APP Americas Previews Testimony for Hearing on the Coated Paper Trade Case

WASHINGTON, DC—Sept. 16, 2010—Ahead of his testimony today, Terry Hunley, acting president, APP Americas, issued the following statement regarding the U.S. International Trade Commission hearing on certain coated paper imported from China and Indonesia:

“The petitioners failed today to prove that they’ve been harmed by importers and they are not entitled to any special protections under our trade laws. Domestic producers gained market share between 2007 and 2009 and during that time we lost our largest U.S. customer, Unisource, to NewPage. NewPage lured them away with lower prices made possible by the enormous federal ‘black liquor’ subsidies they received.

“Duties in this case will cost, not save, American jobs. That goes against the spirit and intent of our trade laws. We have heard from hundreds of American printers who fear losing jobs and business to offshore printers, if duties are imposed. The number of printer jobs threatened is far higher than the 280 jobs the ITC staff investigation says the domestic coated paper sheet industry lost between 2007 and 2009.

“What we’re seeing here are hedge fund managers, who have taken over the American paper industry, looking for another government bailout through the ITC. America’s small businesses and taxpayers are tired of bailouts and our trade law system cannot be used to address poor management and bad investment decisions by domestic manufacturers.

“I am confident that the ITC will issue a fair ruling based on the facts and conclude that the domestic industry has not been harmed by imported coated sheets. Our goal is to get back to the business of providing our American customers with the quality products and service they expect from us.”

—Terry Hunley

Asia Pulp & Paper also released a summary of its position on the matter:

Summary of Argument before the United States International Trade Commission in the matter of certain coated paper suitable for high-quality print graphics using sheet-fed presses from China and Indonesia

September 16, 2010

Overview: The facts revealed through investigation in this case prove that certain coated paper sheets imported from China and Indonesia have not caused any material harm to the domestic industry and no additional duties are warranted.

Key facts:

• The volume of imported paper involved in this case (subject imports) did not change significantly between 2007 and 2009, increasing only 1 percent.

• Domestic producers increased their share of the U.S. market by 5.4 percent from 2007 to 2009.

- Domestic industry production and shipments closely tracked domestic consumption and actually fell less than the decline in overall consumption.

• The subject imports in this case largely compete with other imports, not domestically produced products.

-The facts show a one-to-one substitution. Subject imports simply replace imports from other sources.

• Imports from China and Indonesia did not cause paper prices to decline in 2009. Prices declined because of the following economic reasons:

- Demand for coated paper collapsed during the recession.

- Purchasers relied more on existing inventory, further reducing new orders.

- Raw materials costs for coated paper fell sharply.

- Domestic producers passed the benefits of “black liquor” tax subsidies on to customers through lower prices.

- Domestic producers lowered prices in a fierce competition to win a larger share of the shrinking market.

• The domestic industry strategically restructured during the investigation period (2007-2009), shutting down some older, less efficient mills.

- These closures were driven by trends in the much larger coated paper web roll market, which account for most of the production at these mills.

- Small declines in domestic coated sheet industry employment were the result of these closures, not any effect of subject imports.

- Domestic industry claims that these closures are good for the industry. Domestic producers claim they can produce as much or more coated paper at existing facilities and production capacity actually increased during the investigation period.

• Domestic prices remained low in the first half of 2010 because of the above cited economic and intra-industry domestic producer competition, even though coated paper sheets imported from China and Indonesia left the market because of preliminary duties imposed by the U.S. Department of Commerce.

• There is no evidence that there will be an imminent increase in subject imports that will threaten the domestic industry with future material harm.

- Import volumes were very stable from 2007 to 2009 and have dropped since.

- Chinese suppliers lost major U.S. accounts before the petition was filed and replacing that volume will be difficult.

- More than 90 percent of subject shipments from China and Indonesia during the case investigation period (2007-2009) went to markets other than the United States.

- Chinese and Indonesian producers do not have significant excess capacity.

- The rapidly growing Chinese market will absorb a substantial portion of future increased production.

- As subject imports did not affect domestic prices levels in the past, there is no basis to assume they will in the future.

- The largest subject importers cannot meet growing demands for certain environmental and sustainability standards, particularly those of the Forest Stewardship Council, thus limiting their U.S. market growth potential.

- Historical patterns indicate that any increases in subject imports will displace nonsubject imports in a direct and complete import substitution pattern.

Note: USITC is scheduled to vote on this case on October 19. Only an affirmative decision that the domestic industry has been harmed by the subject imports would lead to the imposition of a duty order.