ROSEBURG — When it comes to getting lumber off lots, bad grades are a good thing and U.S. mills say their Canadian counterparts are flunking on purpose.

The conflict is particularly pronounced at an Oregon mill, where owner Steve Swanson says underpriced Canadian wood is forcing him to lay off employees, the Roseburg News-Review reported.

The lumber is priced by grade. Mills in British Columbia claim a pine beetle infestation is affecting their harvest, forcing them to drop the price on lumber.

While the overwhelming majority of timber in Canada is grown on public lands, U.S. mills rely mostly on private timberlands. For Swanson, that means paying $50 for a 40-foot-tall, 12-inch-diameter tree that costs a Canadian mill 25 cents, the newspaper reported.

Buying the logs accounts for most of the cost of producing lumber, he said.

“I can compete with any lumber company in the world, but I can’t compete with the government of Canada,” he said.

The Swanson Group has gone from operating six mills and having 1,200 employees in 2007 to four mills and 700 workers, Swanson said.

Softwood Lumber Agreement

The seven-year renewable Softwood Lumber Agreement, signed in 2006, replaced U.S. lumber import duties with a Canadian export tax and for some provinces a combination of quotas and a lower border tax.

The trade agreement expires in 2013, though the countries may approve a two-year extension.

The issue of undergrading logs is the subject of a trade complaint filed in international court. U.S. officials say the Canadian lumber has cost $499 million. To compensate, the U.S. wants Canadian mills to pay higher export taxes.

Canadian mills disagree, and say they produce an equivalent product with worse wood.

Poor quality wood not an exaggeration

John Allan, president of the B.C. Council of Forest Industries, said Canadians are not exaggerating the extent of the beetle damage. The infestation has damaged 800 million cubic meters of British Columbia timberland and is the reason for an increase in low-grade logs, Allan said.

“Those logs are legitimately scaled as low grade,” he said. “They’re cracked. They’re gray. They’re brittle.”

With time and skill, the poor logs can still be milled into lumber, he said. “The lumber you make from those logs is tough to process,” Allan said.

But Swanson said he doesn’t believe that Canadian mills are taking the lowest-quality logs — called pulp logs — and churning out lumber of the same quality as that produced in the U.S.

“You can’t make lumber out of a pulp log,” he said. “Our mills are as good as their mills. … It’s just not possible.”

The consequences will be dire if international arbitrators side with the Canadians, he said.

“They’re going to continue to drive us out of business,” Swanson said.