Government sets duties on China, Indonesia coated paper

WASHINGTON (Reuters) - The United States on Tuesday imposed preliminary duties on two goods from China, glossy magazine-quality paper and certain salts used to make fertilizer, adding to a growing list of bilateral trade disputes.

The Commerce Department hit Chinese coated paper companies with countervailing duties ranging from 3.92 to 12.83 percent to offset government subsidies and also levied a 17.48 percent duty on Indonesian firms in the same case.

In a separate action, the department found even higher government subsidies on certain potassium phosphate salts and hit Chinese companies that produce or export them with a preliminary duty of 109.11 percent.

China has accused the United States of misusing its trade laws to slap duties on an array of Chinese goods, including passenger tires and several steel products.

Washington says the duties are justified to protect vulnerable U.S. companies against unfair Chinese trade practices, like subsidies or below-market prices.

The coated paper case is a victory for U.S. companies NewPage Corp, Appleton Coated LLC and S.D. Warren Co, and for union workers, who filed a request last year for relief.

Environmental groups also applauded the action, saying it would discourage illegal logging in Indonesia that contributes to global warming and threatens habitat for endangered species like orangutans and the Sumatran tiger.

CHINA CURRENCY PRACTICES

The final countervailing duties on China could be higher if the Commerce Department accepts the industry's argument that Beijing subsidizes coated paper exports by maintaining an undervalued currency against the dollar, said Gilbert Kaplan, a lawyer at King & Spalding representing the petitioners.

Western economists estimate China's yuan is undervalued by anywhere from 20 to 40 percents.

If the department agrees to that, it would be the first time that U.S. countervailing duty laws have been used against China's exchange rate regime. That makes the paper case potentially much more politically explosive than many other trade spats.

Asia Pulp & Paper (APP), a major exporter of coated paper from both China and Indonesia, said it was disappointed with the ruling and would continue to fight the duties.

In a similar case brought by U.S. producers a few years ago, the U.S. International Trade Commission blocked final duties from going into effect.

"This investigation has even less basis than the last one, since the U.S. industry is making more money and has benefited from enormous government subsidies in the form of environmental tax credits," Terry Hunley, acting president of APP Americas, said in a statement.

The United States imported $228.7 million of the coated paper from China in 2008 and $44.3 million from Indonesia.

The companies and union are also seeking additional anti-dumping duties of 33 to 41 percent on Indonesia and 25.7 to 135.8 percent on China to offset below-market pricing.

The Commerce Department will issue its preliminary decision on those anti-dumping duties in coming months.

U.S. imports of certain potassium phosphate salts totaled $16.4 million in 2008.

U.S. producers are asking for anti-dumping duties of 33.7 to 177.5 percent on the salts in addition to the countervailing duties set on Tuesday.

(Reporting by Doug Palmer, Editing by Philip Barbara)