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U.S. tariffs could hit Corner Brook Pulp and Paper

The Corner Brook Pulp and Paper mill.
The Corner Brook Pulp and Paper mill. - SaltWire Network

Watch started for preliminary decision on trade challenge

The Government of Newfoundland and Labrador is anxiously awaiting word from the U.S. Department of Commerce on possible new tariffs for Canadian newsprint.

The provincial government indicated a decision might come Tuesday, but as of 7:30 p.m. there had been no word. The premier’s office is committed to an immediate response when a decision is made public.

The fear is the tariffs would challenge the finances of the mill in western Newfoundland — the province’s only remaining paper mill. And exactly how the company and province would respond remains unclear.

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“We’re going to do everything we can to help the forestry industry be viable and sustainable. That will include a continuing, working relationship with Corner Brook Pulp and Paper,” Premier Dwight Ball told The Telegram.

Asked if there has been any discussion of a limit to support for the mill, he said the issue is not just the mill. The mill in Corner Brook is a base for the province’s entire forestry industry and is tied to 2,500 direct and indirect jobs.

“We’re not going to give up on the forestry industry in the province,” Ball said.

Exports to the United States amount to about half of the total production at Corner Brook Pulp and Paper. The company directly employs about 500 people.

 

Tariffs on tap?

New tariffs are a possibility for all of Canada’s uncoated groundwood paper products — a category featuring newsprint, as opposed to high-gloss paper or lumber.

If approved, the added charge at the border would come into effect just five days following a decision date, according to provincial government officials.

The possibility began in August 2017, when the North Pacific Paper Co. (Norpac) of Longview, Wash., petitioned the U.S. Department of Commerce, asking for anti-dumping and countervailing duties to be imposed on newsprint and related products coming into the U.S. from Canada.

Countervailing duties are applied to essentially level the playing field when products coming in from another country are subsidized by a government. Anti-dumping is meant to address products being sold at a cheaper rate in the U.S. than they would be domestically.

The status quo, according to the complaint, involves American newsprint manufacturers trying to compete with products coming in from Canada, when Canadian producers are receiving grants, loans, tax breaks, raw material at below-market cost and cheap, subsidized electricity.

 

U.S. investigations

There are actually two separate investigations undertaken in 2017 by the U.S. Department of Commerce in relation to the producer’s complaint.

One is specific to anti-dumping and the second —where the U.S. is doing a deep-dive on Corner Brook Pulp and Paper, with Kruger and the province required to respond to inquiries — is on countervailing.

The province provided Corner Brook Pulp and Paper with a $110-million loan in 2014, and there was a deal in 2017 to help support the pension plan. These and every other interaction between the company and government at the provincial and federal level from the last 13 years was part of the investigation that could lead to tariffs.

Corner Brook Pulp and Paper was evaluated along with other Kruger operations in Quebec. Kruger is not the only Canadian exporter involved, with Resolute Forest Products and Catalyst Paper Corp. also asked to supply detailed information in response to questionnaires.

All Canadian exporters will be hit if tariffs are applied.

The U.S. Department of Commerce stated in August imports of uncoated groundwood paper products into the U.S. from Canada had a total estimated value of $1.27 billion in 2016.

The investigation undertaken on the U.S. side is not unprecedented. Between Jan. 20, 2017 and Aug. 29, 2017, the U.S. Department of Commerce started 58 different anti-dumping/countervailing investigations. At the time the investigations involving newsprint were launched, there were 407 standing orders for the collection of import duties.

 

Provincial response

The provincial government’s response to the ongoing investigation has come in lock-step with Kruger, and has been co-ordinated by the deputy ministers’ steering committee established by the Liberal government to deal with developing U.S. trade issues, including anything arising in ongoing NAFTA negotiations.

A legal team of both Canadian and U.S. lawyers was hired by the province to support work on the newsprint case. They were teamed with a select group of bureaucrats, specifically handling responses to U.S. investigator inquiries.

The staff has worked closely with Kruger, while reporting to the deputy ministerial committee.

Even before the decision was issued Tuesday, the provincial Progressive Conservatives were asking if the Liberal government was doing everything it could to protect jobs in Newfoundland and Labrador in the face of U.S. protectionism.

“We are concerned with the Ball government’s ability to convince the Trudeau Liberals to make this province’s economy a national priority,” Intergovernmental Affairs critic Keith Hutchings said in a statement.

The premier told The Telegram he was disappointed with the comments. He said the province is best served by opposing any damaging tariffs with a clear, unified voice.

ashley.fitzpatrick@thetelegram.com

 

Progress of the investigation in 2017

Aug. 9 — North Pacific Paper Co. (NORPAC) calls on the Department of Commerce to conduct an anti-dumping/countervailing investigation into uncoated groundwood paper imported from Canada (a category covering newsprint)

Aug. 30 — U.S. Department of Commerce begins investigation

https://www.commerce.gov/news/press-releases/2017/08/us-department-commerce-initiates-antidumping-duty-and-countervailing

Sept. 22 — Kruger is named a mandatory respondent in the countervailing portion, along with Resolute Forest Products and Catalyst Paper Corp.

Nov. 10 — The Government of Newfoundland and Labrador submits an initial response to questionnaire as part of the investigation

Dec. 22 — The Government of Newfoundland and Labrador submits response to Part 1 of a supplemental questionnaire

Jan. 5 (2018) — The Government of Newfoundland and Labrador submits response to Part 2 of a supplemental questionnaire, meeting U.S. deadline

 

Going Forward

• The imminent tariff decision is a preliminary decision and applies only to countervailing investigation. Another decision, based on anti-dumping, is expected in March.

• In July, the Department of Commerce will make a final decision on both the anti-dumping and countervailing findings and any associated tariffs applied.

  • In August, the U.S. Department of Commerce will provide the case to the U.S.-based, quasi-judicial International Trade Commission. The ITC will review the findings and make a final determination on any injury resulting from the existence of dumping or government subsidy of exports entering the U.S. If there is a finding of injury, the tariffs are maintained. If not, the tariffs will be removed.

• The federal government will, should the tariffs stand, have the ability to appeal.

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