[Congressional Record Volume 144, Number 86 (Friday, June 26, 1998)]
[Senate]
[Pages S7242-S7243]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




U.S. GOVERNMENT IS ALLOWING EVASION OF U.S./CANADA LUMBER AGREEMENT, AT 
                   THE EXPENSE OF U.S. MILLS AND JOBS

  Mr. CRAIG. Mr. President, I would like to talk today briefly about an 
issue that affects hundreds of American companies and tens of thousands 
of American workers, and that is, of course, the proper enforcement of 
the 1996 U.S./Canadian Softwood Lumber Agreement.
  On several occasions I have stood before this body to express 
disappointment at our trading partners who are violating trade 
agreements with the United States. Generally, the problem arises abroad 
and requires aggressive efforts by the administration to insist on 
compliance by other countries to ensure that our products and our 
workers can compete on a level playing field. But the foremost problem 
for the Lumber Agreement is action by the U.S. Customs Service that is 
affirmatively undermining the current softwood agreement that I am 
speaking to.
  As many of us who are from lumber-producing States are so keenly 
aware, the 1996 Lumber Agreement is our largest sectorial trade 
agreement with our largest trading partner, Canada. It is a very 
moderate response to a massive Canadian subsidizing of lumber. Unlike 
United States lumber mills which must buy timber at market prices, 
Canadian mills are provided timber by the Provinces at prices that are 
oftentimes one-quarter to one-third the market value of real timber on 
the stump. Those subsidies amount to $4 billion Canadian dollars a 
year. Subsidized imports have cost the United States thousands of jobs 
and have injured and constrained a pivotal U.S. industry.
  In 1991, Canada unilaterally abrogated a 1986 settlement of that 
dispute. Canada's imports to the United States climbed from about 27 
percent of market share to almost 37 percent. The compromise in the 
1996 Agreement was intended to offset, in part, Canada's subsidies and 
bring Canada's share of our market back to around 33 percent to 34 
percent.
  In February of 1997, however, a ruling by our own Customs Service 
enabled Canadian producers to evade the agreement merely by drilling 
holes in the lumber. Let me repeat that--by simply drilling holes in a 
2X4 or a building stud, ostensibly, the argument was, for wires and 
pipes in construction purposes. Customs said this lumber with a hole 
was ``joinery or carpentry,'' like doors or window frames or buil-up 
truss. This was a ridiculous ruling, by almost everybody's evaluation. 
It is inconsistent with other classifications. It is inconsistent with 
common commercial understanding. Official guidance issued by the 
Commerce Department, the International Trade Commission, and the 
Customs Service all confirmed that drilled lumber is ``lumber'' for 
import classification purposes, not joinery or carpentry. The U.S. 
Trade Representative confirmed that this product was intended to be 
covered by the Agreement.
  Not surprisingly, though, once Customs opened the door, imports of 
``joinery and carpentry'' rose from about $8-10 million a month to 
nearly $46 million a month in April. This loophole is allowing over $1 
million a day--let me repeat that--$1 million a day of subsidized 
lumber to evade the Agreement and destroy the Agreement's intent of 
offsetting the subsidy.
  The U.S. industry is again experiencing widespread shutdowns, 
slowdowns,

[[Page S7243]]

and job losses. In my State of Idaho, mills are closing or anticipating 
closure because of this flood of Canadian timber now hitting our 
market.
  Last September, Congress confirmed its intention that drilled lumber 
be considered ``lumber.'' But while Customs promised a quick 
reassessment of the February 1997 ruling, our report was ignored. 
Customs finally requested formal comments on the ruling by late 
October, but then gave a 60-day comment period rather than its normal 
30-day comment period. You almost have to say, ``U.S. Customs, whose 
side are you on?''
  Customs delayed its response until April 15--that is from a February 
ruling of the year before--when it acknowledged its mistake, but again 
failed to take action. Instead, even though it had thoroughly reviewed 
extensive public comment, it asked for more comment, but this time 
referenced a statute with a deadline for formal action by June 15. Now 
we are almost a year and a half into the process. After 17\1/2\ months 
of review, the agency failed to meet that statutory deadline. Highly 
subsidized drilled lumber continues to pour over the border, damaging 
the agreement and destroying jobs in my State and in every other 
timber-producing State in the Nation.
  Now, some are arguing that even if Customs finally corrects the 
error, it will take another 60 days for implementation, at the cost of 
more than $70 million in U.S. sales. I have to say --and I use this 
word, but I would like to find a stronger word -- ``Customs, how 
ridiculous can you get?'' Importers were warned by Customs in the 
October 27, 1997 Federal Register notice that they could not rely on 
the old ruling. Once Customs decides that this product is properly 
covered by the United States-Canadian Lumber Agreement, further 
invasion should be stopped. By its terms, the international agreement 
will cover this lumber.
  What is particularly shocking about this loophole is that before the 
Agreement was signed, the administration expressly committed to the 
U.S. lumber industry that USTR, Commerce, and Customs would work 
aggressively at full and effective enforcement.
  Now, I do not know if you call stumbling through the darkness of 
statutes for 17 months an aggressive effort. Mr. President, this 
``ain't'' aggressive.
  Mr. President, the Customs Service handled this issue in what I would 
have to say is the most outrageous of ways. U.S. mills and workers 
should be able to expect their Government, their President, to work for 
them by enforcing trade agreements. Heaven knows, they should be able 
to expect their Government not to affirmatively undermine trade 
agreements and cause them to be defenseless against unfair imports. 
That Customs would continue to do so in violation of a direct statutory 
requirement and blithely ignoring this Congress' report is beyond the 
pale. Of course, now with the Asian flu, we have Indonesian dimensional 
lumber beginning to hit the west coast at even well below our cost of 
production.
  In the strongest terms, I urge Customs to begin doing the job that it 
is commanded to do by U.S. law and for which U.S. taxpayers are paying. 
Customs must immediately issue a definitive, corrected ruling on 
drilled lumber and implement the ruling at once--not 30 days, not 60 
days, not 17 months--but at once. It must also correct related 
miscalculations regarding notched lumber that are also undermining the 
lumber agreement. Reported efforts by the administration to clarify 
with Canada the Agreement's treatment of drilled and notched lumber do 
not affect Customs' obligation to act in accordance with U.S. law and 
policy. In fact, if Customs fails to act properly and reclassify this 
product, we can only expect more delay and more efforts at evasion in 
the future. More broadly, the agency must vigorously enforce the 
agreement and help the U.S. lumber industry realize that full subsidy 
offset is exactly what they deserve.
  Failure by Customs to proceed in conformity with U.S. law and policy 
could have grave implications for other trade agreement programs. Just 
at a time when this country must awaken to not only the fairness of 
trade, but the importance of trade, and the balance of it, the 
administration is apparently moving in the other direction by ignoring 
it and allowing the flow of subsidized imports. The administration 
promised full and vigorous enforcement. With this loophole, it is not 
living up to that commitment.
  Trade agreements serve U.S. interests only if they are effective. If 
the American people cannot trust the administration to maintain the 
integrity or much less enforce such agreements, the administration 
cannot expect a continued mandate to pursue trade agreements. Here we 
are trying to, struggling to, get this administration the ability to 
deal in trade, and they are simply doing the slow waltz at a time when 
it is costing this country hundreds of jobs, if not thousands.
  Customs' mishandling of this important issue could also have 
budgetary implications. The taxpayers should not be expected to fund 
activities that actually worsen their position. Moreover, Congress 
should reconsider who has authority to make and implement 
classification decisions which can undermine our international trade 
agreements. In the context of countervailing duty and antidumping duty 
cases, the Commerce Department has direct authority to prevent these 
types of evasion. Perhaps we need to give USTR direct authority--and a 
mandate--to stop Customs from the twiddling of their fingers and their 
willy-nilly attitude toward obeying and enforcing the law. ``Customs, 
I'm sorry, 17 months doesn't cut it.''
  Mr. President, this is truly one of those situations that makes most 
Americans outside the beltway just shake their heads in disbelief at 
our Government. I, and I know others in Congress, will demand drastic 
actions if this problem is not rectified in a prompt manner. I am 
sending a copy of this to Secretary Rubin, and I am going to ask other 
senior Treasury officials to report to Congress immediately about the 
agency's intentions on this matter.
  At a time when trade is of utmost importance to the producers in our 
country, we must recognize that balance is what really counts, and not 
allow industry or certain industries to die simply by arbitrary 
decision or inaction on the part of Customs and other agencies of our 
Federal Government.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRAMS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Hagel). Without objection, it is so 
ordered.
  Mr. GRAMS. I ask unanimous consent to be able to speak for up to half 
an hour in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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