newspaper printing press

This could have been ugly—a case before the federal government that offered both a chance to stick it to the press (a.k.a. the enemy of the people) and send a message to Canada with a trade barrier.

Pure Trump administration catnip, right?

And yet, all five members of the International Trade Commission on Wednesday said no. The bipartisan commissioners unanimously voted to stop collecting punitive duties on imports of Canadian uncoated groundwood paper—the stuff that newspapers are printed on—in a case involving a dozen major law firms.

Among the winners: Covington & Burling; Sidley Austin and Baker Hostetler. On the losing side: King & Spalding.

Still, the decision didn't exactly amount to the ITC thumbing its nose at politics. Both liberal and conservative members of Congress bombarded the agency with letters opposing the tariffs—because every state has newspapers, and those newspapers have complained bitterly about the added cost, which they can ill-afford.

“For the Douglas Budget, a local paper in Wyoming, 6 out of their 24 jobs—25 percent of the paper's employees—have been eliminated,” wrote Wyoming Senators John Barrasso and Mike Enzi and Rep. Liz Cheney. “We are told that the Douglas Budget may be forced to cut more jobs should the tariffs remain and their production costs continue to rise.”

The Connecticut delegation—not typically in sync with Wyoming—said almost the same thing. “Publications have confirmed that they are cutting staff and pages from their papers. Connecticut newspapers already operate with extremely small staffs and tight resources, and these tariffs could very well result in the closure of essential news outlets in our state.”

Trade wars aren't so easy after all.

The case was instigated by North Pacific Paper Company, represented by King & Spalding's Stephen Jones, Benjamin Bay and Elizabeth Owerbach. In August of 2017, the company petitioned the Department of Commerce and the ITC to impose antidumping and countervailing duties on U.S. imports of uncoated groundwood paper from Canada.

“Norpac's only motivation is to address and offset the very significant subsidies provided by the Canadian provincial governments, many of which are aimed at keeping Canadian mills operating and competitive,” the King & Spalding lawyers wrote in an ITC filing. Their client, they added, “does not receive government subsidies, and thus its only recourse is the trade remedy laws.”

Without relief, they warned, Canadian producers will “push prices downward to the detriment of the domestic UGW paper industry, causing mill closures, employee layoffs, and financial losses.”

In March, Secretary of Commerce Wilbur Ross announced that his department had made a preliminary determination that Canadian paper mills were dumping newsprint, or selling it for less than fair market value. “President Trump made it clear from the beginning that we will vigorously administer our trade laws to provide U.S. industry with relief from unfair trade practices,” Ross said.

Commerce ordered U.S. Customs and Border Protection to start collecting cash deposits in anticipation of a final order. (In August, Commerce lowered the tariff slightly.)

But such duties are a two-step process. Commerce determines if there is dumping, and then the ITC decides if the dumped goods “materially injure, or threaten material injury to, the domestic industry.” Only after both agencies say yes is the antidumping order final.

The ITC balked.

The agency won't release its report explaining why until October 8, but briefs filed with the agency outline the anti-tariff arguments.

“This case presents the unique circumstance of a single minority participant in the domestic industry—the petitioner, North Pacific Paper Company—claiming that subject imports cause or threaten to cause material injury to the domestic industry,” wrote Sidley's Richard Weiner, Neil Ellis, Rajib Pal and Carys Golesworthy for Canada-based Catalyst Paper Corp.. “The remainder of the domestic industry—indeed, the vast majority—opposes the petition and has told the commission in no uncertain terms that subject imports do not cause or threaten to cause material injury.”

Why no unified industry front?

In part, because competition for newsprint is regional. “Newspapers in the east buy newsprint from eastern suppliers, while those in the west buy from western suppliers, a Covington team led by Shara Aranoff and Peter Lichtenbaum wrote in an ITC filing.

Norpac is located in Washington State, and “there is no economically viable scenario in which Norpac can sell significant newsprint tonnage to purchasers in the east. Due to high transportation costs, those purchasers are far more likely to close their doors or go digital than pick up Norpac as a long term supplier,” wrote the Covington team, which represents the News Media Alliance of about 2,000 newspapers as well as Canadian paper mill Kruger.

The bigger issue is a long-term decline in in demand, they said. The import duties will only “decimate the already struggling newspaper industry, permanently and significantly reducing demand for the domestic industry's production.”

Baker Hostetler's Elliot Feldman, John Burke Michael Snarr and Mark Lehnardt, who represent Resolute FP Canada Inc and Resolute FP US lnc., summed it up bluntly: “Norpac's narrative is not worth the paper upon which it was printed: prices went up, import volumes went down and market share stayed about the same.”

Other law firms involved in the case include Hogan Lovells for the Government of Ontario; White & Case for Irving Paper Limited; Steptoe &Johnson for Alberta Newsprint Company; Hughes Hubbard & Reed for the Government of Canada; Cassidy Levy Kent for Tembec Inc.; Morris, Manning & Martin for White Birch Paper; Arnold & Porter Kaye Scholer for the Government of Alberta; Arent Fox for the Government of Quebec and Mowry & Grimson for Gannett Supply Corp.

 

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