Port Hawkesbury Paper is contesting a U.S. Department of Commerce preliminary ruling that says the Nova Scotia company, along with J.D. Irving Ltd. in New Brunswick, are unfairly subsidized.

The investigation sets the way to levy duties on supercalendered paper, glossy paper used for magazines and catalogues.

The ruling says the Port Hawkesbury plant’s exports to the U.S. are being subsidized at 20.3 per cent. That rate could be used to determine the level of duties.

Port Hawkesbury Paper says the commerce department miscalculated its electricity costs, and included subsidies given to the previous mill owner.

“This interim ruling is without merit and is unfair to other Canadian mills in addition to ours,” Port Hawkesbury Paper’s development manager Marc Dube said in a statement.

The Nova Scotia plant takes issue with the finding that electricity purchased by PHP from a privately-owned electricity company was a subsidy because it was approved by a public utility commission.

Dube said the plant’s legal team is reviewing what he calls a “flawed” and “erroneous” interim decision.

“Port Hawkesbury Paper intends to vigorously defend against the finding of subsidies and the interim duty,” he said.

“The other subsidy findings are similarly flawed, such as the finding that money given to the Port Hawkesbury mill’s prior owner, NewPage Corporation (now Verso Corporation, one of the petitioners) while it owned the mill qualified as a subsidy to Port Hawkesbury Paper.”

Cash deposits to be collected

The preliminary ruling means the paper company must start setting aside millions of dollars now to pay the 20 per cent customs duty, which it will have to pay if a final decision rules government subsidies have harmed American companies.

The U.S. investigation began in February after a complaint by an American industry group, the Coalition for Fair Paper Imports. The complaint was prompted by the Nova Scotia government’s 2012 rescue package for a mill in Port Hawkesbury, a $124-million package that included a $40-million provincial government loan guarantee. The Utility and Review Board approved a discount onelectricity

Dube says representatives from the U.S. department plan to visit the Nova Scotia site.

The department’s final ruling is due Oct. 13, with the commission’s final ruling due Nov. 23. Assuming they uphold Tuesday’s decision, duties and tariffs would be ordered in place Nov. 30.

Two other Canadian companies, Resolute Forest Products of Quebec and Catalyst Paper Corporation of Quebec, are also affected. Resolute’s subsidy rate was found to be 2.04 per cent and Catalyst’s at 11.19 per cent, the same as Irving.