MONTREAL - Canada has filed a complaint to the World Trade Organization over China's imposition of dumping duties against Canadian exports of a kind of wood pulp used to make rayon for clothes and other products.
The duties, starting at 13 per cent, have been imposed against a number of companies, including Fortress Paper (TSX:FTP) and Tembec (TSX:TMB), which exported $317 million in dissolving pulp to China last year.
Nearly half of the 750,000 tonnes of the pulp produced in Canada was shipped to the Asian country.
China first imposed duties in November 2013 against Canada, the United States and Brazil, claiming the imports hurt its domestic pulp market.
In April, China made permanent the duties, which range up to 23.7 per cent against dissolving pulp produced by new Canadian mills.
Shannon Gutoskie, a spokeswoman for International Trade Minister Ed Fast, called the duties "unfounded and discriminatory measures."
Under international trade rules, dumping generally refers to selling exported goods below prices in the producer's home market. Under WTO rules, duties can applied by importing countries if the dumping is harming their domestic producers.
Ottawa is seeking consultations as a first step under WTO rules to reach a settlement. China has 30 days to engage in talks unless the countries agree to another timeline. If that isn't successful, Canada can seek the establishment of a WTO panel and pursue formal litigation.
The Canadian forestry sector welcomed the government's intervention even though it wished the complaint had been lodged sooner.
"It's impactful on individual companies and communities so there's jobs and economic opportunity here that's being impacted so we think a speedy resolution is better for everybody than a long protracted process," said David Lindsay, CEO of the Forest Products Association of Canada.
Fortress Paper says the duty has cost the company about $20 million annually in lost revenues.
It said the duty has put thousands of jobs in the Canadian dissolving pulp industry at risk, including more than 300 at the Fortress Specialty Cellulose Mill in Thurso, Que. The higher duty on new mills has "effectively frozen expansion" such as the indefinite suspension of a conversion project at its cellulose mills in Lebel-sur-Quevillon, Que.
Fortress said the Canadian pulp was not being dumped into China and the imposition of the duty has not had any positive impact on local prices.
Tembec CEO James Lopez said the company hopes "a dialogue between Canada and China will soon resolve the conflict."
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