May 28, 2007
Paper weight | Maine's papermakers could benefit from a new tariff on coated paper
By Jeffrey Bouley
NewPage Corp., an Ohio-based company that operates a paper mill in Rumford, showed itself to be anything but a paper tiger when it filed for a federal investigation last October into unfair trade practices from overseas paper manufacturers.
The company claimed that subsidized coated paper was entering U.S. markets from China, Indonesia and South Korea ˆ a trade practice commonly referred to as "dumping." That action helped spur a preliminary decision by the U.S. Department of Commerce on March 30 that unfair trade subsidies did indeed exist for Chinese manufacturers of coated paper, a high-quality glossy stock used for such purposes as magazines and gift-wrapping paper.
The result were stiff federal taxes on coated paper imports from China, Indonesia and South Korea. Those taxes ˆ called "countervailing duties," or CVDs ˆ typically are levied on cheap imports heavily subsidized by foreign governments. In this case, DOC officials agreed that cheap paper from China, Indonesia and South Korea was causing unfair competition for U.S. producers.
What all this means for Maine's papermaking industry remains to be seen. Tony Lyons, a spokesman for NewPage's Rumford Mill, which makes coated paper, admits that no one really knows what the impact of the CVDs will be for the domestic coated-paper marketplace until final decisions are handed down, duties are assessed and enough time passes to "allow the dust to settle." "We're waiting to see what the effect will be throughout the country, but I think it will be a generally good thing for Maine, which produces a lot of coated paper," Lyons says.
Along with NewPage, two other companies make coated paper in Maine: Sappi Fine Paper North America, a division of global paper giant Sappi Fine Paper, which runs mills in Somerset and Westbrook, and Verso Paper, which operates mills in Jay and Bucksport. (Sappi officials declined to comment for this story, and Verso did not respond to repeated calls.) Together, the mills can produce 7,149 tons of coated paper a day at the four mills ˆ or nearly two thirds of the papermaking capacity of the state's $1.5 billion pulp-and-paper industry, according to the Maine Pulp & Paper.
Leveling the playing field
The potential impact of the dumping of coated paper on the U.S. market also grabbed the attention of Sen. Olympia Snowe and Sen. Susan Collins. In December, Snowe and Collins sent a letter to Daniel Pearson, chairman of the U.S. International Trade Commission, supporting the commission's determination that the U.S. coated paper industry may have been negatively impacted by illegally underpriced and subsidized paper producers in China, Korea and Indonesia. The commission's decision acted as a precursor to the DOC's investigations.
And now, spurred at least in part by the paper dumping issue, Collins is co-sponsoring a bill with Sen. Evan Bayh (D-Ind.) to extend countervailing duties to so-called non-market economies, or economies that don't operate on the free market system. Those markets traditionally have been excluded from such trade tariffs. China, for example, has been considered a non-market economy because of the difficulty in accurately gauging communist-controlled financial and business markets.
The issue of non-market economies is central to the current coated-paper case because the DOC's decision reverses a decades-old policy of not applying CVDs to non-market economy countries. The breaking point for the DOC, it seems, was the rapid rise in China's economic fortunes. "China's economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law," Commerce Secretary Carlos Gutierrez said in a March news release defending his position. "The China of today is not the China of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly."
Although the American Forest & Paper Association wasn't involved in any of the cases, it has thrown its moral support behind NewPage, which is a member of the association. For many years, AFPA has fought foreign subsidies that offer unfair advantages in the global marketplace, says Juanita Duggan, AFPA's president and CEO. "China and Korea have been two countries where we have recently identified significant levels of government subsidization for the paper industry," she recently said in a news release.
Thirty years ago, CVDs against Asian countries for paper manufacturing would have been virtually unimaginable, Lyons notes. A mill like the one in Rumford would have sold down the eastern seaboard and perhaps as far west as Chicago. Today, the paper market is global, and Lyons says companies worldwide need to play fair so that the field is relatively level for everyone.
"There needs to be a fair chance for every company to sell in every market," he says, "and we are committed to fighting for competitive pricing practices. These decisions by the DOC are only preliminary, but they are a critical first step, and a very positive one, and we are optimistic that we will prevail in the final decisions."
Lyons expects preliminary decisions to be handed down on the three anti-dumping cases by the end of this month. Final decisions on all six cases ˆ including the three CVD cases ˆ are due by the end of the year.
The company claimed that subsidized coated paper was entering U.S. markets from China, Indonesia and South Korea ˆ a trade practice commonly referred to as "dumping." That action helped spur a preliminary decision by the U.S. Department of Commerce on March 30 that unfair trade subsidies did indeed exist for Chinese manufacturers of coated paper, a high-quality glossy stock used for such purposes as magazines and gift-wrapping paper.
The result were stiff federal taxes on coated paper imports from China, Indonesia and South Korea. Those taxes ˆ called "countervailing duties," or CVDs ˆ typically are levied on cheap imports heavily subsidized by foreign governments. In this case, DOC officials agreed that cheap paper from China, Indonesia and South Korea was causing unfair competition for U.S. producers.
What all this means for Maine's papermaking industry remains to be seen. Tony Lyons, a spokesman for NewPage's Rumford Mill, which makes coated paper, admits that no one really knows what the impact of the CVDs will be for the domestic coated-paper marketplace until final decisions are handed down, duties are assessed and enough time passes to "allow the dust to settle." "We're waiting to see what the effect will be throughout the country, but I think it will be a generally good thing for Maine, which produces a lot of coated paper," Lyons says.
Along with NewPage, two other companies make coated paper in Maine: Sappi Fine Paper North America, a division of global paper giant Sappi Fine Paper, which runs mills in Somerset and Westbrook, and Verso Paper, which operates mills in Jay and Bucksport. (Sappi officials declined to comment for this story, and Verso did not respond to repeated calls.) Together, the mills can produce 7,149 tons of coated paper a day at the four mills ˆ or nearly two thirds of the papermaking capacity of the state's $1.5 billion pulp-and-paper industry, according to the Maine Pulp & Paper.
Leveling the playing field
The potential impact of the dumping of coated paper on the U.S. market also grabbed the attention of Sen. Olympia Snowe and Sen. Susan Collins. In December, Snowe and Collins sent a letter to Daniel Pearson, chairman of the U.S. International Trade Commission, supporting the commission's determination that the U.S. coated paper industry may have been negatively impacted by illegally underpriced and subsidized paper producers in China, Korea and Indonesia. The commission's decision acted as a precursor to the DOC's investigations.
And now, spurred at least in part by the paper dumping issue, Collins is co-sponsoring a bill with Sen. Evan Bayh (D-Ind.) to extend countervailing duties to so-called non-market economies, or economies that don't operate on the free market system. Those markets traditionally have been excluded from such trade tariffs. China, for example, has been considered a non-market economy because of the difficulty in accurately gauging communist-controlled financial and business markets.
The issue of non-market economies is central to the current coated-paper case because the DOC's decision reverses a decades-old policy of not applying CVDs to non-market economy countries. The breaking point for the DOC, it seems, was the rapid rise in China's economic fortunes. "China's economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law," Commerce Secretary Carlos Gutierrez said in a March news release defending his position. "The China of today is not the China of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly."
Although the American Forest & Paper Association wasn't involved in any of the cases, it has thrown its moral support behind NewPage, which is a member of the association. For many years, AFPA has fought foreign subsidies that offer unfair advantages in the global marketplace, says Juanita Duggan, AFPA's president and CEO. "China and Korea have been two countries where we have recently identified significant levels of government subsidization for the paper industry," she recently said in a news release.
Thirty years ago, CVDs against Asian countries for paper manufacturing would have been virtually unimaginable, Lyons notes. A mill like the one in Rumford would have sold down the eastern seaboard and perhaps as far west as Chicago. Today, the paper market is global, and Lyons says companies worldwide need to play fair so that the field is relatively level for everyone.
"There needs to be a fair chance for every company to sell in every market," he says, "and we are committed to fighting for competitive pricing practices. These decisions by the DOC are only preliminary, but they are a critical first step, and a very positive one, and we are optimistic that we will prevail in the final decisions."
Lyons expects preliminary decisions to be handed down on the three anti-dumping cases by the end of this month. Final decisions on all six cases ˆ including the three CVD cases ˆ are due by the end of the year.
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