raise the price charged to buyers of a product, making it less competitive.

In twin rulings last week on two categories of duties, the Commerce Department rejected the claim that the phone call with Ross played a role in Irving getting to plead its case separately.

"Resolute's suspicion that our selection of J.D. Irving was the result of the owner of J.D. Irving gaining access to the Secretary of Commerce, while Resolute did not, is untrue," the department wrote in an issues and decision memorandum released Nov. 24.

The department wrote that it wanted to investigate one company from Eastern Canada to ensure "wide geographic coverage" in its review of the countervailing duties.

But it said that "geographic coverage was a relatively unimportant determinant" in the separate anti–dumping review in which Resolute asked to be investigated individually.

Singling out Resolute "would have been a poor allocation of our strained resources," it said.

Resolute complained last July that the department "argues disingenuously that geography does matter for countervailing duty investigations, but not for anti–dumping."

Under U.S. trade law, a company chosen as a "voluntary respondent" gets to present its own sales, cost and subsidy data rather than being lumped into a single category with dozens of other producers.

Irving first used that provision in 2017 to win a lower countervailing duty.

The new duty rates resulted from an annual review of the amounts first set in 2017, when the U.S. ruled that Canadian wood exports into the U.S. were undercutting domestic sales thanks to government subsidies that made them cheaper.

Irving's countervailing duty will be 3.41 per cent, the second-lowest in Canada after Canfor Corp. at 2.42 per cent. Resolute was hit with an 18.07 per cent duty. Most other lumber exports are subject to 6.31 per cent countervailing duties.

In a separate ruling last week, the U.S. raised anti-dumping duties to 11.59 per cent for most Canadian companies including Irving.

That leaves JDI's wood exports subject to a total of 15 per cent in duties, compared to 17.9 for the majority of Canadian mills and 29.66 for Resolute.

Wood from the Atlantic Provinces was historically exempt from such duties, but in 2017 the U.S. included New Brunswick because it decided subsidies had reached too high a level.

Since then, the duties have been subject to annual retroactive reviews. This year's review was based on 2019 data.

J.D. Irving did not respond to a request for comment on Resolute's claim.

According to an Aug. 14, 2020 memorandum filed online, the phone call between Irving and Ross took place two days earlier, at 2:30 p.m.

Ross and four other Commerce Department officials were on the call with Jim Irving and Ross Langley, JDI's executive vice-president.

It wasn't the first contact between JDI and Ross.

In 2017, Ross was a special guest when co-CEO Robert Irving announced plans for a new $400 million US tissue plant the company would build in Macon, Georgia.

Ross sat next to Jim Irving at the event and joked about JDI's success with the crowd.

"Their long term perspective is nothing to sneeze at," said Ross. "But if you do have to sneeze, please use a Scottie tissue," a brand Irving owns the rights for in the U.S.

Not the only example

Several Washington heavy-hitters have also gone to bat for JDI in other trade cases.

Public records showed in 2015 that two powerful Democratic senators, Chuck Schumer and Heidi Heitkamp, asked the administration to go easy on Irving when applying duties on supercalendered paper made at the company's Saint John mill.

Heitkamp, who represented North Dakota, "expressed her concern" that punishing Irving might harm JDI's agricultural business in her state. 

A third Democratic senator, Joe Manchin of West Virginia, called a Commerce Department official "on behalf of" J.D. Irving Ltd., according to documents. The company had not "done anything wrong," Manchin said.

And then-Maine Governor Paul LePage wrote the Obama administration arguing Irving should be given a chance to make its case. JDI employed 1,200 people in Maine in 2015.

In 2017 JDI executive Jerome Pelletier said the company maintains an "open channel of communication with different stakeholders in the United States … to ensure we're represented properly" in Washington.

He said that was done in conjunction with other mills as part of the New Brunswick Lumber Producers, a group set up to fight the U.S. trade action.

As part of this year's review, the New Brunswick government urged the U.S. to "reassess" its finding that N.B. Power's Large Industrial Renewable Energy Purchase Program amounts to a subsidy for six large pulp and paper mills, including three owned by Irving.

The province argued that the World Trade Organization ruled last year against "key portions" of the American findings about the energy buy-back program.

The arrangement requires N.B. Power pay the mills elevated prices for renewable energy they generate, then sell it back to them at a discount.

The Commerce Department said it had not changed its mind about that being a subsidy.

"Because N.B. Power works backwards from the target discount, the program guarantees that the target discount is reached each month by adjusting the volume of N.B. Power's purchases of electricity from the participating Irving companies," says last week's ruling.

"In other words, N.B. Power has determined in advance the amount of credits it wishes to give the participating Irving companies."

The U.S. noted that WTO rulings are "without effect" under U.S. law until an appeal process has unfolded and a formal report is issued.

The WTO's appeal process has been frozen because Trump refused to appoint Americans to the body, and President Joe Biden is doing the same.