Premier blames 'protectionist politics' in U.S. for $8M tariff on Corner Brook Pulp Paper

Corner Brook Pulp and Paper is facing a crisis following introduction of a duty on all Canadian newsprint exported to the United States.

Industry group warns American duties will have serious consequences for N.L. mill

Blustery weather in Corner Brook Wednesday as the paper mill there considers the impact of a nearly 10 per cent tariff on newsprint sold to the United States. (Colleen Connors/CBC)

Corner Brook Pulp and Paper is facing a major crisis following a ruling of the U.S. Department of Commerce that imposes a duty on all Canadian newsprint exported to the United States.

Kruger, which owns the mill in western Newfoundland, was hit the hardest with a preliminary tariff of 9.93 per cent on all uncoated groundwood paper, such as newsprint, sold to the U.S.

The duty will also apply to two mills in Quebec.

"We're extremely concerned. This is a serious threat to the jobs and [Corner Brook Pulp and Paper]," said Joel Neuheimer, vice-president of International Trade of Forest Products Association of Canada.

The Corner Brook mill produces 120,000 tonnes a year specifically for the United States, which is about half its total production.

Kruger has not publicly commented on the U.S. tariffs.

Protectionist politics

Premier Dwight Ball blamed "protectionist politics" from the Donald Trump administration as the reason for the new duty.

"We've seen it with NAFTA, we've seen it with the aerospace sector, we've seen it with softwood lumber. So everything coming out of the U.S. when it comes to trade is one of "let's protect the United States," the premier said.

"We believe that this is an unjust decision that we've seen by the Department of Commerce. We believe in free trade, and we've been working hard to establish the position of the province — some $5 billion annual that we do with the U.S."

Neuheimer agreed, saying the U.S. is following an approach it's used in the past for other disputes.

"Basically they're trying to prove unsuccessfully that our business practices are not fair, and that's simply not the case," he said.

Serious impact 

Neuheimer said the tariff would have such a serious impact on the forest products industry in the province, which employs roughly 2,500 people, that the association is exploring a legal defence and other options.

"Are we going to start building other products in that facility? Are we going to be able to diversify market to alleviate some of the impact this will have?" he said.

Trucks carrying wood to the yard at Corner Brook Pulp and Paper. Premier Dwight Ball calls the mill the foundation of Newfoundland and Labrador's forestry sector. (Tony Collier.)

Ball told reporters Wednesday that while Kruger has been paying the interest on a $110 million loan the province gave it in 2014, first payments on the principal start next year.

That will become a lot harder, he said, if the mill has to pay $8.3 million annually in new duties.

It's still not clear if the loan factored into the Department of Commerce's decision to impose the tariff, as the formulas used have not yet been made available.

Not a done deal

The 9.93 per cent tariff announced Tuesday is preliminary, which means any cash deposits paid by Kruger will be held in a trust until a final decision is made. If the decision is reversed or altered so that the rate drops, then money would be returned to Kruger.

Before that final decision is made, officials from the provincial government and Kruger will have an opportunity to lobby the Department of Commerce.

Corner Brook Pulp and Paper, seen here in a postcard from the 1920s, first produced paper in 1926 and was once the largest pulp and paper mill in the world. (Facebook/Historic Corner Brook)

According to provincial negotiator Jeff Loder, that process will involve a visit from senior officials in the U.S. in March and will culminate with hearings involving U.S. Secretary of Commerce Wilbur Ross.

"The province, along with the companies will have an opportunity to speak directly to the U.S. Department of Commerce, file briefings, challenge some of the assumptions that have been made in this decision and then there will be a set of final hearings later in the year."

Jeff Loder represented the province during re-negotiation of the North American Free Trade Agreement. He will lead the effort to challenge the U.S. newsprint duty. (CBC)

Both Ball and Loder say they can't speculate as to how the department came to the 9.93 per cent rate, and are waiting to read the decision report before they can really start working on a case to challenge it.

"It was really a math exercise that got us to the creation of the duty that was imposed by the Department of Commerce, so once we get a good look at that we will then have a better idea of what the solutions will look like," Ball said.

 Foundation of forestry sector

In the meantime, Ball said his government is committed to doing whatever it can to work with Corner Brook Pulp and Paper to make sure it's sustainable and that Kruger can continue doing business in the province.

"We know that Corner Brook Pulp and Paper is one of the most efficient, competitive mills that you would see in the country," Ball said.

"We see them as fundamental and really the foundation of the forestry industry, which is employing some 2,500 people in our province and doing just under $400 million a year."  

With files from Peter Cowan