New Brunswick

Irving reaches deal in tariff dispute over paper shipped to U.S.

New Brunswick’s largest forestry company could soon be shipping specialty paper into the United States tariff-free.

If settlement is accepted, Irving will be refunded duties paid since 2015

J.D.Irving Ltd. could soon be shipping its specialty paper into the United States tariff-free from the Irving Paper mill on Bayside Drive in Saint John. (Google Street View)

New Brunswick's largest forestry company could soon be shipping specialty paper into the United States tariff-free.

J.D. Irving Ltd. and another paper company in Nova Scotia have agreed to a settlement in a U.S. trade case against Canadian supercalendered paper, a glossy product used to print magazines and flyers.

Irving manufactures the paper at its Saint John paper mill.

It's rare to see a settlement like this.- Yohai Baisburd

If the settlement is approved by the U.S. Commerce Department, Irving will receive refunds on duties it has been paying since 2015.

Part of the money would be paid to Verso Corp., the U.S. paper-maker whose complaint led to the tariffs. The company says in regulatory filings that it represents "substantially all" of the U.S. production of supercalendered paper.

"We are pleased that an acceptable settlement with Verso has been reached and are hopeful that the U.S. Department of Commerce will approve the settlement," Irving spokesperson Mary Keith said in an email statement.

Keith said the tariffs can't be rescinded until the administration agrees to revoke the order for duties, which she said can take up to 90 days.

Verso receives part of refund

Irving and Port Hawkesbury Paper will pay a percentage of their refunded duties to Verso to a maximum of $42 million. Keith did not say what Irving's share of that would be.

Keith did not respond to a question about how the tariffs had affected Irving's exports of the paper to the U.S.

But Midland Paper, a Verso customer in Illinois, said on its website the duties had not stopped Canadian supercalendered paper from entering the U.S., and there had been an increase in imports from other manufacturers not subject to tariffs.

"These factors offset the benefits of the tariffs to Verso," Midland said.

Yohai Baisburd, a Washington-based trade lawyer who has worked on cases involving Canada, called the deal "unusual. … It's rare to see a settlement like this."

He said Verso would have the "certainty and predictability" of payments that would otherwise have ended up as tariff revenue in the U.S. Treasury.

Predictability for pricing

Meanwhile, Irving and Port Hawkesbury avoid a tariff that the U.S. government can review and adjust every year.

"For the Canadians, it gives them predictability for pricing into the future because they won't have the uncertainty of the administrative review process," Baisburd said.

J.D. Irving Ltd. has been paying duties on the supercalendered paper it ships into the U.S. since 2015. (CBC)
"Your duty rate can go up or down, and so by settling the case, you take that uncertainty out of the equation."

Verso said there was no assurance the U.S. Commerce Department would agree to withdraw the tariffs. But Baisburd said it was unlikely to keep them in place now that the company that complained was asking that they be ended.

Irving was caught in a net cast by the U.S. government when the Obama administration investigated the trade complaint, which focused on the $124-million Nova Scotia government bailout of the Port Hawkesbury paper mill in 2012.

Verso, which describes itself as the leading North American producer of printing and specialty papers and pulp, complained that the bailout led to cheaper Canadian paper unfairly competing with the U.S. product.

Irving argued case

That trade action also ensnared three other Canadian companies selling supercalendered paper into the U.S.: Irving, Catalyst Paper Corp. of British Columbia, and Quebec-based Resolute Forest Products.

The U.S. administration investigated Port Hawkesbury and Resolute and hit them with duties, then applied an average of those two rates, known as an "all-others" rate, to Irving and Catalyst without even investigating their practices.

Irving called that "completely unfair" and pleaded with the U.S. for a chance to prove it wasn't subsidized to the same level as Port Hawkesbury.

As part of the settlement, if accepted by the U.S. government, Irving and Port Hawkesbury Paper will pay a percentage of their refunded duties to Verso, to a maximum of $42 million.

Irving had the support of several high-profile U.S. politicians in the case. Maine Gov. Paul LePage and at least three U.S. senators, including Democratic minority leader Chuck Schumer, asked the administration to consider Irving's arguments.

That eventually happened, leading to a reduction of the Irving tariff from from 18.85 to 5.97 per cent in 2017.

Irving and the other Canadian companies also challenged the tariffs before a dispute-resolution panel under the North American Free Trade Agreement. The NAFTA panel upheld the tariffs.

The paper settlement is unrelated to another U.S. trade case affecting Irving that saw duties imposed on softwood lumber.