Coated Paper Controversy: Paper Case Cuts Both Ways

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LATE LAST September, NewPage Corp., Sappi Fine Paper
 North America and Appleton Coated LLC, along with the United Steel Workers (USW), filed a petition with the Department of Commerce (DOC) and the International Trade Commission (ITC) charging Indonesia and China with illegal subsidies and dumping during 2008 and 2009, which subsequently caused “material injury” to the U.S. paper industry.

The petition relates to “certain coated paper,” i.e., coated paper “suitable for high-quality print graphics using sheetfed presses,” whether containing groundwood fiber or not. If the petitioners are successful, the government will impose duties on these imports.

The issue becomes emotional. Certainly, individuals whose business is affected either favorably or unfavorably by the imports have strong opinions. Others I’ve spoken with, including economists and other industry people representing printers, merchants and mills, have also expressed strong opinions on both sides. Some feel strongly that there should be unrestricted free trade, and that tariffs in general are disruptive. Conversely, others feel that we have lost our manufacturing base to subsidized imports, and want a level playing field. Major trade associations, including Printing Industries of America (PIA), NPTA and AF&PA, have all remained neutral, basically saying that they support free and fair trade.

Countervailing duties (CVD) are the remedy for exports to the United States that have benefitted from illegal subsidies. In this case, the petitioners claim that the subsidies include preferential lending and tax credits, as well as input subsidies concerning the cost of timber, papermaking chemicals, land and electricity. The petitioners also claim that China’s currency is undervalued, which also provides a subsidy.

On March 2, the DOC announced a preliminary finding that subsidies have occurred, and ordered U.S. customs to collect duties ranging from 3.92 percent to 17.48 percent, pending final determinations.

Anti-dumping duties (ADD) are the remedy for dumping, which is defined as selling at less than fair value (LTFV). This normally means that a company is selling in the U.S. at a price below the price it sells at in its home market, but can also mean selling below cost or selling below the price it sells at in other export markets. It is up to the DOC to determine if dumping has occurred. On April 29, the DOC was scheduled to announce preliminary findings on anti-dumping.

Jack Miller is founder and Principal Consultant at Market-Intell LLC, offering Need to Know™ market intelligence in paper, print and packaging. Previously, he was senior consultant, North America, with Pira International.

Known as the Paper Guru, Jack is the former director of Market Intelligence with Domtar, where he also held positions as regional sales manager, territory sales manager and product manager. He has presented at On Demand, RISI’s Global Outlook, PRIMIR, SustainCom World and at various IntertechPira conferences. Jack has written for Printing Impressions, Canadian Printer, Paper 360, PaperTree Letter and Package Printing, along with publishing a monthly e-newsletter, MarketIntellibits.

He holds a Bachelor of Arts degree in Economics from The College of the Holy Cross and has done graduate studies in Statistics and Finance.

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  • http://BarryJasonSchneider Barry Jason Schneider

    It appears to me that the real issue is w/Asian paper’s successful entry in this market, having leveled off at 14% in a decade’s time. But the specific case in question–of material harm caused in 2008 & 2009–is not beyond reasonable doubt. The Black Liquor deal, the economic decline, the shifts of imports, withdrawal and market competitors, and pricing controls within the power of the domestic companies, such as NewPage, do not make for a defenseless, unsubsidized industry at home. Therefore, the the anti-dumping duties need to be seriously reduced, if not entirely thrown out, as happened years ago.

    The limits of this case brought against APP, and the various guiding & protective laws in place (to protect from dumping, and to encourage free market) should not have brought the DOC to their April 29th findings, and should be seriously reconsidered prior to July’s final determination.

  • http://LarryEdwards Larry Edwards

    The way I see it is, whether the U.S. paper manufactures like it or not the paper market is now a global marketplace. You need to ask yourself why didn’t the U.S. manufacturers reinvest their capital in new technologies and in paper machines that are much larger in size and more efficient in order to reduce their costs? Compare the amount of paper exported by U.S. manufactures and you will find they are no longer competitive.

    U.S. paper manufactures can only blame themselves for their lack of vision.

    Printers in our country will be also competing more on a global scale as well as competing against alternate electronic methods of communication. If print prices begin to rise rapidly, American companies will need to evaluate their marketing dollars and decide where they can receive the biggest bang for the buck.

    It has been proven that isolation has never worked in the past. So then, why suddenly will it work now?

    NewPage received over $300 million from the black liquor tax credits to lower their costs. They turned around and undercut APP pricing to Unisource Paper and stole $400 million of private label coated paper business away from APP. They also did the same and stole about $300 million of private label business APP was supplying to Spicers Paper. So then, who has harmed who?

    I still think every product needs to compete on a global scale. I also believe in survival of the fittest. Perhaps American manufactures will wake up and will government officials realize they need to tax less and allow for American companies to compete globally. There are other ways to raise revenues. A flat income tax could certainly be a much better way to do so.