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Nova Scotia Premier Stephen McNeil says trade officials don’t understand the mill’s power rates were negotiated between two private companies and approved independently by the Nova Scotia Utility and Review Board, rather than the province itself.

Darren Pittman/THE CANADIAN PRESS

A Canadian paper mill that relies on exports to the United States to maintain more than 330 jobs at its Cape Breton mill says it will fight hard against a decision by the U.S. government to slap large tariffs onto its coated paper products.

Port Hawkesbury Paper said Wednesday the interim duty of 20.33 per cent announced by the U.S. Department of Commerce is unfair and without merit.

"We are very confident in our ability to reduce these interim duties substantially, or eliminate them entirely, as part of the process," said Marc Dube, development manager of Port Hawkesbury Paper.

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The J.D. Irving mill in New Brunswick and Catalyst Paper of British Columbia are also facing an 11.19-per-cent duty under the U.S. decision, while Resolute paper is facing a 2-per-cent tariff.

The trade action is the result of a petition filed by two U.S. producers of supercalendered paper that say the Canadian paper goods are unfairly subsidized.

The Cape Breton mill received a rescue package from the former NDP government in fall, 2012, valued at about $124.5-million, to help it reopen after private investor Ron Stern purchased its assets during bankruptcy proceedings.

That assistance came on top of $36.8-million the province spent keeping the mill in usable condition while a new buyer was sought.

Since then the Nova Scotia factory has returned to profitability as falling fossil fuel costs and a plummeting dollar have helped it achieve rising sales in the United States, where it sends about 90 per cent of its paper for use in glossy magazines and calendars.

Mr. Dube says the rescue package shouldn't be considered a subsidy under free trade rules because a portion was in loans that can still be repaid, and about half of the funds came in return for the company's sale of land to the province.

The U.S. Department of Commerce website provided little detail on why the decision was made, but says officials with the agency will visit the Canadian mill prior to a final decision expected in mid-October.

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Mr. Dube said about three-quarters of the 20-per-cent duty is because the Americans determined an electricity deal struck between Port Hawkesbury Paper and Nova Scotia Power Inc. is a subsidy on power rates.

Nova Scotia Premier Stephen McNeil told reporters his government will do all it can to convince the Americans that's factually incorrect.

He said the trade officials don't understand the mill's power rates were negotiated between two private companies and approved independently by the Nova Scotia Utility and Review Board, a regulatory agency, rather than the province itself.

"It's ironic they're talking about the power rates in the province of Nova Scotia considering we have the highest power rates in the country," he said.

Steve Thomson, the B.C. Minister of Forests, Lands and Natural Resources, said his province is also confident its programs don't break international trade rules.

He says Catalyst was not given the opportunity to respond, and was assigned an average subsidy duty determined for two other Canadian exporters.

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"Catalyst was not given the opportunity of due process," he said in a news release.

International Trade Minister Ed Fast declined an interview.

He issued an e-mail statement saying he is disappointed by the ruling and considers it unwarranted.

"Canada is also concerned that the U.S. Department of Commerce is not conducting a thorough and complete review. We call on the U.S. Department of Commerce to review all of the facts in this matter," said the e-mail.

The U.S. agency says it will announce its decision on the duty by Oct. 14. The matter could then go to the U.S. International Trade Commission for additional hearings, with a decision made by Dec. 10.

Mr. Dube said his company doesn't plan any layoffs or changes in response to the interim duty, which is held in trust until the proceedings are complete.

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"It's business as usual," he said.

The manager estimated that the U.S. government will be collecting about $4-million monthly in duties as the trade action continues.

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