Wheat sales to the lucrative and valuable United States market were expected to grind to a halt this week.
The U.S. department of commerce was expected to announce March 4 that it had imposed a sizable countervailing duty on imports of spring wheat and durum from Canada.
The announcement was expected after the publishing deadline for The Western Producer, but Canadian and American industry officials said March 3 there was virtually no doubt duties would be imposed.
“We do expect that they will put tariffs in place,” said Canadian Wheat Board director and international trade spokesperson Larry Hill.
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Neal Fisher, administrator of the North Dakota Wheat Commission, which initiated the trade challenge last year, had similar expectations.
“We’ve been confident all along that we had a very good case and been grateful that so far the agencies involved have also seen it that way.”
The wheat commission asked for a countervailing duty of 14.7 percent on durum and 25.5 percent on spring wheat.
Meanwhile, a preliminary ruling on an anti-dumping case also launched by the commission is to be released May 1. That could result in additional tariffs of nine percent on durum and 12 percent on spring wheat.
Under U.S. trade law, temporary duties are collected until a final determination is made, which will happen this summer. There must also be a finding that U.S. wheat producers have suffered material injury from Canadian imports. If the tariffs are dropped at that time, the money collected will be reimbursed.
Hill said the wheat board remains confident that it will be vindicated.
“We have to assume that the facts will prevail here at some point in the process,” he said. The standards for imposing temporary duties are low.
The countervail duties will be based on alleged subsidies provided to the Canadian wheat industry by the federal government. Four subsidies have been identified by the Americans:
- Federal guarantees on the board’s initial payments, financial borrowings and export credits.
- The cap on the railways’ revenue from hauling grain.
- The provision of government-owned grain hopper cars to the railways for no charge.
- Government policies supporting branch lines and short-line railways.
Hill said it’s hypocrisy for Americans to impose a duty given the lavish amount of government money sent to U.S. wheat farmers.
“It’s ludicrous that they would point fingers at us.”
The board said that from 1996-2001, wheat farmers in the state of North Dakota received government payments totalling $3.1 billion Cdn, while farmers in all of Western Canada received $1.7 billion. During the period, North Dakota’s wheat production was 34 percent of Western Canada’s.
While the imposition of duties will likely halt the flow of Canadian wheat and durum to the U.S., the economic hurt to Canadian farmers is mitigated because the small, poor quality 2002 crop has limited the amount of wheat and durum being shipped south this year.
In the first five months of the 2002-03 crop year, exports of wheat to the U.S. were 137,800 tonnes, down from 533,000 tonnes during the same period the previous year. For durum, the respective totals were 191,600 tonnes and 211,000.
Hill said there are other markets for the relatively small volumes of top quality wheat available for export.
Shipments of wheat and durum to the U.S. have averaged 1.5 million tonnes in recent years, providing returns of around $400 million, or roughly 10 percent of the board’s total sales revenue.
The board says the U.S. market provides an annual premium worth about $47 million.
