Natural Resources Committee on Nov. 3rd, 2025

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Mr. Verreault, thank you for joining us. Your company, Chantiers Chibougamau, is certainly a model for the rest of Canada in the forestry sector supply chain, whether it be sawmills or pulp and paper mills. That’s interesting.

If I understand correctly, you have a production capacity of 700 million board feet. Is that correct?

[Frédéric Verreault]

That is indeed our annual production capacity.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

So a good portion of the money sitting in American coffers belongs to you.

[Frédéric Verreault]

Yes.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Can you explain how the repurchase of customs duties currently paid to the United States would work in practice?

[Frédéric Verreault]

Absolutely. Thank you for focusing on that aspect.

First, we need to explain what customs duties are. I don’t think all committee members are aware of the difference between customs duties and tariffs. A tariff is a tax. When materials are sold that cross the American border, a bank levy is immediately made at the border crossing for the value of the tax. The tariff is therefore the amount that goes, like all taxes, into the U.S. Consolidated Revenue Fund to support the operating needs of the U.S. government.

In the case of customs duties, which represent 35%, or more than one third, of the revenue from a sale, they are automatically deducted from the bank account. The money from these duties is paid into a kind of trust fund at the same time. This preventive measure was introduced by the U.S. Department of Commerce. It is as if, because of certain claims regarding Canadian timber, the United States took money and deposited it in a parallel account. On the day of settlement, as was the case in 2006 in the context of trade negotiations, the distribution of these sums would be agreed upon.

As an indication, in 2006, 80% of what we had deposited in the United States to sell lumber there was returned to our businesses, our communities and the Canadian tax system. It is extremely important to note this, because we are talking about $12 billion. Obviously, every dollar that returns to the Canadian tax system has a material impact on public finances. If all these funds remain in the United States, we are naturally depriving ourselves collectively of a significant material inflow of funds. On the other hand, in 2006, the remaining 20% remained in the United States.

In this case, the amounts paid in customs duties are an asset in the same way as a customer account in a company’s accounts. For example, I could sell a customer account to private firms, my bankers, American firms, or Export Development Canada. More specifically, it is an invoice owed to us. Here is an illustration: until a customer pays me, I leave a little money on the table for another customer. On the day the money comes in, that new customer will have priority in recovering their money.

This is the philosophy behind the repurchase of customs duties. Of course, today, if you gave us a magic wand, if there were no public finance issues whatsoever and we lived in a country where everything was optimal, we would work to buy back the $12 billion in customs duties that the Canadian wood products industry has collectively paid to the United States. However, since there is no option or means to do so, that is where the idea of buying back 50% of the customs duties comes in.

Let me explain the reasoning behind the 50%. An analysis was conducted of all customs duty buybacks or resales made in recent years by companies and shareholders holding paid customs duties, whether they were American or Canadian companies and American or other shareholders. These customs duties were treated as an asset, without subsidies, without government assistance, without giving any advantage to any industry, simply on the basis of the market, and were valued at between 29% and 80% of their amount.

That is why we believe that this approach is fair and equitable. It is also fair for the Americans. For example, today I can sell customs duties to American financial product firms. This is an asset that is legitimately recognized as such in the American economic and business world.

By splitting the difference and showing solidarity, the Canadian government is temporarily taking on 50% of the responsibility. For our part, we are returning 50% of our diverted revenue in customs duties. This is done at no cost. The government is taking security on this asset, which has no impact on my accountability to my bankers, whether in terms of ratios, performance, balance sheet, or anything else. By returning this revenue, we are significantly offsetting part of the revenue losses, which temporarily translate into operating losses as long as the funds remain in U.S. coffers.

Please forgive me for this lengthy explanation, but the subject is relatively complex. This approach has several advantages, which we can come back to later. However, I hope I have answered the question about the customs duty buyback formula in broad terms.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Thank you, you answered my question very well.

Mr. Cloutier, we have just lost 2,000 jobs. You have 300,000 members. What would be the multiplier effect on the industry?

[Daniel Cloutier]

With regard to the indirect jobs you mention, we generally talk about three to four to one.

[The Chair, Liberal, Terry Duguid]

Thank you, Mr. Malette.

Next is Mr. Guay for six minutes.

[Claude Guay, Liberal, LaSalle—Émard—Verdun, QC]

Thank you, Mr. Chair.

Thank you very much, Mr. Verreault, Mr. Vincent and Mr. Cloutier.

Mr. Verreault, it’s good to see you again. Thank you for joining us.

Tell us a little about the investments Chantiers Chibougamau has made to transform itself. Without giving away your magic formula to the competition, tell us a little about what you have done to transform yourself and what the industry could do similarly.

[Frédéric Verreault]

Mr. Guay, I had the pleasure of welcoming you to our Chibougamau facility, and I invite all members of the committee to visit us at their convenience. It would be my great pleasure to welcome them.

These investments have been made over a period of some 30 years, but I will narrow down the story. Export barriers already existed in the 1990s. As our mill was the northernmost in Quebec’s entire forestry industry, we noticed that our wood was smaller and had esthetic defects. That’s when we started joining wood. One thing led to another, and we began manufacturing floor joists. Today, we produce 90 million linear feet of floor joists. I would like to point out to the members of the committee that 90 million feet of joists could cover Canada five times over from coast to coast. That is a lot of floor joists.

In Chibougamau, we also have the largest solid wood plant for the production of beams, glued laminated timber columns and cross-laminated timber panels. We talk a lot about solid wood as a tool for diversification and decarbonization in construction. In fact, this adventure began more than 20 years ago. One project at a time, we cut our teeth and developed our craft. At the time, only solid wood buildings with four storeys were authorized, but today, in Canada, it is possible to build up to 18 storeys in solid wood. In the space of twenty years, the initially very restrictive context has completely expanded.

When it comes to investments, there is one thing I want to emphasize. I am referring to FPInnovations, a private research centre whose activities cover all of Canada and which has played a key role in developing this basket of products, technical know-how and regulatory expertise for all practices related to wood construction safety.

We humbly note that our Nordic Structures products are well known and have a global reach. That said, if we are now producing cross-laminated timber and it is generating strong interest across the country and around the world, it is because of another perfect storm in 2009, which combined a global economic crisis with a forestry crisis. At the time, FPInnovations was monitoring technological developments and told us to go on a mission to Austria and Germany. So, more than 15 years ago, we went on that mission and, when we returned, we invested in this program.

It is extremely important to note that companies like ours are under pressure today. Most of our products are under intense market pressure, and maintaining our corporate contributions to FPInnovations’ funding requires a tremendous effort on our part. I sincerely believe that maintaining or even increasing the Government of Canada’s support for FPInnovations would have a nationwide impact. This is an extremely critical issue in terms of the development of these products.

Ultimately, we have made private investments ranging from $200 million to $300 million over the past 20 years to develop this industrial structure. Of course, it all sounds great today, but there have been many mistakes and trials, and perseverance and stubbornness. In the end, that is what led us to this basket of products.

[Claude Guay, Liberal, LaSalle—Émard—Verdun, QC]

Thank you, Mr. Verreault.

Mr. Vincent, you mentioned a possible sum of $12 billion for Build Canada Homes. For my part, I spoke with an executive from one of the major paper companies in the wood industry. Since the Americans need our product anyway, he told me that transferring two or three points from the American market to the Canadian market would create enormous pressure on American market prices, which the Americans would find difficult to bear. Explain to us how prices are changing in the market. Also, please tell me if that statement is correct.

[Michel Vincent]

You're absolutely right, Mr. Guay. When I talk about a volume of 2 billion to 2.5 billion board feet to build the additional 250,000 homes, I don't think that's a lot. That's a huge volume, even though it's only about 20% of the $10 billion to $12 billion that we export. You have to understand, that volume represents 4% to 5% of what the U.S. uses in a year. That's huge.

Traditionally, the softwood lumber sector has kept stocks very low, as they're expensive to maintain. Companies often cut wood in November, December and January to build roundwood stocks. That wood can be cut in May, delivered in June and paid for in July. So it's very expensive to keep that wood, and that's why stocks are kept at the lowest possible level. That's typical of our industry.

A two-billion board foot drop in the U.S. market would have a huge impact on prices. Our industry is what we call a perfect competitive industry. It's always the combined forces of supply and demand that dictate what prices will be. Removing $2 billion from the U.S. market—

[The Chair, Liberal, Terry Duguid]

Thank you, Mr. Vincent.

Mr. Simard, you have the floor for six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much.

Witnesses, I don't want to take a lot of time and I'm going to step back a bit to let you explain a proposal from the community that seems to have a broad consensus, both among worker groups and businesses.

Mr. Verreault, you already explained it a bit in response to Mr. Malette. I'd like you to focus on the benefits of the proposal you've developed. I know that you have prepared a document detailing your proposal, and I'd like you to submit it to the analysts so that it can be an integral part of our upcoming report. I'd also like to hear a bit about the BDC's proposal and, if possible, I'd like Mr. Cloutier and Mr. Vincent to add to it afterwards.

[Frédéric Verreault]

Okay, I'll submit it right after the end of the committee meeting.

I will explain how this proposal got started, which is a bit like a bottle thrown into the sea. As Mr. Cloutier, who runs Unifor, knows, four of our mills have teams, workers who are represented by Unifor. In 2025, in the industrial sector, we've come a long way from the caricature of a business leader and a union leader fighting like cats and dogs. We're united in the success of our operations and the success of our business. I read that Mr. Cloutier was concerned about the situation and we talked about it a few days later. I told him that, in an ideal world, yes, there would be a complete buyout of timber rights, but I told him what I was explaining to Mr. Malette a few moments ago. Since Mr. Cloutier saw the benefits of my idea, he took the bull by the horns with the strength of a central labour body to firmly shove that bottle into the sea, which led us to talk to you about it today. That's where the idea came from. There's very fluid co-operation between the union leader, Daniel Cloutier, and our organization.

Before I talk about the benefits, I'd like to say a few words about the loan guarantee program that was announced. Don't get me wrong: We're not criticizing this initiative and we recognize its merit. However, it's not an initiative that we'll use, because it doesn't meet our needs. Our company is healthy and doing well. We're not short of access to credit. Basically, our problem is that our revenue is being diverted. It's not a lack of access to credit. That's why, unfortunately, we have to force ourselves to temporarily close a mill, such as our mill in Témiscamingue-Béarn. We must address a very different need or issue. Yes, the program has merit, and we recognize the agile rollout. So we have no criticism of that, but it's not a tool that would enable us to keep the mills operational, like buying out the timber rights would.

What's the benefit of buying out the rights? The buyout program allows the mills to maintain day-to-day production activities and thus enables them to contribute to the tax system. It helps people keep their jobs and maintain their purchasing power, while avoiding the need for employment insurance. It helps protect the industrial structure and the thousands of subcontractors in an ecosystem that's been extremely weakened by the perfect storm, with a view to recovery. I want to point out that there will be a recovery, if not an increase in demand from the 2021-22 threshold, where there was a shortage. There are fewer raw materials in British Columbia because of an insect infestation, and in Quebec because of the 2023 wildfires. If we want to protect the ability to manufacture homes with our renewable materials, equip resistance in this context of a trade dispute that can get bogged down, and above all intervene at no cost based on the market with a tool offered by the U.S. financial community, a rights buyout initiative will make it possible to check all those boxes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much, Mr. Verreault.

I invite Mr. Cloutier to add to that.

[Daniel Cloutier]

For our part, during the pandemic, softwood lumber had some very good years: Prices were very high and production rates were high. However, since the 2023 wildfires, the situation has become much more problematic. Our members are experiencing uncertainty and temporary job losses, not really knowing when business will pick up. Many of them have used up their employment insurance, given the successive job losses.

In fact, we've seen this in all sectors. We represent contractors and forestry equipment operators, among others, who have to buy equipment that costs $3 million, $4 million or even $5 million. They have big mortgages, and that puts a huge strain on them. We represent people who work in almost single-industry communities and earn their living from their sawmills and the forest.

If the current uncertainty and job losses continue, we know full well that we'll no longer be able to ask our members to wait. Traditionally, they were used to having a few weeks off in a year. Everyone was fine with it, but now the situation is getting so out of hand that they're starting to desert the sector. If we don't find a solution quickly, we'll no longer be able to inspire hope among our members by telling them that they need to hang on. They're going to go somewhere else, and we won't be able to get them back. We may find them in other industrial settings, since we represent people in 23 industrial settings, but it will be a disaster for this sector.

Mr. Verreault's solution is excellent, as long as it keeps people working. That's the first of the conditions. If we keep people at work, they no longer need employment insurance and we no longer need—

[The Chair, Liberal, Terry Duguid]

Thank you, Mr. Cloutier.

Colleagues, we're going to start the next round.

We're going to start with Mr. Tochor, who will be sharing his five minutes with Mr. Dawson.

[Corey Tochor, Conservative, Saskatoon—University, SK]

Thank you, Chair, and thank you to our witnesses.

I'll carry on with the unfortunate situation that workers across Canada find themselves in right now. Any job loss is heartbreaking, especially for good-paying union jobs that let you buy a home and raise a family.

To our friends at Unifor, why do you think Mark Carney promised that you would get a deal by July 21?

[Daniel Cloutier]

Until we see the agreement, it remains hypothetical. We would have liked an agreement like this to be signed last year or, even better, two or three years ago. The sooner the better.

However, even if an agreement is reached by the date you mentioned, we will have to be able to get to that point. What I feel and what I understand from our members is that the elastic is fully stretched out. If something doesn't happen very quickly, the elastic will simply break, and we'll all have to bear the consequences.

[Corey Tochor, Conservative, Saskatoon—University, SK]

Thank you so much for that.

I'm going to cede my time to Mr. Dawson.

[Mike Dawson, Conservative, Miramichi—Grand Lake, NB]

My questions are for Mr. Lavigne and Mr. Cloutier from Unifor.

How many workers in the forestry industry in New Brunswick are represented by Unifor? What types of concerns would you have for those members? How many jobs do you expect to be affected by the current softwood lumber dispute if things continue under this government?

[Daniel Cloutier]

I don't know the exact number of members we represent in New Brunswick, so I will ask my colleague Mr. Lavigne to answer you. If he doesn't have the answer, we can commit to getting it to you as soon as possible.

[Simon Lavigne]

We don't have the exact number, but we can certainly estimate the number of members we have in New Brunswick at over 1,000, if not almost 2,000. I can get back to you with the exact number. Certainly, the impact is the same everywhere, be it in New Brunswick, Quebec, Ontario or British Columbia.