Agonizing tariffs removed from Port Hawkesbury Paper’s products

POINT TUPPER: Officials from the paper mill in Port Hawkesbury say it’s a relief to finally have the weight of a significant tariff lifted off their backs, and will finally be able to focus on making improvements rather than focusing on negatives.

“We feel vindicated, first and foremost,” Mike Hartery, co-operations manager, said in a phone interview Friday. “We’re vindicated and pleased that we can move ahead and focus on the core issues to make our business successful in the long term.”

Port Hawkesbury Paper received word on July 6 a decision had been made by the United States Department of Commerce to revoke a 20.18 percent tariff that was imposed on its glossy paper since 2015.

This news comes after a World Trade Organization update last week ruling in favour of Canadian supercalendered paper producers.

Bevan Locke, co-operations manager, said the lifting of the tariff allows the mill to re-shift focus to other challenging business aspects such as their overall market, which is ever-reducing.

“It means we can focus on other key aspects of our business,” Locke said. “We will do so in a way that will continue to give the business the best chance to grow and prosper in the region, without this distraction that the CVD brings.”

The judgment by the U.S. Department of Commerce was made retroactive to day one, meaning Port Hawkesbury Paper will now be able to export its products more competitively in the U.S. market.

The tariff had been putting a serious strain on the mill as it took away from the focus at times, with regard to the core of the operation, Hartery said.

“It’s important for us to be extremely cost competitive. We’re doing a good job at that, and we’ll do an even better job at that going forward, now that the collective focus is in that area.”

Locke added, from a personnel side of things, the whole team’s psyche was directly effected by the countervailing duty.

“With that type of grey cloud and question over your business, it’s hard to attract and maintain proud employees – it definitely impacts the morale.”

After the last remaining U.S. producer of glossy paper involved in the complaint, Verso Corp. withdrew its objections, the decision was made to end the duties.

Earlier this year, Irving and Port Hawkesbury Paper reached a settlement with Verso Corp., resulting in Verso filing for a change of circumstances review with officials from the U.S. Department of Commerce.

A decision was anticipated to be made earlier than this but in June the U.S. Department of Commerce indicated there would be a delay.

“I think the delay caused us all some discomfort,” Locke said. “We thought the delay would have been much longer than we’d hope it would be, when it came through last Friday, it was a surprise for this to happen, based on timing.”

Under the agreement, the two Canadian companies would pay Verso a percentage of the returned duties over time, with the total being capped at $42 million.

Both J.D. Irving in New Brunswick and Port Hawkesbury Paper have been dealing with the countervailing duty since 2015 after American competitors issued a complaint, under the North American Free Trade Agreement, that the Canadian industry was receiving unfair subsidies.

In the case of Port Hawkesbury Paper, the issues were with the aid package it received in 2012 valued at $124.5 million from the province to reopen the mill after a year-long sales process and a discounted electricity rate it receives.

On June 1, Port Hawkesbury Paper received a scheduled update on said discounted electricity rate with the confirmation that their application for its Load Retention Tariff Pricing Mechanism was approved by the Nova Scotia Utility Review Board.

“During the last two years of the LRR, there were to be a series of reviews that would take place to make sure the rate and its functions were working as had been approved back in 2012,” Locke said.

For the remaining two years of the Load Retention Tariff Pricing Mechanism, the mill’s fixed cost contribution will continue to be capped at $4/MWh.

The intent of this rate is to create a mechanism whereby Port Hawkesbury Paper pays the variable incremental costs of service, plus a significant positive contribution to fixed costs.

Locke said this decision is a simple matter of facts going through the process with the interveners, and making sure the adders, which are the things applied over and above the energy price were set at a correct level.

“It really is just a confirmation the rate as it was originally set, should continue.”

There is a monthly administration fee of $30,000 and it’s paid in weekly advance installments of $6,923.08, which covers the direct support and very regular interactions from Nova Scotia Power.

On a daily basis, Nova Scotia Power provides Port Hawkesbury Paper with a seven day cost forecast, along with a day-ahead cost forecast.

“It’s business as usual,” Hartery said. “Exactly as the rate was first approved and have been functioning very well for all parties since its inception.”