Nov. 4 (Bloomberg) -- Indonesia’s Sinar Mas Group asked a U.S. trade arbiter to reject a request for tariffs on imports of glossy papers, saying U.S. producers benefit from domestic tax breaks.

Sinar Mas lawyers, in a filing to the U.S. International Trade Commission, said U.S. companies such as Appleton Coated LLC, NewPage Corp., and Sappi Fine Paper North America have no grounds to complain about subsidies to producers in Indonesia and China.

“It’s like we’re in an alternative universe,” Daniel Porter, a lawyer at Winston & Strawn LLP in Washington representing Sinar Mas and other paper exporters, told reporters yesterday. “It’s galling to be accused of receiving subsidies” when U.S. producers receive bigger benefits, he said.

Asia Pulp and Paper, which is owned by Sinar Mas, said it accounts for the “vast majority” of coated paper imports from China and Indonesia.

The tariff case concerns $317 million in imports of glossy paper, used in catalogues and brochures, from China and Indonesia. The U.S. producers asked for dumping and countervailing duties totaling more than 100 percent. The independent trade commission is scheduled to make its preliminary decision on the case on Nov. 6.

China and Indonesia together probably account for almost 30 percent of the U.S. market for the paper covered by the petitions in the first six months of this year, double the share they had last year, according to the U.S. companies.

‘Black Liquor’ Credits

U.S. companies profited especially from tax credits on production of pulp waste, the so-called black liquor tax break, which led them to boost production, exporters said.

Paper companies now qualify for alternative-fuel tax credits of 50 cents a gallon to burn black liquor, a wood byproduct from pulp-making. Black liquor is a thick, dark liquid created when wood is transformed into pulp.

NewPage and Sappi have said that they garnered millions of dollars in government payments from the fuel tax credit, the exporters said in a filing to the ITC.

A lawyer for NewPage said the black-liquor credits aren’t relevant to this case, and they are set to expire at the end of the year.

“It has helped the U.S. industry for a short period of time,” Gilbert Kaplan, NewPage’s lawyer, said in an interview. If it weren’t for the credit, “the effect of the dumping would be even greater.”

In addition to the paper case, the ITC is set to rule on separate complaints against imports of Chinese fasteners and sodium phosphate at the same hearing.

Porter represents importing companies such as Gold East Paper (Jiangsu) Co., Ltd.; Gold Huasheng Paper Co., Ltd; PT Pindo Deli Pulp and Paper Mills; and PT Pabrik Kertas Tjimi Kimia Tbk.

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

Last Updated: November 3, 2009 19:00 EST