J.D. Irving Ltd says the provincial government needs to persuade Washington the wood supply in New Brunswick is operating as a free market.
Irving is New Brunswick's biggest player in the softwood lumber market and a major exporter to the United States.
The company has been hit with a 9.9 per cent anti-dumping duty in the final determination of the U.S. Department of Commerce. This is up from the preliminary duty of 3.34 per cent the department announced earlier this year for JDI.
Other New Brunswick companies will face a much higher duty of 20.8 per cent.
JDI might be forced to cut
On Friday, the vice-president of JDI's sawmills division said the Commerce Department's ruling could lead to spending cutbacks.
"When your revenue is cut by 10 per cent, capital projects will be reviewed," said Jerome Pelletier.
"For the short term, our intention is to keep operating our mills the same as we are operating today."
Pelletier said U.S. Commerce authorities were reacting to reports there is "market distortion," when it comes to wood sales from private woodlots in New Brunswick.
One of the sources cited in the U.S. is New Brunswick Auditor General Kim MacPherson.
Accused province of ignoring law
In her 2015 report, MacPherson said, among other things, the Department of Natural Resources is not complying with the province's Crown Lands and Forests Act.
MacPherson said the department has no clear strategy when it comes to the private wood supply and is supposed to ensure the amount of wood taken from private land is proportionate to the timber cut on Crown land.
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She said the provincial government has failed to adhere to that legislative requirement.
"They have not planned for, monitored, or reported on proportional supply since at least 2002," the report said.
Pelletier claimed the auditor general's report has been seized on by "stakeholders" in the U.S.
"We strongly believe those allegations are false allegations," said Pelletier.
Woodlot group disagrees with JDI
He is calling on the provincial government to review findings in the auditor general's 2015 and 2008 reports and to "make sure the information, the facts are being published to explain that we have a free market here in New Brunswick."
But the head of the Federation of Private Woodlot owners predicts that strategy would be disastrous.
Rick Doucett said the auditor general did a good job identifying problems in the marketing of wood in New Brunswick but instead of addressing those issues the government chose to ignore the report.
"You knew the U.S. lumber coalition had that evidence," Doucett said. "Now you're going to try to discredit your own auditor general in order to make your case for exemption?"
Doucett said wood producers and woodlot owners are already paying the price for the duties in the form of low prices for their wood even while North American lumber prices steadily rise.
Premier promises litigation
He said some of the province's smaller mills could be forced to close if there's an increase in the exchange rate or a drop in lumber prices.
"I think New Brunswick has to reflect as a province on why did [this] happen?" Doucett said. "That's a conversation that has to take place."
In the legislature Friday, Premier Brian Gallant promised the province would fight the Commerce Department's ruling.
"You can be certain we will go to litigation," Gallant said. "You can be certain we will win because the facts are on our side."