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NEWS UPDATES 10 October 2009

US accuses Indonesia of subsidising paper products

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Indonesia is facing dumping and subsidy allegations by the United States for certain coated paper products, with the US linking them to tax incentives provided under a 2007 regulation, the Jakarta Post reported.

Trade Ministry director for trade security Ernawati confirmed the allegations Thursday and said the Indonesian ambassador in Washington, DC had consulted with US government officials about the issue Wednesday local time.

"In that meeting, the Indonesian ambassador addressed what have become our concerns, asking for explanations for things that remain unclear in their allegation report," she said at her office. "We are yet to receive the reports from there."

Ernawati said the US government was accusing the Indonesian government of providing some coated paper producers with subsidies through tax incentives made possible under a 2007 Indonesian government regulation for investment in priority business lines and/or designated regions.

The regulation, which has since been replaced by a 2008 government regulation, provides eligible companies with income tax cuts of up to 30 percent for six years.

"We need to learn more about the connection between tax incentives and subsidies," she said. "We also need to coordinate with the Forestry Ministry, which has the greatest role in the regulation's list of priority business lines, and the Finance Ministry."

The allegations were brought about by US coated paper producers Appleton Coated LLC, New Page Corporation, SD Warren Company and Sappi Fine Paper North America, as well as United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.

The companies filed their petition on September 23 with the US Department of Commerce and US International Trade Commission against Indonesian paper producers PT Pabrik Kertas Tjiwi Kimia and PT Pindo Deli Pulp and Paper Mills - both units of the Sinar Mas Group - on subsidy and dumping allegations.

Dumping occurs when a manufacturer exports their products to another country at prices below those charged in their home market or even below their production costs.

Ernawati said the US Department of Commerce would send question forms to Indonesia should it finally decide next Tuesday to initiate an investigation.


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