Workers grade and sort sheets of veneer at the Columbia Forest Products Co. in Newport, Vt., on Wednesday, Nov. 13, 2013. The company makes high-end plywood for fine furniture. (Photo: Glenn Russell, The Burlington, Vt., Free Press)
NEWPORT, Vt. (USA TODAY) - The winter mud is frozen solid into undulating ridges in the log yard at Columbia Forest Products here. The veneer logs, piled as high as two-story houses in frozen stack after stack, fill the yard with about 1 million board feet of prime lumber.
A big diesel rig bounces over the hard ground, grinding its way with a load of logs to the loading chute for the mill, where the logs will be peeled into veneer for hardwood plywood on a giant lathe.
"The yard is pretty much full," says Chris Sloan, Columbia's continuous improvement manager.
That's more than Sloan can say for the inside of the mill, where Columbia has been hit hard by Chinese competitors dumping plywood on the North American market, undercutting price by as much as 56%, says Gary Gillespie, Columbia's general manager for northern operations.
Dumping is defined by the U.S. Department of Commerce as a foreign company selling a product in the U.S. at "less than its fair value."
Gillespie said that since the Chinese targeted the U.S. with low-cost hardwood panels in the early 2000s, the Columbia mill in Newport has laid off more than two-thirds of its workforce, dropping 325 people to about 120 people two years ago. Columbia has been hiring in Newport since then, climbing back to about 200 workers, but in 12 plants across North America, the company fell from about 3,000 employees to about 2,000.
Kip Howlett, president of the Hardwood Plywood and Veneer Association, said 25% of the overall hardwood plywood capacity in the nation has been permanently shut down because four companies have gone out of business.
"We've had 25,000 jobs lost over four years from 2009 to 2013," Howlett said. "Obviously, the housing depression had something to do with it, but the share of Chinese imports continued to grow, even though the absolute numbers went down. Their relative share of the market continued to grow from 2009 to 2013."
Dumping petition rejected
In September 2012, Columbia and five of its competitors, representing about 80% of the hardwood plywood made in the United States, formed the Coalition for Fair Trade of Hardwood Plywood and filed a petition with the U.S. International Trade Commission to put a stop to Chinese dumping.
The ITC voted against the petition this November, despite an investigation by the U.S. Department of Commerce that found the Chinese were dumping. Rep. Peter Welch, D-Vt., said the decision was "baffling and extremely disappointing," and that it represented an "enormous setback" for the wood products industry in the United States.
"The reality is our folks are getting crushed by the Chinese practices," Welch said.
Welch testified before the ITC this past September, urging it to impose tariffs on Chinese plywood imports to ensure a "level playing field."
In its decision to vote against the coalition's petition, the ITC cited growth in the U.S. hardwood plywood industry from 17.2% of the market in 2010 to 22.7% in the first half of 2013. The ITC also maintained the Chinese, while supplying some 35% of the market, supplied only the low-end product - plywood used for interiors, backs and drawer bottoms of cabinets - "while the domestic product is used for cabinet fronts and sides."
Furthermore, the ITC said, there is little chance the Chinese will enter the higher end of the hardwood plywood market in the "imminent future." The commission concluded the hardwood plywood industry in the United States is not threatened by plywood from China, even though the production of the plywood is subsidized by the Chinese government, and it is sold at "less than fair value."
Jeff Levin, chief counsel for the Coalition for Fair Trade of Hardwood Plywood, says the irony of the ITC's decision is that the growth in market share among U.S. producers in the first half of 2013 came at a time when the Commerce Department was imposing what amounted to a temporary 22% tariff on most of the Chinese plywood, which had to be paid by importers.
"What happens in real life is importers who have been relying on the cheaper Chinese product begin to think to themselves, 'Maybe I should go find a domestic supplier,'" Levin said.
Pushed off the edge
Gary Gillespie takes issue with the ITC's assertion that the Chinese will not go after the high-end market for hardwood plywood anytime soon. Gillespie said they're already doing it.
"I think that's one of the things that pushed the coalition off the edge, getting together and filing a petition," Gillespie said. "The Chinese came in with a low-price, low-quality entry, then got better and better and worked up the food chain."
Gillespie and his counterparts at the five other hardwood plywood companies that filed the ITC petition are trying to decide what to do next. The coalition has until the middle of February to decide whether to appeal.
Levin believes an appeal could be successful. "This is a determination that is just full of partial analysis, and that omits many points of very strong probative evidence, not the least of which is that although the ITC is directed by law to consider the magnitude of the dumping margin, they did nothing but mention it in a passing footnote," Levin said.
The ITC declined to comment.
D'Ambrosio also writes for the Burlington (Vt.) Free Press