The United States Department of Commerce will announce Wednesday afternoon whether it will uphold a 20.33 per cent tariff on imports from Port Hawkesbury Paper LP.
The ruling has the ability to significantly affect the competitiveness of the Point Tupper mill’s product in its largest market.
It won’t just reverberate through northern Nova Scotia, where about 700 people either work in the mill or in the woods supplying it with fibre, but it will also be felt in the handful of other North American communities surrounding mills that produce the glossy paper used on calendars and for newspaper inserts.
“In 10 years, can we expect there to be less capacity than there is today? Absolutely,” Arnaud Franco, a senior analyst with the Pulp and Paper Products Council in Montreal, said when asked about the future of the industry.
Excess capacity versus demand for supercalendered paper grew from 13 per cent during the first eight months of 2014 to 15 per cent for the comparable period this year.
The decline in demand has occurred over many years and is predicted to continue, Franco said Tuesday.
Eight mills produce supercalendered paper in North America.
Each of them are critical economic drivers to their areas.
The restart of the Point Tupper mill in 2012 under new owners, Pacific West Commercial Corp., and the $124.5-million aid package provided by the provincial government was cited by Resolute Forest Products Inc. as contributing to its decision to close its Shawinigan, Que., mill last fall.
In August, Verso Corp. shut a supercalendered paper machine in Maine, throwing 300 people out of work, and cited foreign competition and declining markets as two of its primary reasons.
In response to the restart of Port Hawkesbury Paper and declining markets, Verso and Madison Paper Industries of Maine petitioned the U.S. Commerce Department to place tariffs on Canadian mills due to alleged subsidies.
In July, the department announced its preliminary finding that the Point Tupper mill was unfairly subsidized and placed a 20.33 per cent tariff on its products headed to America. It also placed lesser tariffs on four other Canadian mills.
In a 49-page written recommendation, the U.S. Commerce Department’s Paul Piquado analyzed each component of the $124.5-million package, which included $66.5 million in “forgivable loans” and $38 million for the mill to manage woodland.
Piquado found each section of the package constituted a subsidy but said the greatest subsidy of all is the discounted power rates negotiated by the mill’s new owners.
“To us, this isn’t scary,” mill manager Marc Dube told The Chronicle Herald after the tariff announcement.
“We believe there’s no potential subsidy in the electricity rates, and we have information packages for the (Department of Commerce representatives) on all the alleged subsidies.”
Investigators from the Commerce Department visited the mill in August as part of a more thorough investigation that was meant to lead to the decision that will be announced Wednesday afternoon.
If the Commerce Department upholds its initial ruling, it will send the file to the United States International Trade Commission — which will determine for itself within 45 days whether Canadian subsidies cause material injury to the American industry.
If the tariff is upheld, Port Hawkesbury Paper will have to determine whether it can continue to compete in it largest market.
“We were very disappointed and frustrated with the preliminary ruling from the U.S. Department of Commerce,” Nova Scotia Environment Minister Andrew Younger said in a statement Tuesday.
“Nova Scotia has done everything possible to defend against these allegations. Since the preliminary decision, we’ve continued to work through our trade lawyers in Ottawa and Washington to present our information and evidence.”