May 5, 2017 / 8:04 PM / in 7 months

UPDATE 2-Canada hits back in lumber dispute, threatens action against U.S.

(Recasts with Canada considering duties on Oregon exports, reaction)

By David Ljunggren

OTTAWA, May 5 (Reuters) - Canada struck back at the United States over a lumber dispute on Friday, threatening to ban shipments of U.S. thermal coal from Pacific ports and suggesting sanctions against products from Oregon.

Liberal Prime Minister Justin Trudeau says his government will defend the timber industry against what he calls an unfair U.S. decision last month to impose tariffs on exports of softwood lumber.

Trudeau said Ottawa would study whether to stop U.S. firms from shipping thermal coal via the Pacific province of British Columbia. Provincial Premier Christy Clark asked for the ban in response to the U.S. tariffs.

Canada is also considering duties on exports from Oregon such as wine, flooring and plywood, said a source close to the matter, citing Oregon Democratic Senator Ron Wyden’s prominent role in pressing for the lumber tariffs.

Analysts said Cloud Peak Energy Inc would be the biggest coal producer affected by a British Columbia ban or levy. Coal is railed to those ports by Burlington Northern Santa Fe Corp, owned by Berkshire Hathaway Inc.

The dispute threatens to cloud talks on updating the North American Free Trade Agreement, which are set to start this year. NAFTA groups Canada, the United States and Mexico.

Washington’s imposition of tariffs kicked off the fifth formal bilateral dispute over timber in less than 40 years. U.S. producers say Canadian lumber is unfairly subsidized, a charge Canada has successfully fought in trade tribunals.

British Columbia is a major lumber exporter and says the duties will devastate its industry.

Clark, who faces a May 9 election, vows to apply a levy on thermal coal exports if she retains power and Trudeau does not agree to a ban. A shortage of port capacity means some U.S. coal firms rely on Canada.

“The government of Canada is considering this request carefully and seriously,” Trudeau said.

A White House official did not immediately respond to a request for comment.

The United States exported 1.2 million short tons of thermal coal into Canada in 2016, according to the U.S. Energy Information Administration. It is unclear how much of that coal was later sent to Asia through British Columbia ports. (Additional reporting by Richard Valdmanis and Valerie Volcovici in Washington; Editing by James Dalgleish and Lisa Shumaker)

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