December 06, 2006

Wyden Calls for Investigation of Chinese Hardwood Plywood Issue, Says Practices Are Hurting U.S, Oregon Industries

Washington, D.C. Noting that approximately 70 percent of North Americas hardwood plywood is manufactured by companies headquartered in Oregon, U.S. Senator Ron Wyden today called on three federal agencies to investigate alleged abuses by the Chinese that have greatly harmed the domestic hardwood plywood industry.Nearly 2,000 Oregonians work in the hardwood plywood industry.In separate letters to the U.S. Department of Homeland Security, the U.S. Trade Representative and the U.S. Department of Commerce, Wyden urged the agencies to actively investigate alleged practices ranging from Chinese subsidies of its timber industry to fraudulent labeling of Chinese hardwood plywood.Over the past few years, the U.S. hardwood plywood sector has experienced a dramatic downturn, which has put the entire U.S. industry in jeopardy. Since at least 2003, U.S. production, shipment volume, production capacity, and market share have all declined, Wyden wrote in the letters. At the same time, the Chinese hardwood plywood sector has been surging. This dramatic growth in the Chinese industry at the apparent expense of U.S. industry is extremely troubling because it may be based on a number of illegal trade practices.In his letters, Wyden, who serves on the Energy and Natural Resources Committee, cited a number of alleged illegal Chinese trade practices. For example, the Senator noted the Chinese sell significant imports at less than fair market value in the United States. Between 2003 and 2005, Chinese average hardwood plywood import unit values were consistently below U.S. average values. This disparity persists today. To the extent that some product prices have gone up since 2003, the increases have failed to cover the domestic industrys costs.This underselling may be at least partially attributable to the Chinese governments heavy subsidization of its forest product industry. A 2004 study by the American Forest and Paper Association (AF&PA) identifies Chinese government subsidies of $1.67 billion for renovation of state-owned paper mills in China from 1998-2002.Additionally, the Center for International Trade in Forest Products (CINTRAFOR) identifies several types of Chinese subsidies of the domestic wood products industry, including below-market interest rates, loan interest subsidies, and unusually long payback periods. As a result of this underselling and subsidization, the U.S. domestic market has suffered severe injury.Wyden also noted that import tariffs vary depending on the species of hardwood on the face and back of the plywood: oak-faced plywood has an eight percent tariff, birch-faced plywood has no tariff. Wyden said he has been informed that China hardwood plywood is being improperly characterized (e.g., identifying the back as the front) to avoid applicable tariffs. As a result, Chinese hardwood plywood enters the U.S. market duty-free, giving it an unfair competitive advantage over legally identified imported hardwood plywood and U.S. produced hardwood plywood.In his letters, Wyden noted that mislabeling of Chinese hardwood plywood also is hurting U.S. manufacturers. There are a large number of hardwood plywood industry classifications and specifications. Usage of these stamps is contingent on compliance with the applicable rules and the ability to document that compliance. It is often very expensive and difficult to meet a specification or a classification. Chinese hardwood plywood is apparently being stamped with specifications and classifications that it does not meet. As a result, cheap, potentially unsafe, and fraudulently labeled Chinese hardwood plywood is supplanting U.S. products that do meet these specifications and classifications. This appears to be occurring in China as well as in the United States. It may also be occurring elsewhere, including Europe and Japan.Wyden also pointed to illegal logging that allegedly provides Chinese hardwood plywood manufacturers with an abundant source of low-priced imported forest products to the detriment of the US hardwood plywood manufacturers. A June 2006 report by the Office of Industries, U.S. International Trade Commission (ITC) states that a relatively large portion of Chinas log imports may be from questionable sources, and estimates that 50 percent of Chinas hardwood log imports from Russia and West Africa are from suspicious or illegal sources. According to the CINTRAFOR and the American Forest & Paper Association, China has imported more than eight million cubic meters of illegal logs and 1.4 million cubic meters of illegal lumber in the past few years. CINTRAFOR has also found that illegal Chinese imports resulted in $182 million in lost exports to U.S. industries in 2005 alone. These cheap, illegal imports also provide Chinese hardwood plywood with unfair competitive advantage over U.S. hardwood plywood manufactured from legal logging sources.Finally, Wyden questioned that despite the substantial increases in Chinese wood product exports to the United States, there has been limited reciprocal access to the Chinese market. For instance, China has misclassified U.S. exporters forest products, resulting in the imposition of abnormally high import tariffs. Additionally, there have been reports of reduced levels of Value Added Tax (VAT) or no VAT at all being applied to logs and timber imported from Russia, which also disadvantages the U.S. hardwood plywood industry.These are serious questions that must be answered to protect good, family-wage jobs in Oregon and across the country, Wyden said.