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Some of the last rolls of paper to come out of the Resolute Forest Products pulp and paper mill in Fort Frances, Ont. are on display at the Fort Frances Museum on Nov. 13 2014.

Fred Lum/The Globe and Mail

U.S. paper producers are seeking trade action against Canadian rivals who they say are dumping their product south of the border and pricing them out of the market.

The Coalition for Fair Paper Imports has filed a petition with the U.S. Department of Commerce and the U.S. International Trade Commission asking that countervailing duties be imposed on Canadian exporters of so-called supercalendered paper. The glossy paper is used in retail catalogues, flyers and magazines.

The move comes as Canadian lumber producers brace for the Oct. 12 expiry of a long-running truce in the Canada-U.S. lumber wars.

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The petition, filed in late February, alleges that "Canadian [supercalendered] paper has gained market share by underselling the U.S. market prices of U.S. producers."

It claims that the federal and provincial governments provide subsidies that include preferential loans, tax benefits, grant programs and cheap access to Crown land trees.

The Canadian companies named in the petition are Resolute Forest Products Inc., Port Hawkesbury Paper, Irving Paper Ltd. and Catalyst Paper Corp.

One of the two members of the U.S. coalition – Madison Paper Industries of Maine – has been actively campaigning for years to get the U.S. government to counter what it says are unfair subsidies provided by the Nova Scotia government to Port Hawkesbury Paper, which restarted operations in 2012 after Vancouver-based Pacific West Commercial Corp. bought it out of bankruptcy.

Port Hawkesbury received $124.5-million in provincial financial aid on top of more than $35-million to keep the Cape Breton mill operational since it went bankrupt in 2011.

Politicians in Maine have increased the pressure on the U.S. government to take action under terms of the North American free-trade agreement.

"Obviously, we're taking things very seriously," Port Hawkesbury development manager Mark Dubé said in a telephone interview Tuesday.

The company has put together a team to deal with the issue in conjunction with federal and provincial officials, he said.

In 2012, the company and Nova Scotia made sure the support provided by the province was appropriate and closely followed the rules for exports to the U.S., he added.

"The decision by two companies in the U.S. forestry industry to request a countervail investigation on Canadian exports of supercalendered paper is unfortunate. We take our international obligations seriously and are confident that our programs are consistent with international trade rules. As we always do, our government will take the necessary steps to defend Canada's interests and protect Canadian workers, " said Max Moncaster, a spokesman for Ed Fast, Minister of International Trade.

Port Hawkesbury said in 2013 that the reopening of the mill was part of a standard Canadian bankruptcy proceeding in which all stakeholders, including those from the U.S., had an equal opportunity to participate. It added that mills in Maine have also benefited from government assistance.

Montreal-based Resolute spokesman Seth Kursman said "it is our understanding it is Port Hawkesbury that is clearly targeted."

"It's unfortunate we got caught up in it."

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The Coalition for Fair Paper Imports alleges that supercalendered paper imports from Canada between 2012 and 2014 were "significant."

It says the result on U.S. producers has been "severe negative price effects, resulting in lost sales and lost revenues to the domestic industry."

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