Hardwood Plywood from China ITC Inv. Nos. 701-TA-565 and 731-TA-1341

December 9, 2016 Presentation at the ITC

On behalf of the Coalition for Fair Trade in Hardwood Plywood

I n t e rna t i ona l Economic Research L L C

Dr. Seth T. Kaplan

skaplan@IER-LLC .com

Overview

Conditions of Competition

Long-Term Trends

Conclusions

Conditions of Competition

• Substitutability

• Demand

• Capital Intensive Industry

• Certification

Substitutability

The Hardwood Plywood (HWPW) industry competes on the following characteristics:

• Grade

• Core

• Overall Thickness

• Face Species

Substitutability The ITC Identified the Key Characteristics

o f H W P W

l<! plywood which -M a stupe or eesgn <j (SI products made entire'v from bamboo as 'sold bamboo"!."

The scope in the final phase of these invest mat* preliminary phase of the investigations, with me simplification of enciLSxsn (4). and the addif cn o

Hardwood pywood rs a wood panel pre wood veneer to a core thai may MM be compos] such as medum density 'ifierboard ("MDf" ). par I'OSB"). The outer ply or (ace veneer is typicaiy p.ywood product and is the sOe of the product 0 hardwood species are used in hardwood plywood poplar, and cherry. However, hardwood plywood plywood that may have a face veneer and/or othJ distinguishing characteristic of ha'dwooo piywool non-structural applications."

Hardwood plywood is manufactured m J common ranging from A inch ( 3 . 2 mm) to 1 inch I requirements and th* intended end us*. The m 8 feet ( 1 2 1 9 1 1 8 2 9 mm), but hardwood plywood

Hardwood p.ywood is commonly used woodwork, wall pane'mg. manufactured homes, is almost always used m interior applications wt* some hardwood plywood rs made spec fca ty for manne applicators. Hardwood plywood :s also used m some construct ion-related applications where structu'al strength and moisture resistance are nol required, such as for providing a fat. stab* underfaymert for a finished flooring product."

Hardwood plywood products are differentiated by species, qual-ty of veneer, thickness, number of p! es, type of core (veneer, part-cleboard. MDF. or other), and the type o! adhesive used m the manufacturing process. Grades of hardwood pfrywood are determined oy such things as the number and sue of knots, visible decay, splits or nsect .notes, surface roughness, and other defects. Grades are assigned to both the face and bac« veneers. Plywood with the highest face grades is used in applications where appearance 4 a pnna-y cons«derataxv Most hardwood PVwood produced in tne Un ted States s graded acceding ts a consensus-based voluntary standard developed by the Hardwood Plywood and Veneer Assooabon ("HPVA').

"Hardwood plywood products are differentiated by species, quality of veneer, thickness, number of plies, type of core (veneer, particleboard, MDF, or other), and the type of adhesive used i the manufacturing process."

Source: USITC, Hardwood Plywood from China Investigation Nos. 701-TA-490 and 731 -TA-1204 (Final), Publication 4434, November, 2013, page 7.

' 78 fed R«* S S 2 7 3 . 5 8 2 8 3 ( S k i 23 . 2013) .

" See rro'ffwocd PVwood/rom the Peo&e'i Repufcin o/O-infl. inv Hos. 701 T A - 4 9 0 and 731 TA-

1 2 0 4 (P-e - na-y). CSfTC Pub * 3 6 1 (Kov 2 0 1 2 ) . at 4-5 i'P-e ~ u - y D e l e — u t c n " ) .

" CR at 1 1 0 - 111. PR i t 1-9 - 1 - I d

CR at I U , PR at 1-9

' C R a t l 11 . PR at l 9

5

Substitutability Chinese Importers Confirm the Physical Characteristics

White Birch / Betula Platyphylla

General Information

Chinese White Birch plywood is the centerpiece of our Imported plywood product line. This highly FAR EAST AMERICAN versatile wood is produced from carefully selected whole piece rotary-cut Birch veneers harvested in

China and Russia. Our import hardwood China Birch panels are sure to offer exceptional value to ail USA plywood distributors and companies that manufacture plywood.

Grades

Proprietary Face/Back grades are: A-2, B-2, C-2, C-3, C-4, D-2, E-E and F-F.

Characteristics

Creamy uniform white color with occasional small brown pin knots, tight grain, closed pores, hard and durable, finely-textured, smoothly sanded, satin-like sheen. White Birch has exceptional machining properties and is suitable for natural, colored, and painted finishes.

Origin

People's Republic of China (Chinese Birch Plywood), Russia (Russian plywood)

Thickness and Dimension

5.2mm (1/4"), 9mm (3/8"), 12mm (1/2"), 15mm (5/8"), 18mm (3/4") and 25mm (1").

Most panels are 4x8 but we also offer 48.5*96.5, various oversized panels including 4x9, 4x10, 5«8, 5*9 and 5x10 and Cut- to-size panels. All panels tightly calibrated to ensure exceptional thickness tolerances.

Source: wvvw.feaco.com/products/imported-hardwoodplvwood/white-birch/, 12/7/16

Bui-Substitutability

Chinese Importers Confirm the Key Physical Characteristics (cont'd)

FAR EAST AMERICAN

Thickness and Dimension

5.2mm (1/4"), 9mm (3/8"), 12mm (1/2"), 15mm (5/8"), 18mm (3/4") and 25mm (1").

Most panels are 4*8 but we also offer 48.5*96.5, various oversized panels including 4*9, 4*10, 5*8, 5*9

and 5*10 and Cut- to-size panels. All panels tightly calibrated to ensure exceptional thickness tolerances.

Glue Types

We offer E-1, E-2, CARB II Certified, NAF, NAUF and Moisture Resistant MR Type II interior glues.

Melamine & WBP Phenolic Type I Exterior glues.

Cores

We offer our White Birch plywood panels in a wide variety of cores from our standard multiply Poplar veneer core to high-end lamination grade veneer cores.

Specialty cores include sturdy combination cores, ultra-lightweight veneer cores, MDF cross band veneer core and finger-jointed lumber cores.

Applications

Cabinetry, Furniture, Trim work, Fixtures, Closets, Counter Tops, Entertainment Centers, Lamination.

Features

Our Chinese White Birch plywood is manufactured in select factories under tight supervision by our team of employees and inspectors for a consistently high quality

panel. Our product features durable packaging consistent with strict FEA regulations for maximum product protection and easy handling.

Source: www.feaco.com/products/imported-hardwoodplywood/white-birch/ 12/7/16 7

Chinese importers Confirm tlie Key Physical Substitutability A ' *

— Characteristics (cont'd)

\ N O R T H W E S T • / H A R D W O O D S I\WH

In collaboration with our Chinese manufacturing partners, we offer a complete

array of industrial and appearance plywood for most any application. Now

marketed under the NWHPLY brand name, this plywood product line offers a

variety of species with an array of core options that provide whatever your

application requires. Glue options include CARB 2 certified, ULEF and MR.

Thicknesses: 3 mm, 5.2 mm, 9 mm, 12 mm, 15 mm, 18 mm, 19 mm, 21 mm, 25 mm, 30 mm

Dimensions: 4 ' x 8 \ 4 ' x 9 \ 4' X 10', 4' x 12' 5'x8', 5 'x9' , 5'x10', 5'x 12'

Glue: CARB 2 certified, ULEF. MR

Cores:

Premium Veneer Core (VC) MDF MD/VC

Source: http://northwesthardwoods.com/products/plvwood/. 12/7/16 8

substitutability^ Chinese Importers Confirm the Key Physical Characteristics (cont'd)

T LibertyWoods lnternatiotwl

China PRODUCTS SOUTHEAST ASIA CHINA RUSSIA BRAZIL US LOCATIONS

Plywood Products from China

BROWSE PLYWOOD PRODUCTS •

WHITE BIRCH WPF

Thickness Available: 2.7-25MM

Grades Available: B1, B2, B4, C I , C2, C4

Applications: Cabinets, Furniture, Lamination, General Woodworking & Manufacturing

Core Options I Glue Options

Poplar VC E2

MDF CARB

Source: \AAA^Jibertvwoods.com/products/china/ accessed on 12/5/16

C o f C

Substitutability US Manufacturers Confirm the Key Physical Characteristics

A s t a n d a r d b e y o n d t h e s t a n d a r d

ANSI/HPVA defines hardwood plywood as "a panel composed of an assembly of layers

or plies of veneer or veneers in combination with lumber core, particieboard core. MDF

core, hardboard core, or of a special core material joined with an adhesive Except for

special constructions, the gram of alternate plies is at right angles and the face veneer

is a hardwood species."

Specifications

Species : various

Face grades A.B.C.D.E

Back grades 1.2.3.4

Sizes : 4 x 6 . 4 x 7 . 4 x 8 , 4 x 1 0 , 5 x 8 , 8 x 4

Thickness 1 / 8 " io 1 - 1 / 4 "

Core types : JayCore®, KayCore®, veneer core, particieboard core (PBC), medium

density fibercore (MDF). combination core, Classic Core®, lumber core

Columbia F O R E S T P R O D U C T S "

http://www.columbiaforestproducts.com/12/7/16 10

Comparison of Wood Species Sold

US China

Birch / /

Red Oak / /

White Oak / /

Cherry / /

Walnut / /

Maple / /

Ash / /

Lauan / /

Mahogany / /

Pine / /

Alder / /

Poplar / /

Substitutability Substitutability - Al l Grades Available

Species Grade A B C B E

US China US China US China US China US China

Birch / / / / / / / / / /

Maple / / / / / / / / /

Oak / / / / / / / / /

Walnut / / / / / / / / / /

12

Substitutability Excerpt of email from Chinese importer regarding similar grades.

Nice day.

1. B2 is the best grade exported to the US. B2 equivalent to A .

©.About the Sliced out of Walnut.Maple.Cherry The face &back is B2 Grade

©About the Rotary cut of Birch The face&back is B2 Grade.

Because we have been working with" hardwoods usply bluelinx".So we will give you the best quality.

Excerpt of email from Chinese importer regarding similar grades, (cont'd)

The latest quotation as attachment.

Fancy plywood,Hardwood core,Both side ,E0 Glue,B2 Grade.

Technics face&back Thickness FOB

Qingdao/m3

FOB

Qingdao/pc Loading by 40HQ

Sliced cut

Walnut

Maple

Cherry

12mm $ 641 / m 3 $ 22.90 /pc 1440pcs/18pallets/51.44m 3

Sliced cut Walnut

Maple

Cherry

18mm $ 532 / m 3 $ 28.51 /pc 954pcs/18pallets/51.12m 3

Fancy plywood,Hardwood core,Both side.EO Glue,B2 Grade.

Rotary cut Birch

12mm $ 484 / m 3 S 17.28 /pc 1440pcs/18pallets/51.44m 3

Rotary cut Birch

18mm $ 441 / m 3 $ 23.65 /pc 954pcs/18pallets/51.12m 3

Substitutability Overall Panel Thickness Sold

Thickness in Inches US China

1/4" and thinner / /

3/8" / /

1/2" / /

5/8" / /

3/4" / /

15

Substitutability

US and Chinese Producers Provide All Core Types

Core Type US China

Veneer / /

Particieboard / /

MDF / /

16

Substitutability US and China HWPW Compete Head-to-Head Among Product Characteristics

Head-to-Head

• Core (VC, MDF, PB)

• Widths and Lengths

• Glue

• Quality

° Species

• Availability

Not Significant

• Face Veneer Thickness

• Core (types of VC)

• Moisture

• Strength

• Decorative vs. Non-Decorative Uses

17

] Demand

Apparent Domestic Consumption and US Housing Starts

CD CD

CO 3 C T

tn "5

30000

25000

20000

15000

10000

5000

10000.0

n r 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Y e a r

- 9000.0

8000.0

7000.0 9.

• 6000.0

ts S

tart

5000.0

ig U

ni

- 4000.0

lou

sir

3000.0 X

2000.0

1000.0

0.0

Source: USAD FAS database, US Dept. of Census 18

HWPW is a Capital Intensive Industry

A greenfield plant costs over $100 million

High fixed costs require that US manufacturers operate at a high level of capacity utilization

High capacity utilization is best achieved by long runs of high-demand SKUs.

Prolonged inability to operate at high capacity levels leads to plant shutterings.

C of C

Certification

Both US and Chinese producers are certified to:

D California Air Resources Board Formaldehyde Emissions Standard (CARB)

• EPA Formaldehyde Emissions requirement will be nationwide in 2017

• Timber legality under the US LACEY Act

Source: HPVA 20

Long-Term Trends

Long-term trends are consistent with injury by Chinese imports.

• Domestic industry capacity and production declined

• Plants were shuttered

• Apparent domestic consumption increased

• Chinese import penetration and market share increased

• Domestic industry shipments and market share decreased.

US Production and Chinese Imports of HWPW

2500.0

2000.0

CB CD

u. g> 1500.0 co CT C/5

O

|

= 1000.0

500.0

0.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Y e a r

Source: HPVA Annual Stock Reports, 2002-2015, USDA FAS Database