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Paper Tariffs — Will Commerce Be Swayed?

June 2007 By Erik Cagle
Senior Editor
Rising postal rates. Ever-increasing energy prices. Add the cost of obtaining coated free sheet (CFS) paper to the list of runaway costs being experienced by the printing industry.

After socking China and Indonesia with 20-plus percent countervailing duties (CVD) and assessing a smaller tariff (1.76 percent) on South Korea in late March, the U.S. Department of Commerce stood poised to release its final ruling this month, though the ultimate word on the CVDs could come later in 2007. Barring an 11th hour reversal by Commerce, the U.S. paper manufacturing sector’s gain will be the U.S. printer’s loss.

Hardest hit will be West Coast printers, where up to 90 percent of the CFS market is supplied with Asian paper, according to John Maine, vice president of RISI, which publishes titles in the pulp and paper industry. Maine notes that Chinese and Indonesian suppliers shipped 360,000 tons of CFS to the United States in 2006, and believes that volume could drop off by 50,000 to 100,000 tons should the tariffs remain unchanged.

More CFS Price Increases

While Korea will help fill the void left by the reduced volume, Maine cautions that a second price increase in 2007 for CFS was imminent, which will boost prices by about 5 percent—this in addition to the $20 transaction fee instituted with the February price increase. The potential also exists that an anti-dumping duty (ADD), slated to be announced at the end of last month, had the potential to impact the Korean suppliers more so than the CVDs.

Fortunately for printers, Maine says there are “buffering factors” that could help prevent prices from escalating too sharply.

“The Chinese government reinstated the export tax rebate, or in some cases, completely eliminated the value-added tax that was partially rebated,” he notes. “Korean and European suppliers will fill in some of the supply gap. And North American producers will shift capacity to sheets, when possible, and will eliminate dabbling in the uncoated offset market if free sheet becomes tight.”

U.S. printers and foreign paper suppliers find themselves in the odd position of fighting for the same cause. Michael Makin, president and CEO of PIA/GATF, sent a letter opposing the CVDs to members of Congress, stressing that given the uptick in postal rates and energy costs, the printing industry could hardly reconcile the 5 percent rise in paper costs. Further, Makin pointed out that Canadian printers—out of arm’s reach from the impact of CVDs while firmly within the NAFTA free trade zone (not to mention just a geographically short distance away)—could have a devastating impact from a competitive standpoint.
 

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