The United States has put countervailing duties on fresh mushrooms grown in Canada following a U.S. Department of Commerce investigation which the Canadian industry has called “deeply flawed.”

The change, posted in the federal register on Monday, will slap most fresh mushrooms with tariffs of 2.84 per cent.

Two companies received separate duties: Champ’s Fresh Farms Inc. was hit with a tariff rate of 1.62 per cent and Farmers’ Fresh Mushrooms Inc. was hit with a tariff rate of 4.97 per cent.

Separate anti-dumping duties are expected to be added later this month.

The preliminary Commerce investigation said Canadian mushroom producers received unfair government subsidies.

Mushrooms Canada CEO Ryan Koeslag said last week that Canadian growers haven’t engaged in unfair trade practices and producers are not receiving special treatment.

Move ‘contrary to common sense’: Industry association

In a news release, Koeslag said the Commerce department’s justification is linked to mainstream agricultural tax treatment, including provincial sales tax exemptions available to farmers generally.

“Treating broad-based agricultural tax measures as unfair subsidies is contrary to common sense and unfairly penalizes Canadian mushroom growers for participating in programs available across the agricultural sector in any number of countries,” Koeslag said.

Mushrooms Canada said under U.S. trade law, a subsidy must meet specific legal requirements before it can be countervailed and the group does not believe those requirements have been met.

“It is difficult to reconcile Commerce’s preliminary approach with the fact that comparable agricultural tax treatment exists in the United States,” Koeslag said.

The Commerce department launched the investigation in January after receiving a complaint from the U.S.-based Fresh Mushrooms Fair Trade Coalition. The group said tax exemptions meant Canadian mushrooms were unfairly subsidized and claimed Canadian mushroom imports had grown in recent years while domestic mushroom consumption remained relatively flat.

Giorgio Mushroom Co., which is part of the U.S. coalition, said in a news release Monday that the duties are an important step.

“For years, American mushroom growers have faced enormous pressure from unfairly subsidized mushroom imports that distorted competition and threatened domestic production,” said Giorgio Mushroom CEO Mark Currie.

William Pellerin, a partner in international trade at McMillan LLP, said the Commerce investigation would not look at the specific agriculture subsidies that U.S. producers might be receiving — even if it is similar to what Canadian companies get.

Pellerin, who is not involved in the mushroom case, noted the preliminary subsidy amount is extremely low but the Commerce investigation into Canadian mushrooms is still ongoing.

When Canadians think of countervailing and anti-dumping duties they often look to lumber tariffs. Those tariffs, which predated the Trump administration, have also increased in the last year.

Pellerin said Commerce investigations like the one around fresh mushrooms generally are not U.S. administration-led tariffs.

The Canadian mushroom industry would be able to push back on the countervailing duties under the appeal mechanism through the Canada-U.S.-Mexico Agreement on trade, better known as CUSMA.

Countervailing and anti-dumping duties are separate from U.S. President Donald Trump’s massive tariff agenda. Trump has used different tools to hit countries around the world with tariffs and Canada is also being hammered by his sector-specific duties on things like steel, aluminum, automobiles and cabinetry.

But Trump’s push to realign global trade through tariffs may see more agricultural industries in the United States follow the mushroom coalitions’ lead and push for Commerce investigations, Pellerin said.

“I think that’s going to be not just the United States,” Pellerin said. “We are seeing them in Canada vastly increase also where Canadian associations are bringing cases against agricultural products from around the world.”