Are You Protected from Canadian Lumber Tariff & Other Future Material Cost Increases?

When the 20% tariff on Canadian softwood lumber was announced earlier this spring by the Trump Administration non-construction folks finally started realizing lumber prices were rising. In February we started warning our members to make sure they had an escalation clause in their customer contracts that would allow them to be adjusted for sudden spikes in material costs (whether for lumber, glass, or any other material). Are you using one?

Thirty percent of all softwood lumber used in residential construction is imported from Canada and will, for the time being, be subject to this 20% tariff. A typical single-family home uses about 15,000 board feet of lumber and the 20 percent tariff could add about $3,600 to the cost of that home. That’s in addition to the 22% spike in lumber prices we saw in the first quarter of this year due to uncertainty about

the renewal of the trade agreement on Canadian import of softwood lumber which expired at the end of 2016.

HBAM’s legal counsel recommends that the language found below be used. Obviously, this language may not fit every circumstance or customer agreement you may have or develop in the future and we strongly recommend that you seek your own legal advice if you have any questions about how to address this issue. Most importantly, however, we want to make sure you are protecting yourselves from having to eat these cost increases.

Material Cost Increases

The Contract Amount is based on the current price for materials from local suppliers as of the date of execution of this Contract. If a price increase in the materials set forth below occurs after the date of execution of this Contract, Owner agrees to pay the amount of the difference in cost to the Builder.

Builder agrees to use reasonable efforts to seek the best available local price on comparable terms and to identify substitute materials which are suitable and not as volatile in price. Builder shall provide written notice to Owner stating the increased cost, the

material, and the supplier, and to provide or maintain for inspection the invoices or bills of sale for the materials.

Material Current Price per (Unit) Date Supplier

All increases in, and all new taxes, excises, or other governmental charges hereafter imposed on the production, sale or transportation of the material shall become part of the price payable by Owner. l