PORTLAND, Maine — A recently released federal report sheds light on why U.S. trade officials are moving ahead to propose a trade duty on certain Canadian paper imports, heeding a cry by two paper producers operating in Maine.
The U.S. International Trade Commission’s preliminary report on Canadian supercalendered paper imports found Canadian producers took up a steadily increasing share of the U.S. market from 2012 to 2014 and could have suppressed prices.
The preliminary report concluded that volumes of those imports “ had a significant impact on the domestic industry,” measured by falling profits, fewer hours worked and falling wages from 2012 to 2014.
The report also found that U.S. producers generally have fewer export options and are, as a result, limited mostly to the domestic market for supercalendered paper, which is used primarily for color printing applications, including magazines, retail inserts, directories and coupons.
The report found that while domestic demand has generally been on the decline, those conditions and imports from other countries largely could not account for the drop in prices and declining revenues for U.S. producers.
The report’s findings were the basis for a 5-0 vote of the International Trade Commission in April to continue its investigation and propose a trade duty on those imports by a July 27 deadline. It will be the first of many steps for the International Trade Commission in approving a duty on those imports.
As the investigation moves ahead, trade officials will consider how long-term decline in paper demand and whether substitutes for supercalendered paper have played a role in the declining performance of U.S. paper producers.
Verso Paper Corp. and Madison Paper Industries, working together as The Coalition for Fair Paper Imports, petitioned for trade officials to investigate.
Madison’s and Verso’s petition alleged Canadian paper made up 88 percent of all supercalendered paper imports into the United State and that prices for Canadian imports were as much as 5.2 percent lower in the last half of 2014.
Verso, which operates a mill in Jay and closed its Bucksport mill at the end of last year, makes supercalendered paper at two mills it owns in Minnesota. Those mills, the Madison mill and a South Carolina mill owned by the U.S. arm of the Canadian company Resolute Forest Products, make up all of the production capacity for supercalendered paper in the United States.
Officials at the Madison mill — a joint venture between Northern SC Paper Corp. and the U.S. subsidiary of Finland-based UPM-Kymmene Oyj — have for years lobbied Maine’s congressional delegation to push for the investigation, saying international competition has factored into various decisions to cut back production and temporarily lay off staff.
The major focus of Verso and Madison has been the reopening of a mill in Port Hawkesbury, Nova Scotia, which received government support to maintain the former NewPage facility after it closed in 2011.
The mill received about $35 million (Canadian) to stay open after NewPage’s Chapter 11 bankruptcy reorganization in 2011 and received about another $125 million in aid to restart.
In filings with trade officials, Verso said that the reopening of the Port Hawkesbury plant factored into its decision to close a fire-damaged mill in Sartell, Minnesota. Port Hawkesbury officials disputed that assertion to trade officials.
After the International Trade Commission completes its preliminary determination, its findings will go to the International Trade Administration for review.