ITC goes to bat for U.S. hardwood plywood makers.

U.S. hardwood plywood manufacturers are crying foul against their Chinese competitors.

Not only do they question the fairness of prices of hardwood plywood panels entering U.S. ports, they also voice concern that many of the panels from China are made from illegally harvested logs and that some products are intentionally being misclassified to avoid higher tariffs.

On top of these concerns, a severe downturn in new home construction and retail sales has weakened U.S. demand for cabinets, furniture and other products made with hardwood plywood. This weakened demand has prompted many U.S. and Canadian plywood manufacturers to close plants and lay off workers.

Yet, in spite of a constricted market, China has continued to make strong market share gains, according to a pair of industry executives who spoke at a May 30 hearing before the Subcommittee on Public Lands and Forests. Both Phill Guay, vice president of corporate strategy for Columbia Forest Products, and Joseph Gonyea, COO of Timber Products Co., spoke critically of trade practices by Chinese manufacturers, while each acknowledged that their respective companies import hardwood plywood from China.

Guay noted that hardwood plywood imports nearly doubled between 2002 and 2006 to 4.4 million cubic meters. During that same period, Guay said China's share of imports skyrocketed from less than 10% to about 50%. "Imports are up 33% on a value basis and 6% on a volume basis first quarter 2007 over 2006 despite the housing slump," Guay said. "Absolutely, at this point, we believe imports have done far more damage to our industry than the current housing slump. And many of these imports are subsidized by illegal logging as well as unfair trade practices."

Gonyea said, "The Chinese government provides direct subsidies to hardwood plywood manufacturers which export their products to the United States. Many of these products are sold at below our cost, despite the distance they must travel. We have learned that Chinese hardwood plywood importers have been tryng to avoid tariffs by misclassifying their hardwood plywood, and we appreciate your work with Customs to look into this."

ITC to Investigate Potential Abuses

Guay and Gonyea were invited to testify at the hearing by Sen. Ron Wyden (D-OR). Wyden recently used his influence as a member of the Senate Finance Committee to get the International Trade Commission to launch an investigation into possible trade abuses impacting hardwood plywood and wood flooring. The ITC's probe, "Wood Flooring and Hardwood Plywood: Competitive Conditions Affecting the U.S. Industries," will encompass China, Canada, Brazil, Indonesia, Malaysia and Russia. The investigation will examine the role of each countries tariffs, technological capabilities, labor practices, environmental policies and government programs in illegal logging and other factors affecting potential trade.

"The allegations that have been brought to my attention, particularly relating to hardwood plywood imports from China, are extremely concerning," Wyden said. "Family wage jobs in Oregon and throughout the country are in jeopardy and I am hopeful that the results of the ITC's investigation will help make sure China starts playing by the rules."

The ITC is scheduled to issue its report by June 8, 2008. It is the latest in a long string of trade issues that the ITC has investigated over the past decade involving myriad Chinese industries and products, including of recent note the highly publicized melamine-tainted pet food scandal.

In 2004, the ITC's antidumping investigation into Chinese wooden bedroom furniture determined that most of the manufacturers exporting products to the United States were selling products at below market cost. That investigation led to the imposition of a varying range of duties against the Chinese companies that were investigated.

In 2005, the National Oak Flooring Manufacturers Assn., working through the Hardwood Federation, asked the U.S. Customs Bureau to take a closer look at flooring shipments coming from China that it believed were misclassified. NOFMA suspected that products that were factory finished, end-matched or both were not classified as such to avoid a 3.2% duty.

Now comes the investigation into potential hardwood plywood and wood flooring abuses from our largest source of imported goods.

These three recent actions by U.S. wood products industries might be only the tip of the iceberg.

If the U.S. wood products industry continues to lose business to China, which industry segment will most likely be next to seek trade relief?

Lines form at the right.