July 29--PORTLAND, Maine -- The U.S. Department of Commerce will start collecting duties on imports of certain Canadian paper after a long-sought ruling from the mill in Madison and Verso Paper Corp.
Both companies have mills making the same type of paper as Canadian producers that have received government subsidies.
While the two U.S. producers cheered the decision, Gov. Paul LePage and the Canadian owner of the Rumford mill raised concerns about the fairness of applying the subsidy to all Canadian producers of supercalendered paper. That grade of paper is used in color printing applications such as magazines, retail inserts, directories and coupons.
The preliminary decision from the U.S. Department of Commerce found that government subsidies to Canadian producers of that grade of paper met standards required for the federal government to impose duties.
Russ Drechsel, CEO of Madison Paper Industries, said in a prepared statement that the preliminary finding by the Commerce Department is "an important decision for the U.S. paper industry."
The mill in recent years has gone through stretches where it curtailed operations and imposed temporary layoffs that management attributed to high energy costs and subsidized imports, particularly from the Port Hawkesbury mill on Nova Scotia's Cape Breton Island.
The preliminary ruling by the Commerce Department calls for the highest level of countervailing duties on paper from the Port Hawkesbury mill, to counteract subsidy rates of 20.33 percent. The ruling puts a 2.04 percent duty on paper from Resolute Paper and an 11.19 percent duty on other exporters in Canada, including J.D. Irving Ltd. and Catalyst Paper Corp., which last year bought the Rumford mill formerly owned by NewPage.
Catalyst purchased the mill as part of a settlement with U.S. antitrust regulators, who required NewPage to sell the mill before being acquired by Verso.
Michael Croteau, president of the United Steelworkers Local 36 union at the Madison mill, said in a prepared statement that the Commerce Department ruling will help preserve jobs at the Madison mill, which has about 220 workers.
The Madison mill -- a joint venture between Northern SC Paper Corp. and the U.S. subsidiary of Finland-based UPM-Kymmene Oyj -- and Memphis-based Verso Paper Corp. formed The Coalition for Fair Paper Imports to petition for the imposition of duties on Canadian producers.
The companies together own all of the U.S. capacity for making that grade of paper, according to the Commerce Department's initial review.
"We don't want to see more lost jobs in this country caused by unfair imports, and this preliminary decision is a good step in preventing that," Croteau said.
But LePage raised concern that the Commerce Department's application of the subsidies could affect other paper industry jobs in Maine that are supported by Irving and Catalyst, both based in Canada.
LePage, in a July 17 letter to White House economic adviser Jeffrey Zients, wrote that the Commerce Department was wrong to use subsidy determinations for the Port Hawkesbury mill and Resolute Paper as a basis for subsidy rates on Irving and Catalyst.
"This is extremely unfair, unreasonable and contrary to the remedial purpose of the countervailing duty law," LePage wrote.
The decision, he wrote, puts the jobs of 1,200 Maine employees of Catalyst and Rumford at risk.
The Commerce Department noted that it did not consider responses from Catalyst or Irving in the preliminary decision, issued late Monday.
Catalyst also criticized the decision, on Wednesday calling for an expedited review of the duty imposition case that is due for a final determination by the end of the year.
"Catalyst rejects the allegation that we've received government subsidies, and we're confident a full and fair investigation would confirm this," Joe Nemeth, Catalyst's president and CEO, said in a prepared statement. "We will continue to work with the Canadian federal and provincial governments, and we will seek an expedited review of our case by the [Commerce Department]."
Meanwhile, Republican U.S. Rep. Bruce Poliquin hailed the Commerce Department's decision Wednesday.
"This is terrific news for the hardworking men and women employed by Madison Paper," Poliquin said. "Maine is home to the most skilled paper makers in the world. We can compete with anybody, anywhere, and win as long as the playing field is level."
The subsidy rates for Irving and Catalyst were set at an average of the rates for Resolute and the Port Hawkesbury mill. Port Hawkesbury has been the primary focus of complaints from the petitioning U.S. papermakers as the Nova Scotia government spent to preserve the mill during a shutdown and later provided a $125 million incentive package to restart it.
In their formal petition to U.S. trade officials, Verso and Madison alleged prices for Canadian imports were as much as 5.2 percent lower in the last half of 2014 and that subsidies have depressed U.S. prices and reduced their revenue.
The preliminary findings will be subject to further review, and final imposition of duties on supercalendered paper will need further approvals from the International Trade Administration and the International Trade Commission.
The International Trade Administration is due to issue a second ruling on the duties in October and a final order in December.
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