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Catalyst’s Crofton mill is the last of the company’s three remaining plants to make newsprint.CATALYST PAPER

The U.S. Department of Commerce has decided to impose initial duties of up to 9.93 per cent against Canadian newsprint sold south of the border.

The Commerce Department made its ruling late Tuesday on countervailing duties, saying Canadian producers of uncoated groundwood paper such as newsprint are receiving subsidies.

A second decision is scheduled by March 7, when the Commerce Department will rule on whether to slap anti-dumping tariffs on Canadian shipments of groundwood into the United States.

U.S. newspaper publishers have been warning that a combination of countervailing and anti-dumping duties will have a devastating impact on an industry already struggling to cope as readers increasingly make the transition from printed products to digital devices.

A wide range of U.S. senators and members of the House of Representatives – Republicans and Democrats – have sided with American newspaper publishers and printers.

But groundwood from Canada is subsidized and being dumped at below market value, according to U.S. manufacturer North Pacific Paper Co., also known as Norpac. The company, which is based in Longview, Wash., complained to the Commerce Department in August that U.S. paper makers are being hurt by Canadian groundwood.

The three mandatory respondents in the countervailing investigation into subsidies in Canada are Montreal-based firms, Kruger Inc. and Resolute Forest Products Inc.; and Catalyst Paper Corp. of Richmond, B.C.

The Commerce Department imposed a preliminary countervailing tariff of 9.93 per cent on Kruger, 6.09 per cent on Catalyst, 4.42 per cent on Resolute, 0.65 per cent on White Birch Paper Canada Co. and a weighted average of 6.53 per cent against other Canadian paper mills. The tariffs are expected to take effect within one week.

Norpac, owned by hedge fund One Rock Capital Partners LLC of New York, said subsidies in Canada include breaks on electricity rates and unfair financial assistance.

"Norpac has a world-class facility that can compete with anyone around the world, but we need to be able to compete on a level playing field. This decision will protect American jobs in Washington, Mississippi and Georgia, and may even serve to create jobs in the U.S. as idled paper machines restart," Norpac chief executive officer Craig Anneberg said in a statement Tuesday night. "While we understand the concerns recently surfaced by some newspaper publishers, we strongly disagree with the notion that their industry requires low-priced, government-subsidized, imported newsprint from Canada to sustain its business model."

In sharp contrast to U.S. publishers' warnings of potential devastation for small-town newspapers, Mr. Anneberg estimates that the impact of the Commerce Department's countervailing ruling would be less than 5 cents (U.S.) for the average printed newspaper – "a small price to pay to preserve American manufacturing jobs."

Resolute and Catalyst are the two mandatory respondents in the anti-dumping probe. Connecticut-based White Birch Paper Co., which runs three Quebec paper mills through its Canadian unit, is the voluntary respondent in both the countervailing and anti-dumping cases.

Norpac is targeting products such as newsprint, directory paper, bookgrade paper and groundwood printing and writing paper. About 80 per cent of newsprint is sold directly to newspaper publishers, Norpac estimates.

Eight U.S. senators expressed their concerns in a joint letter last week to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer. "People in small towns all over America still depend on their local newspapers," according to their letter, the latest in a series of political efforts to sway the Commerce Department.

The preliminary countervailing duties against Canadian newsprint producers come as Canada and the United States remain deadlocked during talks to renegotiate the North American free-trade agreement and amid the prolonged fight over softwood lumber.

The U.S. lumber industry targeted four mandatory respondents from Canada, claiming they benefit from Canadian subsidies and gain from dumping softwood into the United States: Resolute and three B.C.-based producers – West Fraser Timber Co. Ltd., Canfor Corp. and Tolko Industries Ltd.

The Commerce Department slapped final softwood duties on West Fraser that totalled 23.56 per cent; Tolko 22.07 per cent; Canfor 20.52 per cent; Resolute 17.90 per cent; and voluntary respondent J.D. Irving Ltd. of New Brunswick 9.38 per cent. Other Canadian producers pay the weighted average of 20.23 per cent. The revised softwood duties took effect on Jan. 3, 2018, after preliminary tariffs that were set as high as 30.88 per cent.

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