Verso calls for federal inquiry into Canadian subsidies

27 March 2015

Federal trade officials are considering an investigation of Canadian government subsidies for a rival of Memphis-based Verso Paper Corp.

The U.S. Department of Commerce has recommended opening an investigation of 28 instances of government help to the Canadian mill in response to a petition from Verso and Madison Paper Industries, working together as The Coalition for Fair Paper Imports.

Verso and Madison, based in Madison, Maine, contend the Port Hawkesbury Paper mill in Nova Scotia unfairly undercut and damaged their business.

The companies are seeking to have a duty imposed on Canadian imports of supercalendered paper, an uncoated but glossy paper used for magazines, catalogs, flyers and other printed material.

Verso and Madison account for all of the U.S. production capacity for supercalendared paper, says the Commerce Department.

The U.S. International Trade Commission will determine whether an investigation into those subsidies should continue. The Commerce Department expects a preliminary decision from the International Trade Commission by April 13, and, if affirmative, a final order on duties for those imports in September.

The subsidies have been an issue for the Madison mill and Maine’s congressional delegation since 2012. In a joint statement last week, U.S. Sen. Susan Collins, Sen. Angus King and U.S. Rep. Bruce Poliquin said “it’s time that we level the playing field again for the hardworking men and women in paper mills across Maine.”

In January, Madison Paper decided to cut back production and temporarily lay off some hourly workers, citing international competition, market conditions and energy costs.

Verso produced some supercalendered paper at its Bucksport mill, which it closed at the end of 2014. A union representing 58 former workers at that mill is disputing a U.S. Department of Justice antitrust review that allowed Verso to close its $1.4 billion purchase of Ohio-based rival NewPage Holdings, which previously owned the Port Hawkesbury mill.

In their petition, the companies allege prices for Canadian imports were as much as 5.2 percent lower in the last half of 2014 and that subsidies have depressed U.S. prices and reduced their revenue.

Competitors in Canada also have alleged unfair competition from the Port Hawkesbury mill, on Nova Scotia’s Cape Breton Island. The Cape Breton Post reported in September the Montreal-based Resolute Forest Products blamed the closure of a Quebec mill on that competition as well as higher operating costs and declining demand.

The public version of the petition withholds details of that financial effect. For 2014, which will be the 12-month period of the Commerce Department’s investigation, the petition alleged Canadian paper made up 88 percent of all supercalendered paper imports into the United States.

The focus of Verso and Madison’s complaint has been a $125 million incentive package for the Port Hawkesbury mill, which also received other tax breaks. But the petition names three other Canadian producers of supercalendered paper — Resolute Forest Products of Montreal, Quebec; Irving Paper Ltd. of Saint John, New Brunswick; Catalyst Paper Corp. of Richmond, British Columbia — and asserts those producers received government subsidies as well.

Before opening the investigation, the Canadian government on March 12 disputed the validity of Verso’s and Madison’s claims, arguing the U.S. companies did not provide sufficient evidence of a subsidy for various supercalendered paper producers and that some subsidies mentioned in the petition helped makers of other related products.

The Commerce Department turned down those arguments in its decision, finding that the companies did provide sufficient evidence of a relevant subsidy to paper producers.