Nova Scotia questions U.S. definition of what constitutes a subsidy

HALIFAX – A U.S. Commerce Department decision to continue imposing tariffs on a Cape Breton paper mill is based on an erroneous assumption about what constitutes a subsidy, the Nova Scotia government said Thursday.

Provincial cabinet minister Andrew Younger said while it’s true Port Hawkesbury Paper is getting electricity at a reduced rate from Nova Scotia Power, that does not amount to a subsidy.

“There will be a number of appeals that will be moving forward,” he said after a cabinet meeting. “We don’t think it’s fair.”

Younger, speaking on behalf of Trade Minister Michel Samson, said the cheaper power rates from the privately owned utility don’t constitute a subsidy because, under U.S. rules, subsidies must come from government entities.

He stressed that the decision to offer lower rates to the mill came from the Nova Scotia Utility and Review Board, which is an arm’s-length agency.

“The board decided that was not a subsidy from ratepayers,” he said. “Very clearly, there is no subsidy from government, in our view.”

The U.S. Commerce Department has said countervailable subsidies are “financial assistance from foreign governments that benefit the production of goods from foreign companies and are limited to specific enterprises or industries.”

Younger, the environment minister, also said the province is pleased the federal government is getting involved in the file, and he’s hoping Ottawa will launch a formal challenge through the World Trade Organization.

The initial trade challenge was launched by U.S. companies that include Madison Paper Industries of Maine and Verso Corp. in Ohio. Their petition was supported by the U.S. union that represents workers at Madison Paper.

In 2014, imports of supercalendered paper from Canada were valued at an estimated US$868 million, the Commerce Department says.

On Wednesday, U.S. authorities issued a decision saying Canadian mills that produce glossy paper products will continue to pay duties levelled against them last summer.

The U.S. Commerce Department said it has determined that U.S. imports of supercalendered paper from Canada have received countervailable subsidies ranging from 17.87 to 20.18 per cent.

The decision upholds, and in some cases increases the tariffs first put in place after a preliminary ruling in July.

Under the decision, Port Hawkesbury Paper faces a 20.18 per cent duty, while Montreal-based Resolute Forest Products is hit with a duty of 17.87 per cent.

While the duty for Port Hawkesbury Paper remains about the same as in July, Resolute’s duty increased significantly from the two per cent levelled last summer.

A spokesman at the Cape Breton mill has said the company would appeal the decision.

Other Canadian supercalendered mills such as the J.D. Irving mill in New Brunswick and Catalyst Paper of British Columbia now face a duty of 18.85 per cent, an increase over the originally imposed rate of 11.19 per cent.