U.S. to slap tariffs on Canadian glossy paper imports

A series of costly duties will be levied against Canadian mills that produce glossy paper following a vote Wednesday affirming the trade action by the U.S. International Trade Commission.

The trade body says the vote was part of the final phase of a countervailing duty investigation into Canadian imports of supercalendered paper, which is mainly used for magazines, catalogues, corporate brochures and advertising inserts.

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Exports of supercalendered paper from Canada to the United States were valued at $959 million last year, the Canadian government said.

The U.S. commission issued a statement saying the duties will be imposed because the U.S. paper industry has been injured by unfairly subsidized imports from Canada.

"As a result of the (commission's) determinations, the Department of Commerce will issue a countervailing duty order on imports of this product from Canada," the statement said.

Duties of 17-20%

Under a decision released last month, the U.S. Department of Commerce said it would impose duties ranging from 17.87 per cent to 20.18 per cent against Canadian mills.

The U.S. ruling affects Nova Scotia's Port Hawkesbury Paper, which has been hit with a 20.18 per cent duty. As well, Montreal-based Resolute Forest Products will have to pay a duty of 17.87 per cent. Other Canadian supercalendered mills, such as the J.D. Irving mill in New Brunswick and Catalyst Paper of British Columbia, face a duty of 18.85 per cent.

Canada's international trade minister Chrystia Freeland, issued a statement saying an appeal under the North American Free Trade Agreement will determine if the countervailing duties are being applied in accordance with the laws of the United States.

"Canada believes that the U.S. Department of Commerce erred in calculating subsidy rates on Canadian exports of supercalendered paper," the minister said. "Canada is exercising its rights under NAFTA Chapter 19 and requesting a panel review in order to defend the Canadian industry."

The U.S. trade action is the result of a petition filed by two American producers of supercalendered paper.

Mill gets power at reduced rate

The latest decision was greeted with disappointment in Nova Scotia, where the minister responsible for trade called the duties "unfair."

Michel Samson said the issue for the Cape Breton mill centres around power rates set by the province's regulator. The mill is getting electricity at a reduced rate, however Samson said U.S. officials don't understand the role of the Utility and Review Board, which is an arms-length organization independent of government.

The Nova Scotia government has said the cheaper power rates from Nova Scotia Power, a privately owned utility, don't constitute a subsidy because, under U.S. rules, subsidies must come from government entities.

"There continues to be a misunderstanding," Samson said. "We will be joining Port Hawkesbury Paper and the government of Canada in launching a NAFTA appeal process of this decision."

Samson said the province had so far spent $2.3 million fighting the ruling and he expects that figure to climb as a result of the NAFTA appeal.

"There will be future costs, yes, and the frustration with the NAFTA process is that it could take up to two or three years," he said.

NAFTA appeals filed

Port Hawkesbury Paper issued a statement saying NAFTA appeals were also filed by the Canadian government on behalf of the provinces of British Columbia, New Brunswick, Nova Scotia, Ontario and Quebec.

"While we are disappointed by the ITC's decision, we are keen to have the opportunity for our case to be heard by an impartial NAFTA panel of five Canadian and U.S. international trade legal experts," the company said, adding that it has filed a notice to start appeals at the U.S. Court of International Trade and is considering an appeal through the World Trade Organization.

"We are early in a long process, and based on the advice of our team of experienced trade legal counsel, we are very confident in our ability to reduce these duties substantially, or eliminate them entirely."

Until the appeals are concluded, all duty payments will be will be held in trust, the company said.