International Trade Committee on Feb. 13th, 2013

[Tom Sundher]

Absolutely. They are very good. Our trade services are excellent in India. I use them all the time. I was in India two weeks ago. I use them every time I go. The first time I went to India, I used our trade services to present our first show.

In answer to your other question about house building in India, I don't see in the short term our providing construction lumber to India to build homes out of wood. I see our opportunity, as it has been for us in the industry for the last 15 years, in interior lumber uses, such as, windows, doors, flooring, wood framing, finishing, spare parts. That's what I send our lumber for now. That's where I see the opportunity.

What slows us down is the tariff. When there's a 14.5% duty on our wood, by the time it reaches the customer, it's 22%, because 14.5% is the duty when it comes right into India and they take it at the border. Then there are state taxes, dock charges and related items that bring it up to 22% before our customer receives the lumber. I don't think there's much you can do on India's tax structure, but you might be able to do something on the duty of 14.5%. If you could do anything to reduce that down as close to zero as you could, we would get more opportunity to move our lumber into India and grow our market share.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Sundher, did you face any non-tariff barriers in your dealings with India?

[Tom Sundher]

The non-tariff ones were in the paperwork, the documentation.

Similar to what Mr. Sahsi said, every time the lumber presents there, we think we've dotted our i's and crossed our t's, but they find some issue to hold up the shipments, and then Canadian businesses don't want to do business in India.

If this committee could help us on the non-tariff issues, and I've listed them in my presentation, that would be a big help to us.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Sahsi, do you want to make any comment on it?

[Darshan Singh Sahsi]

Nothing much; I have covered almost everything, but I would give one suggestion. If, like China, the Canadian government could do something with our own shipping lines, they can....

I tried with steel scrap to India. I have also tried with lumber to India. I shipped two containers of logs. I think there were infected logs. In B.C. they were allowed. There was no duty on the logs, but they wanted this certificate and that certificate, and then my manager cleared those containers in some other way.

But on the processed board there is a duty in India.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Let me ask both of you a question.

In this competing global market, should Canada go ahead with an agreement with India, and would there be a loss of opportunity if we do not finalize our agreement with India?

[Tom Sundher]

It's very important that we finalize an agreement with India on trade. I understand you have lumber on your list, and that would help us.

We have a surplus of lumber and we need export markets. India has a deficit in forestry and forest products, and there's an opportunity for us to grow our business. I believe that if we move forward in the next 10 to 15 years—not the short term, but in a marathon—we will be close to China in shipping lumber products to the Indian market. Not everybody agrees with that summation, but I do.

[Darshan Singh Sahsi]

One of my managers in Accra, Ghana is a fifth generation in the lumber industry in India. He knows anything about lumber. I think India is a big market for lumber in the future. He was telling me that there is a high demand for Canadian lumber. Especially in the Kandla seaport, there are a lot of containers. A few of my friends are exporting from B.C. I am also thinking of exporting lumber from B.C.

I don't know the duty on the processed wood, but there is a market there. They are using this lumber for furniture. They export furniture also. It's not for doors or windows, because they are importing plastic windows and doors from China. They're basically using it for furniture. This softwood lumber is good for furniture.

I think in the future, Canadian lumber would be loved in India. That's what my manager was telling me. We are also trying to step into lumber. We will soon start shipping lumber from B.C. to India.

[The Chair, Conservative, Rob Merrifield]

Okay, very good.

Mr. Easter.

[Tom Sundher]

I just want to make one comment on—

[The Chair, Conservative, Rob Merrifield]

We'll just have Mr. Easter speak. He's the second round, and he'll probably give you a question.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you both for appearing.

There obviously should be a market for lumber or housing materials. We're talking about 200 million new housing units that are required. That's substantial.

I want to come to you first, Mr. Sahsi. I didn't quite understand your operation. You are buying used clothing. Did you have a plant in Canada, or did you have a plant in India and were importing that clothing from containers from here?

[Darshan Singh Sahsi]

I started in Canada in 1995. We were grading around 50,000 pounds every day. We were buying from Value Village, the Salvation Army, everybody. Then in 1999-2000, the Canadian dollar started to strengthen and our viability was not there. Many people closed down.

I decided to take it to the country where labour is cheap. I applied with the Ministry of Commerce to get a duty-free licence. I can import used clothing into India, use Indian labels, and get cheap warehousing. There was no tax for the first 10 years. They gave us a tax break for the first 10 years. I'm buying used clothing from Value Village, the Salvation Army, Goodwill. They are leftovers from the charities. The Salvation Army, for example, receives clothing donations, sorts them, puts price-tags on them, and tries to sell them in their thrift stores. Whatever they can't sell, whatever they would throw away, the leftovers and the damaged items, they sell to me by weight. I turn that clothing into money. I buy from them and ship them.... I sort and grade in Vancouver and Toronto, and extra containers—150 containers—I ship to the plant in India, grade them there, and ship them to Africa. I have my own outlets in Africa. I sell them in Africa, bring the dollars to India, and from India to Canada.

[Wayne Easter, Liberal, Malpeque, PE]

What would it take to create those jobs in Canada? One of my concerns with the government approach is that they believe in signing trade agreements, but then the thinking is that they're done. How do we add value in Canada and create other economic activity in Canada to take advantage of the trade agreement? If we had an FTA with China that reduced the tariffs, would that in any way see you creating those jobs in Canada?

[Darshan Singh Sahsi]

Yes, that's why I printed this paper. Unfortunately, there was no option. If free trade is allowed, then we don't need an Indian plant. We could sort and grade here in Canada. Shipping one container of mixed used clothing is $10,000 to $15,000, depending on what we load in it.

If India opens the gate, then we will ship the graded clothes from Canada. We could grade in Toronto and Vancouver. The graded container would be $30,000 to $40,000, at a minimum. If you're shipping 10,000 or 20,000 containers to India, then we don't need them to create jobs. We will create jobs here in Canada. Even right now, today, I have not closed down my plants. I have 17 plants in Vancouver, and I just started in Toronto. I'm keeping these plants alive, because you never know. Tomorrow, India may shut the doors. They can change the policies overnight. I want to keep my plants here. I'm keeping everything in my hands: Africa, India, Canada. I don't want to shut down my Canadian facilities.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you very much.

Mr. Sundher, I think your main issue is tariffs.

[Tom Sundher]

Yes.

[Wayne Easter, Liberal, Malpeque, PE]

An FTA with India would reduce those tariffs and non-tariff barriers. You did mention India's tax structure.

I have two questions. Who are your major competitors in selling lumber products to India? I expect China is one. Does the Indian tax structure apply to those other competitors as well?

[Tom Sundher]

Yes, it does. Our major competitor for our wood into India, Mr. Easter, is hardwoods, hardwood logs. Right now, India has a culture of using hardwoods in all of their building and all of their finished.... Our competition for our lumber is going to be the hardwoods. Right now, 95% of the volume of wood coming into India is in log form, and 90% of the usage of manufactured lumber is in hardwood form. But right now, worldwide for hardwood logs...it's becoming a shortage, because many of those countries that are exporting the hardwood logs into India are doing it illegally.

Our opinion is that there's going to be a demand for more wood. Our share of the Indian market is less than 1% right now, because we've just started. The Indian consumer knows very little about our lumber and its qualities. Our challenge is going to be to introduce our lumber—and that's what we've been doing for the last 10 or 15 years—to interior uses for homes. It's slowly being accepted.

FII, the Forestry Innovation Investment group in B.C., working with Canada Wood, opened up offices this year, and they've chosen India as the next place after China to work on educating the public on the uses of our Canadian lumber, which is softwood. This is an issue that we're up against, and the help from reducing the tariffs would help us introduce our lumber much more quickly than we've been able to in the past.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Cannon, I believe you want to share your time with Mr. Saxton.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you.

Thank you very much, Mr. Sundher. I'm from Kelowna—Lake Country in the interior of British Columbia, and I thank you for your continued effort to grow our forest industry. I have Tolko mills in my riding, and a big part of the interior is forest related.

I wanted to expand on one question you responded to. Right now, most of your market is coastal because of the cost of shipping inland. Is any of your product being used for finished, or is it more for forms and some of the extra material, like they're doing in China right now?

[Tom Sundher]

No. Right now, Mr. Cannan, our wood is interior SPF going into India. Tolko is a big.... I just came back from a trip to India, where there were three of the major companies, Tolko, Canfor, and West Fraser, and us, which is Western Forest Products. We're promoting our coastal species, which are hemlock, Douglas fir and western red cedar, and from our interior, our SPF. Tolko and the other companies are having some success. We've just started in that area recently. That's working out well, actually, and it's mostly for interior use: wood panelling, door panels, door frames, and door parts, like stiles and rails.

We cannot compete for the shuttering business. In the shuttering business, it's a cement forming. Most of that wood comes from New Zealand and Australia in log form, which they can deliver at between $95 and $120 a cubic metre. It's not dried. It comes into port and thousands of small sawmills in India saw it up. It's used for the low end. We're not going to be competing against the low end. We have to compete in the furniture industry and the interior uses of wood for homes and offices.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I want to congratulate you on both of your awards in 2006, and I think you said 2011 as well, so you're obviously leading the way in many sectors of your industry.

You have some staggering numbers on the potential. You mentioned 200 million units by 2020, 80% urban, mostly multi-family. The potential not just for your company but for Canadian companies, as you were saying, is huge.

[Tom Sundher]

Yes, for all Canadian companies. Tolko is excited about it. John Langley and I were just over there together. We're all going to try...it's for our Canadian producers. In the last 15 years, 37 sawmills in B.C. have shut down. The only way we're going to get employment here is to keep that effort going. We're dependent on export markets, so the more export markets we achieve.... China is huge for us now, the U.S. is big, and India could be a big consumer. One of the differences between India and China is that China wants to be the manufacturer to the world. India, in my estimation, will be more of a consumer of our goods than an exporter. I see a huge opportunity for us there.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

That's very exciting. I know Minister Pat Bell is very excited about that. Minister Steve Thomson, the forest minister, is one of the three MLAs in my riding, so we work closely and do all we can.

Thank you for your work.

I'll pass the floor over to my colleague, Mr. Saxton. Thank you.