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APP Americas Previews Testimony for Hearing on the Coated Paper Trade Case

September 16, 2010

- Domestic industry production and shipments closely tracked domestic consumption and actually fell less than the decline in overall consumption.

• The subject imports in this case largely compete with other imports, not domestically produced products.

-The facts show a one-to-one substitution. Subject imports simply replace imports from other sources.

• Imports from China and Indonesia did not cause paper prices to decline in 2009. Prices declined because of the following economic reasons:

- Demand for coated paper collapsed during the recession.

- Purchasers relied more on existing inventory, further reducing new orders.

- Raw materials costs for coated paper fell sharply.

- Domestic producers passed the benefits of “black liquor” tax subsidies on to customers through lower prices.

- Domestic producers lowered prices in a fierce competition to win a larger share of the shrinking market.

• The domestic industry strategically restructured during the investigation period (2007-2009), shutting down some older, less efficient mills.

- These closures were driven by trends in the much larger coated paper web roll market, which account for most of the production at these mills.

- Small declines in domestic coated sheet industry employment were the result of these closures, not any effect of subject imports.

- Domestic industry claims that these closures are good for the industry. Domestic producers claim they can produce as much or more coated paper at existing facilities and production capacity actually increased during the investigation period.

• Domestic prices remained low in the first half of 2010 because of the above cited economic and intra-industry domestic producer competition, even though coated paper sheets imported from China and Indonesia left the market because of preliminary duties imposed by the U.S. Department of Commerce.

• There is no evidence that there will be an imminent increase in subject imports that will threaten the domestic industry with future material harm.

- Import volumes were very stable from 2007 to 2009 and have dropped since.

- Chinese suppliers lost major U.S. accounts before the petition was filed and replacing that volume will be difficult.

- More than 90 percent of subject shipments from China and Indonesia during the case investigation period (2007-2009) went to markets other than the United States.

- Chinese and Indonesian producers do not have significant excess capacity.

- The rapidly growing Chinese market will absorb a substantial portion of future increased production.

- As subject imports did not affect domestic prices levels in the past, there is no basis to assume they will in the future.

- The largest subject importers cannot meet growing demands for certain environmental and sustainability standards, particularly those of the Forest Stewardship Council, thus limiting their U.S. market growth potential.

- Historical patterns indicate that any increases in subject imports will displace nonsubject imports in a direct and complete import substitution pattern.

Note: USITC is scheduled to vote on this case on October 19. Only an affirmative decision that the domestic industry has been harmed by the subject imports would lead to the imposition of a duty order.


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