Pair of paper tariffs could rip publishing industry

Associated Press file photoPiles of wood chips sit near the RockTenn paper mill in Tacoma, Wash.

TRAVERSE CITY — Worry is spreading across a wide swath of U.S. publishers who are concerned about import taxes the U.S. Commerce Department is placing on uncoated groundwood paper from Canada.

At issue is the type of paper typically used in newspapers, directories, book publishing, printing and writing papers.

“I don’t think we’re going to be impacted in the short term, and I certainly haven’t seen any announcements from our vendors who supply printing for us that we will,” said Doug Weaver of book publisher Mission Point Press in Traverse City. “But inevitably it will trickle through the system.”

The commerce department in January issued a preliminary order that imposed an import duty (tariff, or tax), ranging from about 6 percent to nearly 10 percent, on products from various Canadian paper mills.

The department in March announced a separate anti-dumping duty of 22.16 percent on uncoated groundwood paper from all mills in Canada — except two of that nation’s three major paper companies. The U.S. determined that those two companies — Resolute and White Birch — were selling paper at a fair price to U.S. customers, so they are not being assessed the 22.16 percent anti-dumping tariff. But Canada’s third major paper maker, Catalyst — and other Canadian producers of those types of paper — will pay the tariff.

As a result, about half of newsprint imports from Canada would fall under that new tax. The commerce department said it will issue a final determination on the anti-dumping ruling in August.

The two tariffs — the countervailing duty announced in January and the anti-dumping duty announced in March — together could add a total of 32 percent to the price of some paper imported to the U.S. Some producers and dealers may not pass the entire tariff on to their customers; they could absorb part or all of the added cost.

“Newsprint is the second largest expense for small newspapers after human resource costs,” Susan Rowell, president of the National Newspaper Association, said in a release.

Publishers don’t yet have a good feel for how much paper prices could increase as a result of the tariff and anti-dumping duty.

“We learned (the tariff) was being implemented just as we were receiving an order,” said Alan Campbell, publisher of the Leelanau Enterprise. “We do expect prices to go up.”

Campbell said the weekly Leelanau County newspaper belongs to the PAGE cooperative, which negotiates prices for 600 daily newspapers and 1,100 non-daily publishers for paper, ink, graphic arts supplies and other materials. Member newspapers spend a collective total of more than $200 million through the co-op each year, the co-op’s website states.

Some publishers, already feeling pressure from internet competition and a changing marketplace, could find it difficult to handle the added cost.

“We (the U.S. newspaper industry) have small local weeklies that are going to struggle to exist,” said Paul Heidbreder, publisher of the Traverse City Record-Eagle. “Those are very vulnerable properties.”

Paper companies across North America have been consolidating operations to lower costs, Heidbreder said, and they’ve logically gravitated toward retaining groundwood mills closer to the source of their raw materials. As a result, Canada has become a paper-producing powerhouse.

The countervailing duties announced in January resulted from a complaint filed by a single New York hedge fund-owned North Pacific Paper Company mill in the Pacific Northwest that employs 260 people, according to a Dec. 21 letter to the Department of Commerce from dozens of congressmen including Michiganians Jack Bergman, John Moolenaar and Fred Upton.

“U.S. producers, printers, and the consuming public would be harmed by the market-distorting imposition of duties,” the letter stated.

The lawmakers’ letter stated that the U.S. newspaper publishing and commercial printing sectors employ more than 600,000 people, and that the American Forest and Paper Association, the majority of U.S. newsprint manufacturers, and their customers oppose the trade sanctions.

The North Pacific Paper Company complaint claimed Canada was dumping newsprint into the U.S. market and unfairly subsidizing its industry at home.

The Canadian Broadcasting Company reported in January that Newfoundland and Labrador government officials said the investigation by the U.S. focused on various tax credits and a $110-million loan the province gave the company in 2014.

News Media Alliance, a trade organization that represents most American newspapers, said tariffs will lead to job losses and likely cause some smaller newspapers and printers to close.

The U.S. Department of Commerce said Canada in 2016 exported newsprint worth $1.6 billion to the U.S.

Some U.S. newspapers in recent years have cut newsprint costs by reducing the number of days they publish each week. Increased paper costs could result in more measures to reduce paper consumption. Book publishers likely will feel the effects of the new tariffs on a more delayed schedule.

Weaver said Mission Point Press’ traditional print vendor adjusts its paper prices quarterly.

“It’s my guess that in this next round of pricing they’ll see some increases that will come back to us, then it’s up to us to decide if we’ll pass that on to our customers,” he said. “Usually these kinds of things take a few weeks, if not a couple of months, to trickle through the system.”

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