The forests ministry has warned companies in B.C's Interior they are at risk of hitting a surge trigger this month that could increase their softwood lumber export taxes by 50 per cent.

If the Interior hits the surge trigger, lumber shippers would have to pay a 22.5-per-cent export tax, instead of 15 per cent, retroactively for shipments to the U.S. during January.

The key question is whether the Canadian government will be using an adjusted trigger amount calculated under one of the clauses of the softwood lumber agreement.

If an adjusted figure is used -- one which is adjusted to account for a difference in expected U.S. lumber consumption and actual U.S. lumber consumption -- and the Interior continues to ship at the same average daily rate it has to Jan. 24, the Interior is forecast to reach 99 per cent of the surge trigger by month-end.

However, Canfor Corp. vice-president Ken Higginbotham said Monday the company has been told the federal government has determined that the Interior surge calculation is not subject to adjustment, which means there's little risk of triggering the additional 7.5-per-cent tax.

"We're happy with that," said Higginbotham. "Now there may be further steps to find out whether the U.S. agrees or not. That's what the dispute settlement process is for."

As a result, Canfor has made no plans to curtail shipments to the U.S., he said. "It's given us the confidence to go ahead and meet our obligations to our customers and ship the wood."

The ministry's warning from last Wednesday -- which Higginbotham labeled a status report -- was issued in part as a result of efforts by the B.C. forest industry to encourage the province to let the industry know when it comes close to hitting the surge trigger, he said.

Earlier Monday, officials at Prince George-based Lakeland Mills, a privately-owned lumber manufacturer, weren't sure how they would react. Lakeland president Keith Anderson said they haven't taken any specific action, including cutting back production or not shipping, although he said it appears a decision needs to be made quickly.

Also Monday, Brink Forest Products president John Brink said although his company is a small player, he will not be shipping much product to the U.S. in reaction to the risk the surge trigger could be reached.

Brink said the key issue is simply that not enough lumber production has been curtailed in B.C.'s Interior in the face of the poor market in the U.S.

"The agreement was designed to take production off the market, and that really hasn't happened in the Interior," said Brink, who operates lumber remanufacturing plants in Prince George and Houston.

Brink said he's particularly concerned what will happen in February, predicting a similar problem will take place if Interior production and shipments to the U.S. are not rolled back.

The surge trigger -- where the 50-per-cent export tax increase kicks in when a region ships 10 per cent more than its allocation in a given month -- is meant to prevent sudden flooding of the U.S. market.

Each region is allocated a certain percentage of expected U.S. lumber consumption -- the B.C. Interior share is 17.43 per cent -- which is calculated on a 12-month rolling average that has a three-month lag. So, for example, U.S. consumption for January is calculated based on consumption between October 2005 to September 2006.

However, one of the clauses in the softwood agreement allows for an adjustment of expected U.S. consumption, if actual U.S. consumption differs by more than five per cent from expected U.S. consumption during a quarter.

The forests ministry could not produce any officials who would respond to questions from The Citizen.

Forest industry consultant Paul Quinn said he believes the U.S. Coalition for Fair Lumber Imports -- the American group that launched the softwood trade complaint against Canada -- will be watching what happens. "I would say if I'm the coalition I'm definitely going to take this up because it's going to hurt my competitors even more," said Quinn, who works for Salman Partners in Vancouver.

Quinn noted that the surge trigger could be costly to B.C.'s biggest lumber producers.

He has calculated Canfor could pay an additional $4.5 million per month in export duties for every month the surge tax is triggered. West Fraser is not far behind at $3.5 million extra per month, while Tembec could see another $1 million per month in export tax payments.

©Copyright 2007 Prince George Citizen