UPDATE 3-U.S. panel nixes duties in landmark case vs China

(updates with Commerce official comment, more detail)

By Doug Palmer

WASHINGTON, Nov 20 (Reuters) - The U.S. International Trade Commission on Tuesday struck down proposed duties on glossy paper imports from China in a landmark case that had prompted the U.S. Commerce Department to change a decades-old policy.

The trade panel voted 5-1 that U.S. industry was not materially injured by low-priced glossy paper from China, South Korea and Indonesia -- even though the Commerce Department had determined the imports were being sold at subsidized and unfairly low prices in the U.S. market.

A Commerce Department official, speaking on the condition he not be identified, said the trade commission's vote was only a temporary setback to Bush administration efforts to broaden the tools it can use against unfair Chinese trade practices when they occur.

But it was bitter news for NewPage Corp NWP.N, the Dayton, Ohio, paper manufacturer that filed the case last year.

"We're really disappointed. We disagree with the outcome," said Amber Garwood, NewPage vice president for communications. "We're going to take a look at it and decide what to do next."

The company's glossy paper is used in art books, high-end magazines, textbooks and annual reports. Imports from the three countries totaled about $627.1 million in 2006, compared to $355 million in 2004, with China accounting for most of the rise.

At issue in the case against China was whether it was appropriate to impose "countervailing duties" against countries still classified as non-market economies under U.S. trade law.