Monday, October 19, 2015

Two Paper Companies Convicted of Being Canadian

Paper undergoing supercalendering
First there were the Black Liquor Boondoggles, now there’s the Supercalendered Scam. The U.S. government’s attempts to prop up the country’s ailing paper industry once again are going to ridiculous lengths, this time with U.S. consumers, printers, and publishers footing the bill.

Last week, the U.S. Department of Commerce imposed duties on imports of supercalendered (SC) paper from four Canadian companies, supposedly because the companies received unfair subsidies from governments in Canada

But DOC didn’t even bother to investigate two of the companies, Catalyst Paper and Irving Paper. In a case of pure guilt by association, Commerce's case against the two basically amounts to: "They make SC in Canada; therefore, they are guilty."

A Catalyst news release neatly summarizes what happened:

The DOC imposed preliminary countervailing duties on imports of supercalendered paper from four Canadian paper producers – Port Hawkesbury Paper, Resolute Forest Products, Irving Paper and Catalyst Paper – on July 27, 2015. Despite its statutory obligation to examine each of the companies, the DOC refused to examine Catalyst Paper and Irving Paper individually, and instead assigned them a preliminary “all-others” rate of 11.19%, which is the simple average of the preliminary rates assigned to Port Hawkesbury Paper and Resolute Forest Products.

Since August 4, 2015, based on this rate, Catalyst has deposited to the U.S. treasury approximately $1.3 million, representing sales of 17,000 tonnes of supercalendered paper to U.S. customers.

In its Final Determination, the DOC once again refused to examine Catalyst Paper and Irving Paper individually and instead assigned them a final “all-others” rate of 18.85%, which this time is a weighted average of the final rates assigned to Port Hawkesbury Paper and Resolute Forest Products.

Close-up of a supercalender
If you’re an American, you may be saying, “What the heck, let the Canadians pay.” But much of the burden is actually falling on Americans in the form of higher prices for paper and an unintended windfall for Canadian printers.

Because the duties are creating such a huge mismatch between the Canadian and U.S. prices for the same paper, some printing work that was done at U.S. plants is being shifted north of the border. SC paper, which is polished at high pressure through a series of rollers, is often used in magazines and newspaper inserts.

Also, Catalyst and Irving are not exactly foreign companies. Catalyst employs more than 1,000 people at its two U.S. paper mills, and Irving has extensive forestry operations in Maine.

You can blame the struggles faced by American SC manufacturers on the declining demand for magazine-quality paper. Or on the strong U.S. dollar. Or even on capitalism. But don’t automatically blame the Canadian companies that, as far anyone can tell, are merely engaging in good old American-style free enterprise.

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Anonymous said...

There is no way in h*#ll that any tariffs will keep Verso or even the Madison mill afloat. In the case of the former its run by inept fools while the latter is too small to compete. In the end the only thing these stupid tariffs will do is deal another massive blow to the ailing timber industry here in Maine. Ironically the two companies most affected by this ( Irving and Catalyst) are those who were have managed to hold their own during this recent whirlwind.

Anonymous said...

It is certain that Verso Corporation is struggling under both its debt load and rapidly declining market. I wouldn't say the managers of Verso Corp. are inept. I know quite a few of them from the days when the (then 4) Verso mills split off from International Paper. They are, however, on a slippery treadmill. Missteps can be fatal. God save the Queen!

Best of luck to ALL paper companies in a highly challenging manufacturing environment.

- Mark

Anonymous said...

Missteps can be fatal.. yeah what an understatement. Taking on massive debt to manufacture a product with double digit decline in sales. I guess that classifies.