Around the same time that Catalyst Paper Corp. (TSX:CYT) was investing in the U.S. with the acquisition of two pulp mills, its American competitors were lobbying for countervailing duties against the B.C. company, and on October 14, they succeeded.
Catalyst is one of four Canadian producers of supercalendered paper that have been hit with American countervailing duties, based on a finding by the US Department of Commerce that Canadian mills are subsidized. Supercalendered paper is typically used in magazines and catalogues.
On October 14, the U.S. Department of Commerce made a final determination on the duties, setting them at 11.19% for Catalyst. That amounts to $1.3 million in duties for Catalyst.
The duties are not related to the Softwood Lumber Agreement, which is now expired.
Catalyst claims the Commerce Department has made its decision based on the operations of other mills in Quebec and Nova Scotia without examining the particulars of its operations in B.C.
The company said the duties were based on an examination of two other mills – Port Hawkesbury Paper in Nova Scotia and Resolute Forest Products Inc. (TSX:RFP) in Quebec.
In Port Hawksbury’s case, the Department of Commerce found that government loans and power agreements were a form of government subsidy.
“We’ve been given the average of the rate calculated for Resolute and Port Hawksbury and the Department of Commerce has done that without having actually reviewed our information,” said Len Posyniak, Catalyst’s senior vice president of human resources and corporate services.
“They declined to do that because they indicate that they don’t have the resources to accomplish that. So essentially what’s happened is that we’ve been given the duty levied against other companies without any investigation whatsoever.”
Catalyst has asked the Commerce Department for an expedited review of the decision.
B.C.’s International Trade Minister Teresa Wat has weighed in on the issue, disputing the suggestion that B.C. is subsidizing Catalyst.
"We are very disappointed with the continued lack of consideration of Catalyst in this investigation by the U.S. Department of Commerce,” She said in a press release. “We are confident that a full investigation of Catalyst will confirm they have received no government subsidies.”
At the beginning of this year, Catalyst acquired pulp and paper mills in Maine and Wisconsin for $62.4 million. Those mills do not make supercalendered paper.