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Impact of newsprint tariffs being exaggerated by Canadian critics, U.S. mill says

A Washington State newsprint mill that sparked a cross-border trade battle has fired back at Canadian paper producers, saying they are exaggerating the impact of U.S. tariffs.

North Pacific Paper Co., also known as Norpac, lodged a complaint with the U.S. Department of Commerce in August, 2017, alleging unfair competition from Canadian producers of uncoated groundwood paper, including newsprint and book-grade paper. It cited advantages such as discounted electricity rates and financial assistance from governments.

Earlier this year, the Commerce Department imposed preliminary duties on Canadian newsprint in response.

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A winder crewman inspects a roll of newsprint at Resolute Forest Products in Gatineau on Jan. 12, 2018. The U.S. Commerce Department levied a final duty of 9.8 per cent on Resolute last week.

Christinne Muschi/Reuters

Last week, in its final determination, the department reduced those tariffs on most Canadian newsprint producers. But the U.S. International Trade Commission (ITC), which is also investigating Norpac’s complaint, has the power to cancel those duties.

Canadian producers passed most or all of the tariffs onto customers in the United States, where the newspaper industry warns higher newsprint costs have created financial hardships, especially for publications in small communities.

Norpac, in a filing to the ITC last week, slams Canadian producers. “They have made dire predictions of the ruin of small town and rural newspapers, with the heaviest negative impact on the elderly, when the record demonstrates that the economic impact of duties will be very small,” Norpac argues. “Newspapers have been able to increase their subscription prices significantly over time, independent of changes in standard newsprint prices/costs.”

The ITC is slated to vote on Aug. 29 on whether to uphold its finding last year that the U.S. groundwood industry is being injured by Canadian imports.

Related: U.S. trims tariffs for most Canadian newsprint producers

Newsprint-tariffs ruling key in Canada-U.S. trade war

U.S. newsprint producer urges trade commission to uphold tariffs

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The Commerce Department focused its investigations on three Canadian companies, which it refers to as mandatory respondents: Catalyst Paper Corp. of Richmond, B.C., and two Montreal-based firms, Resolute Forest Products Inc. and Kruger Inc.

“Respondents have vilified Norpac and its owner, One Rock Capital Partners, for seeking relief, asserting that One Rock is a greedy ‘hedge fund’ seeking only to cover a poor investment decision,” Norpac’s filing to the ITC said. “One Rock, however, is a private-equity firm with a long track record of investing in and providing support and expertise to U.S. manufacturing companies.”

Members of the U.S. Congress from a wide array of states have said the U.S. tariffs benefit a single mill, Norpac, while hurting hundreds of newspapers in the United States.

“Significant political pressure has been brought to bear,” Norpac said in its filing to the ITC.

Last week, the Commerce Department imposed final duties of 20.26 per cent on Catalyst, 9.81 per cent on Resolute, 9.53 per cent on Kruger and 8.54 per cent on most other Canadian producers. Resolute’s duties rose, but tariffs for other Canadian producers are lower than in the department’s preliminary ruling.

In interviews with The Globe and Mail, the chief executives of two Canadian producers rejected Norpac’s arguments. Catalyst CEO Ned Dwyer and Resolute CEO Yves Laflamme are urging the ITC to reverse course, in a move that would lead to the cancellation of the tariffs.

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Mr. Dwyer and Mr. Laflamme stressed that a bipartisan group of U.S. politicians also oppose the tariffs.

“This has been very challenging for the U.S. newspaper industry and a lot of the commercial printing industry as well,” Mr. Dwyer said. “Our concern is that as these things take time to get sorted out, there will be a permanent destruction in demand for these paper products.”

Mr. Dwyer said Canada has a long history of supplying newsprint to U.S. newspapers, recently accounting for about 65 per cent of total demand south of the border.

“It’s a consistent drumbeat. Representatives of congressional districts and states all around the U.S. are in opposition to newsprint tariffs,” he said.

Within the United States, Norpac said it recently held 47 per cent of the groundwood production capacity, with its mill in Longview, Wash.

Resolute is the second-largest producer of U.S. newsprint. “It’s pretty unique, having a bunch of senators and representatives from Congress in front of the ITC against those duties,” Mr. Laflamme said. “Is it a possibility that the ITC is going to make a different decision based on that? That is what we hope, but I don’t know."

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