US Paper Makers Target Unfair Foreign Tax Subsidies

by Mary Swire, Tax-News.com, Hong Kong

29 September 2009

Three US paper companies have announced that they have filed anti-dumping and countervailing duty petitions to cover imports of certain types of coated paper from China and Indonesia.

Appleton Coated LLC, NewPage Corporation, and Sappi Fine Paper North America, together with the United Steelworkers trade union, have asked the Department of Commerce and the International Trade Commission, the US agencies responsible for investigating unfair trade practices, to impose duties to offset Chinese and Indonesian government subsidization. The paper products covered by the petitions include coated paper used in high-quality writing, printing, and other graphic applications using sheet-fed presses.

Under the antidumping and countervailing duty statutes, the International Trade Commission is expected to make a preliminary injury determination in November 2009 and the Department of Commerce is expected to issue preliminary determinations in the countervailing duty and antidumping duty cases in December 2009 and March 2010, respectively.

The petitions estimate that total imports of covered coated paper have jumped by 40% in the year to June 2009. During the same period, covered coated paper shipments by domestic manufacturers are estimated to have declined by approximately 38%. China and Indonesia together are believed to account for nearly 30% of the US market for the coated paper covered by the petitions in the first six months of this year, almost double the share they had at the same time last year.

The petitions allege that various subsidies are being provided to Chinese paper producers, including low interest loans, tax subsidies, input subsidies, land use programmes, grants and export tax subsidies, together with an undervaluation of China’s currency. Similarly, the petitions allege that Indonesian paper companies are benefiting from timber provided from government-owned land at below-market prices, a ban on log exports, government loans, debt forgiveness, and tax incentives for certain encouraged businesses.

Dumping is alleged if a company sells product in the US for less than its home market price or for less than the full cost of production - and if those sales injure a US industry.

“This case is not about protectionism - it’s about fair trade,” stated Rick Willett, president and chief executive officer of NewPage Corporation. “Domestic manufacturers enjoy numerous cost advantages over their Chinese and Indonesian competitors for paper used in our domestic marketplace, including abundant, well managed forest resources, energy and raw materials, as well as lower transportation and logistics costs. In addition, we continue to invest in modern technology, well-maintained assets and our world-class work force. We are not afraid to compete with anyone on a level playing field.”

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