A Quebec remanufacturer is pulled back inside the softwood countervailing duty order after a seven year court fight, and the ruling carries a warning for every Canadian lumber trading company
WASHINGTON, August 6, 2026
A Quebec lumber remanufacturer that spent seven years outside the United States countervailing duty order on Canadian softwood lumber has been returned to it, after the United States Department of Commerce published amended final results giving Les Produits Forestiers D&G Ltee and its cross owned affiliate Les Produits Forestiers Portbec Ltee a subsidy rate of 1.05 per cent ad valorem.
The notice, published in the Federal Register on Thursday under docket C-122-858 and applicable the same day, ends one of the longest running procedural fights in the softwood lumber file. It also establishes a rule of general application that reaches well beyond the two companies named: a Canadian firm that buys lumber from unaffiliated suppliers and resells it into the United States can be attributed the subsidies received by those suppliers, on the theory that it is functioning as a trading company.
That principle is the real story. D&G and Portbec are modest operations. The reasoning that pulled them back into the order applies to a large share of the Canadian remanufacturing and wholesale sector.
What Commerce decided
The chronology is unusually long, and it is worth setting out because each step narrowed the ground the companies were standing on.
Commerce published the countervailing duty order on certain softwood lumber products from Canada on January 3, 2018. In July 2019, it published the final results of an expedited review covering calendar year 2015 and calculated a de minimis subsidy rate of 0.21 per cent ad valorem for D&G and Portbec, which had the effect of excluding them from the order. Commerce also found two other entities, Le Groupe Gesco Star Ltee and Les Produits Forestiers Startrees Ltee, to be cross owned with D&G and Portbec.
The Committee Overseeing Action for Lumber International Trade Investigations or Negotiations, the United States industry coalition known in the trade as the COALITION, appealed. Its initial challenge was structural rather than arithmetical: it argued that Commerce had no statutory authority to promulgate the expedited review regulations at 19 CFR 351.214(k) at all, and therefore no authority to calculate individual subsidy rates for companies that were not individually examined during the original investigation.
The United States Court of International Trade remanded on that question in November 2020. In February 2021, Commerce agreed with the COALITION and concluded in a first remand redetermination that it lacked statutory authority for the expedited review regulation. In August 2021, the CIT affirmed and vacated both the regulation and the expedited review results, which meant the court never reached the substantive challenges raised by the reviewed companies or by the COALITION.
In April 2023, the United States Court of Appeals for the Federal Circuit reversed, holding that Commerce does have statutory authority to adopt the expedited review process, and sent the case back for the proceedings that authority made necessary.
From that point the fight moved to substance. In April 2024, the CIT sustained several parts of the expedited review but remanded Commerce’s decision not to attribute to D&G and Portbec the subsidies received by their unaffiliated lumber suppliers. In September 2024, Commerce issued a second remand redetermination recalculating the rate by treating the two firms as trading companies under 19 CFR 351.525(c), with respect to lumber they purchased from unaffiliated Canadian suppliers and either remanufactured and sold into the United States or resold without further processing.
In January 2025, the CIT sustained the trading company treatment but sent back the revised rate calculation. In April 2025, Commerce issued a third remand redetermination, declining to reopen the record to solicit the value of lumber Portbec said it had purchased inside the United States after importation, and recalculating the rate to reflect each company’s relative share of purchases from unaffiliated Canadian suppliers and relative share of total sales. That produced an overall rate of 1.75 per cent ad valorem, above de minimis.
In December 2025, the CIT remanded once more, directing Commerce to reconsider the documentation the companies had provided regarding lumber purchased from importers after importation into the United States during 2015. Commerce issued a fourth remand redetermination on April 17, 2026, considered that documentation, and arrived at 1.05 per cent.
On July 21, 2026, the CIT issued final judgment in Consolidated Court No. 19-00122, Slip Opinion 26-77, sustaining the expedited review results as amended by the second, third and fourth redeterminations. Thursday’s Federal Register notice, signed by Christopher Abbott, Deputy Assistant Secretary for Policy and Negotiations, gives effect to that judgment. Commerce said it will instruct United States Customs and Border Protection to collect cash deposits of estimated countervailing duties at 1.05 per cent on shipments entered, or withdrawn from warehouse for consumption, on or after the publication date, and that the requirement remains in effect until further notice.
Why the trading company finding matters
At 1.05 per cent, the rate itself is nearly trivial in commercial terms. Against a combined anti dumping and countervailing duty burden that has run above 35 per cent for most Canadian producers, an extra point of countervailing duty is noise.
The significance lies in the analytical route Commerce took to get there, and in what that route implies for other firms.
The trading company regulation at 19 CFR 351.525(c) exists to prevent a straightforward form of circumvention. If a subsidized producer could sell its output to an unrelated intermediary, and the intermediary could then export to the United States free of countervailing duty because the intermediary itself received no subsidy, the order would be easy to defeat. The regulation therefore permits Commerce to attribute a supplier’s subsidies to the trading company that exports the goods.
Applying that regulation to a remanufacturer is a different proposition from applying it to a pure reseller. D&G and Portbec do process lumber. The CIT nonetheless sustained Commerce’s decision to treat them as trading companies with respect to purchases from unaffiliated Canadian suppliers, whether the purchased lumber was further processed before export or resold without processing.
The practical consequence for the Canadian sector is that a firm’s own conduct is not sufficient to determine its duty exposure. A remanufacturer can hold impeccable tenure arrangements, buy every board at arm’s length market prices, and still be assigned a subsidy rate derived from the stumpage programs of the provinces where its suppliers cut their timber. Exposure follows the fibre, not the firm.
That has consequences for how Canadian remanufacturers should think about procurement. Supplier selection is now a duty rate variable. A firm sourcing heavily from provinces with programs Commerce has found countervailable will inherit more of those findings than a firm sourcing from provinces or private lands where the rates run lower. In a sector where remanufacturers have historically bought on price and species availability, adding a subsidy attribution dimension to the sourcing decision is a real change in commercial practice.
The wider duty picture
The reinstatement lands in a period of unusual movement on the softwood file, which makes it easy to misread.
In April 2026, Commerce issued preliminary results in the seventh administrative review, known as AR7, covering the period from January 1, 2024 through December 31, 2024. Those preliminary results pointed to a combined rate of 24.83 per cent, made up of 10.66 per cent anti dumping and 14.17 per cent countervailing, down from the combined 35.16 per cent then in force, which comprised 20.56 per cent anti dumping and 14.63 per cent countervailing.
Commerce published a post preliminary countervailing determination on June 30, 2026 that superseded the initial April 8 preliminary findings. Global Affairs Canada confirmed in July that the update carried no immediate effect on cash deposit rates. Current rates remain in place until Commerce issues and publishes its final AR7 determination, which market participants expect in October 2026.
Any relief from a lower combined rate is partly offset by a separate measure. A 10 per cent tariff imposed in October 2025 under Section 232 of the Trade Expansion Act of 1962 applies to all imports of softwood timber and lumber on top of the trade remedy duties, and there is no CUSMA exemption. If the AR7 final results land near the preliminary figures, the effective combined burden would be roughly 34.83 per cent rather than 24.83 per cent.
The Section 232 timber action also imposed 25 per cent duties on certain upholstered wooden furniture, kitchen cabinets and vanities effective October 14, 2025, rising to 30 per cent for upholstered furniture and 50 per cent for cabinets and vanities on January 1, 2026. Those rates sit on top of everything else for the value added end of the wood products chain.
And the wall is scheduled to get higher. Three presidential proclamations signed on July 20, 2026 under Section 338 of the Tariff Act of 1930 impose additional 50 per cent duties on a wide range of Canadian goods effective August 19, 2026, reaching an estimated US$20 billion in annual imports. Analysis of the proclamations by Wiley Rein LLP shows that the annexes include wood mouldings, particle board, medium density fibreboard, plywood and veneered panels, doors, picture frames and pulpwood, along with a long list of paper products. Goods already subject to Section 232 tariffs are excluded, which spares softwood timber and lumber itself, but many of the downstream wood products that Canadian mills and remanufacturers depend on for margin are inside the Section 338 lists.
Prime Minister Mark Carney told reporters on Wednesday that forest products are among the sectors Canada is pressing Washington to address in the current negotiations, listing them alongside steel, aluminum and autos as areas where Ottawa wants “all 232s addressed.”
Stakeholder positions
Neither side of the softwood dispute has commented publicly on the D&G reinstatement, which is characteristic of a technical remand notice rather than a headline determination. The positions of the parties are nonetheless well established from the record.
The COALITION, which brought and won the appeal, has pursued a consistent objective across the seven years of litigation: to narrow the circumstances in which Canadian companies can obtain individual rates or exclusions without full individual examination. It lost the structural argument at the Federal Circuit in 2023 when the court confirmed Commerce’s authority to run expedited reviews. It then won the substantive argument on subsidy attribution, which arguably delivers more than the structural challenge would have. An expedited review process that attributes upstream supplier subsidies to remanufacturers and traders produces far fewer de minimis outcomes than one that does not.
For the Canadian side, the case illustrates a longstanding grievance about the design of the United States countervailing duty regime as applied to softwood. Ottawa’s position, maintained across successive governments, is that provincial stumpage systems are administered pricing regimes rather than subsidy programs, and that Commerce’s benchmark methodology systematically overstates any benefit. Canada has won repeatedly on elements of that argument before dispute settlement panels under CUSMA and its predecessor agreements, and has nonetheless faced duties without interruption since 2017.
Provincial governments have their own exposure. British Columbia maintains a public accounting of the dispute and has noted that duties paid by Canadian softwood producers surpassed US$8 billion, a figure that represents cash held by the United States Treasury pending final resolution and one that has grown with each administrative review cycle. Those deposits are, in principle, refundable with interest if final rates come in lower than deposits collected, which gives Canadian producers a large and illiquid receivable on their balance sheets.
Labour organizations have taken a position focused on domestic support rather than on the mechanics of the duty calculations. Unifor has described federal forestry and steel sector supports as encouraging while pressing for more, and has framed the sector’s difficulties as a combination of United States trade action and structural fibre supply problems rather than as a trade dispute in isolation.
The Canadian remanufacturing sector, which the trading company finding most directly affects, is fragmented and has no single voice comparable to the large integrated producers. That is part of why a determination with sector wide implications can be published as a three page notice without generating a reaction.
Market conditions
The commercial backdrop is soft, which sharpens the effect of any incremental cost.
Canadian producers continue to face fibre supply constraints and rising harvest costs. Nova Scotia signed a five year action plan with Finnish partners in April 2024 aimed at maximizing fibre use and modernizing operations, one of several provincial efforts that point to a structural rather than cyclical supply deficit. Ontario committed to a ten year, C$21 billion forest roadmap. These are long horizon responses to a problem that will outlast the current trade dispute.
On the demand side, United States housing is not offering much help. Thirty year fixed mortgage rates stood at 6.66 per cent for the week ending July 30, 2026. Land costs are squeezing builders from another direction: data centre developers have been outbidding residential builders for prime parcels, with reported prices as high as US$6.3 million per acre in Northern Virginia against typical residential land values near US$125,000 per acre. Parcels under one fifth of an acre now account for 64 per cent of speculative home starts. Smaller lots mean smaller houses, and smaller houses mean less board footage per start.
Framing lumber prices have been roughly flat, with three week momentum up 2.9 per cent in late July and mill order files sitting at about two weeks, which gives producers little pricing leverage.
Implications for importers and exporters
For United States importers buying from D&G or Portbec, the immediate action is administrative. Cash deposits of 1.05 per cent apply to entries made on or after Thursday. Purchase orders written on the assumption that these suppliers were excluded from the order need to be repriced, and anyone who has entered goods this week should confirm with their broker which side of the publication date their entries fall on.
For Canadian remanufacturers and lumber trading companies more broadly, the notice should prompt a review of subsidy attribution risk. The relevant questions are: what proportion of throughput is purchased from unaffiliated Canadian suppliers, which provinces those suppliers operate in, and what countervailing duty rates Commerce has assigned to firms in those provinces. A company that has never been individually examined should not assume its own operations determine its exposure.
For firms currently excluded from the order or holding company specific rates below the all others rate, the case is a reminder that exclusions are contingent. D&G and Portbec were excluded in 2019 and reinstated in 2026 without any change in their own conduct. The change was legal and methodological. Firms whose commercial models depend on an exclusion should understand it as a position that can be litigated away, and should model the cost of losing it.
For anyone planning inventory through the autumn, the AR7 final determination in October is the date that matters most. Past practice suggests final results usually track preliminary findings closely, but an upward revision would compress importer margins immediately, and cash deposit changes are not retroactive in a way that helps anyone who guessed wrong. Buyers have been advised to hold framing lumber coverage in the range of 14 to 21 days through August rather than build speculative positions, and to diversify between Canadian spruce pine fir and domestic southern yellow pine as insulation against trade policy shocks.
For Canadian exporters generally, the sequencing over the next ten weeks is demanding. The Section 338 duties bite on August 19. The AR7 final results land in October. The CUSMA review process continues in the background. Each of those has a different mechanism, a different legal basis and a different set of available responses, and the interaction between them is where most planning errors will occur.
A note on process
There is a final observation worth making about the D&G case, which is about the trade remedy system itself.
The subsidy rate at issue moved from 0.21 per cent to 1.75 per cent and finally to 1.05 per cent over the course of four remand redeterminations and five court decisions spanning nearly seven years, on a review period that ended more than a decade ago. The companies involved are small. The commercial stakes in the specific rate are modest.
For Canadian exporters, the lesson is not that the system is unfair. It is that the system is slow, and that slowness is itself a cost. A firm cannot plan a decade of procurement around a duty rate that remains under litigation for seven years. The rational response is to treat trade remedy exposure as a permanent operating condition to be hedged rather than a dispute to be won, and to build supplier relationships, pricing terms and market diversification on that assumption.