Coated Paper Controversy: Paper Case Cuts Both Ways

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.