March 2 (Bloomberg) -- The U.S. imposed preliminary duties on $273 million of glossy paper imported from China and Indonesia, saying it is being unfairly subsidized.

The so-called countervailing duties average 8.4 percent for China and 17.5 percent for Indonesia, the Commerce Department said in a decision announced today. U.S. Customs will start collecting the duties while the case proceeds to a final order scheduled for September, the department said in a statement.

NewPage Corp., Appleton Coated LLC and a unit of Sappi Ltd. have been seeking antidumping and countervailing duties of more than 100 percent, citing Chinese and Indonesian policies of debt forgiveness, cheap electricity and low-cost access to timber for domestic producers. A separate decision on the antidumping tariffs is pending.

The companies also argued that China’s policy of keeping its currency undervalued amounts to a subsidy to its paper industry, which may force the Obama administration to formally address the issue as the case progresses. The George W. Bush administration rejected that argument in previous petitions.

Persuading China to allow the yuan to climb this year is one of U.S. President Barack Obama’s stated goals. A group of 15 senators including Charles Schumer, a New York Democrat, last week called for the Commerce Department to side with the U.S. paper companies and impose stiffer tariffs on imports from Asia’s second-largest economy. The next determination on the glossy paper complaint is scheduled for July.

Phosphate Salts

The People’s Bank of China has kept the yuan at about 6.83 versus the dollar since July 2008, halting a 21 percent three- year advance as a global recession battered exports. Most of China’s foreign trade is denominated in U.S. dollars.

The Commerce Department also imposed preliminary duties today of 109 percent on imports of Chinese-made phosphate salts used in cleaning products, fertilizers and food additives. Imports of those items more than tripled to $16.4 million in 2008, according to the department.

U.S. relations with China have been strained by the Obama administration’s decisions to impose safeguard duties on $1.7 billion in Chinese tires and dumping duties on $2.7 billion in steel pipe used in oil wells. The global recession prompted a rise in complaints from other nations as well last year, with the majority of the cases directed at Chinese-made products, according to data compiled by the World Bank.

The Commerce Department determined that government loans, tax exemptions, research and development tax policies and a government provision of electricity are unfair subsidies benefiting the Chinese producers.

Gold East Paper Jiangsu Co. must pay duties of 12.83 percent, while Yanzhou Tianzhang Paper Industry Co. had a 3.92 percent duty assessed, the Commerce Department said.

Asia Pulp & Paper, a unit of Indonesia’s Sinar Mas Group, must pay the 17.48 percent tariff.

Stories on China’s economy: {NI CHECO <GO>} For U.S. balance of Trade: {USTBTOT Index GP China’s trade: TNI CHINA TRD <GO>} For news on Asia Pulp & Paper: {APUUY US <Equity> CN <GO>} Stories on China’s economy: {NI CHECO <GO>}

--Editors: Romaine Bostick, Larry Liebert.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

March 02, 2010, 5:17 PM EST

By Mark Drajem

Source: www.businessweek.com