Required Report - public distribution

**Date:** 2005/7/25

**GAIN Report Number:** TW5022

TW0000

**Taiwan**

**Solid Wood Products**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Hoa Van Huynh

American Institute in Taiwan

**Prepared by:**

Jeff Miller

**Report Highlights:**

Taiwan's solid wood product imports are growing as the island continues
to enjoy something of an economic recovery (begun in 2001\~2002) and
national and local infrastructure projects continue to receive approval
and funding. The United States, due largely to pricing and aesthetic
preferences for darker wood, continues to be a minor supplier to this
market. Opportunities for US suppliers exist for higher value engineered
wood solutions used in wood / timber frame construction and for lumber
needs that, due to performance requirements, demand performance measures
(e.g., decay resistance) ensured through proper product certification.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Taipei ATO \[TW2\]

\[TW\]

**[Executive Summary]{.smallcaps}**

In recent history, Taiwan has been both a major producer of quality
hardwoods and a regional powerhouse in wood products manufacturing.
However, elimination of most of the island's commercially valuable
timber and the flight of wood processing industries to markets where
labor is cheaper radically changed the amount and composition of
Taiwan's wood consumption within the space of only a decade or so.

Taiwan authorities spent much of the 1990s struggling to implant a
definition of \"leisure time\" into the island's busy schedule.
Authorities continue to allocate to central, provincial, county, and
municipal authorities, significant funds intended to improve
recreational and community infrastructures and make Taiwan a more
\"leisure-friendly\" place. Community zoning rules are being updated -
with businesses gradually relocating out of residential communities;
municipal and national parks are disposing of cement and steel in favor
of wood benches, viewing platforms, and shade trees; and national
infrastructure projects are greatly improving access to the wealth of
activities available beyond Taiwan's crowded cities.

In addition to public infrastructure investment, Taiwanese consumers
continue to increase their investment in their "personal
infrastructure." In the home, increased average living space, growing
levels of individual home ownership, and an increasing willingness to
invest in upgrading home interiors is resulting in a trend of more money
being spent on home improvements. With a large middle class, estimated
average household income of around US\$33,000, and growing propensity to
invest in personal leisure, Taiwanese have money to spend on comfort and
leisure products.

To the existing small but growing demand for 2x4 and timber frame
construction from well-off individuals and resort/recreation area
developers, Taiwan is set to open the doors for using structural wood in
public, commercial, and multi-family developments. In early 2003, Taiwan
approved revisions to the building code that now permit wood to be used
as main structural members in residential and commercial construction.
These revisions generally conform to US construction standards and give
Taiwan developers, for the first time, a regulatory framework within
which to develop multiple-family and commercial properties using
structural wood (2x4 and post-and-beam). These revisions represent a key
step forward in encouraging middle- and upper-middle class homebuyers to
consider purchasing a wood frame home as their first or second home.

While wood will never eclipse other materials for structural use and
will continue to face tough competition from other materials in
furniture, flooring, and other applications, a strong appreciation of
the value and beauty of wood, coupled with the means to pay for
products, makes Taiwanese consumers natural targets for US exporters.
Guided by appropriate market approach strategies, exporters of US wood
and wood products should find good opportunities for sales growth into
Taiwan.

The ATO is dedicated to assisting US exporters of agriculture products
to compete in overseas markets. To learn more about this market and
begin developing contacts, you are welcome to make use of our resources
here in Taiwan.

**[Production]{.smallcaps}**

FOREST RESOURCES

The island of Taiwan is cloaked in forest over nearly 60 percent (2.0
million hectares) of its land mass. For much of the 20^th^ century, both
the logging industry and wood exports contributed significantly to the
island's GDP. Felled virgin stands of cypress, fir, camphor, and oak
helped fund Japan's development up through the Second World War (Taiwan
was under Japanese rule from 1895 to 1945) and provided essential hard
currency exports for the Nationalist Chinese regime after their retreat
from Mainland China to the island in 1949. Although virtual elimination
of high-value virgin stands eventually ground the island's logging
industry to a halt, Taiping Shan, Taiwan's last major logging district,
managed alone to generate 93,000 m^3^ of felled timber as late as 1959.

Over-harvesting of virgin timber, escalating labor costs, and growing
appreciation of the importance of forests in the ecosystem have
diminished Taiwan's commercial forestry industry to its present output
of around 50,000 m^3^ per year and re-targeted government initiatives to
sustainable management of all forest land. In 1992, Taiwan authorities
banned all logging in \"natural\" timber stands (whether virgin or
regrowth). The ban is believed effective apart from cases of illicit
felling / removal of individual logs of high-value wood (e.g., camphor,
red and yellow cypress, and Taiwan zelkova, among others).

In light of the harvest ban on non-plantation timber and current
economic disincentives against logging (low market prices, high labor
costs, aging labor force), only 500 hectares in Taiwan are now formally
engaged in the production of commercial timber. The peacock pine (willow
fir or *cryptomeria japonica*), China fir (*cuninghamia laceolata*), and
Taiwan acacia (*acacia confusa*) are three commonly cultivated species.

From a commercial standpoint, the quality of both natural and plantation
stands in Taiwan is considered generally poor - testimony to the
unbridled exploitation of formerly rich forest resources during the past
century and to a recent history of reforestation efforts that, in many
cases, selected species poorly suited to existing soil and climate
conditions. A recent Taiwan Forestry Research Institute (TFRI) study
estimated that 70 percent of all plantation trees in Taiwan had trunks
measuring between 10 and 30 cm in diameter[^1]. Most of the annual
harvest is currently channeled into low value applications, with over
1/4 of output volume used as firewood. TFRI continues to conduct
research into using Taiwan wood in higher value applications (including
oriented strand fiber boards, plywood backing, and plastic/wood
composite materials) although results are not expected to spur
significant expansion of land under commercial cultivation.

In spite of its large reserve base of standing timber, the potential for
Taiwan to increase production of wood much beyond current levels is
minimal due to a diverse set of factors, including environmental
regulations, low import prices, labor flight to higher paying sectors
(in a recent survey of the forestry industry in Taipei county, only 20
percent of those employed in the sector were below the age of 40), and
the long-term investment required (78 percent of privately held
commercial forest land in Taipei County was inherited by the current
owners).

###### SOLID WOOD PRODUCTS SITUATION and OUTLOOK

Although most timber is now off limits to commercial exploitation,
supporting industries in Taiwan which once processed local wood remain
strong, with many Taiwan-based companies now important players in the
Asia regional and global trade in lumber and lumber products. Initially,
Taiwan firms manufacturing lumber, paper, furniture, and decorative wood
products, shifted from using locally-sourced to using imported raw
materials. As labor and other operating costs rose steadily through the
1980s and 1990s, *most* shifted some or all production offshore. The
most common destinations now for Taiwanese investments in wood
processing is China (focused on Guangdong Province), followed by
Vietnam, the Philippines, and other Southeast Asian countries.

**Asia Wood Purchase Decisions Still Centered in Taiwan**: While much
production has relocated offshore, key operational decisions in
Taiwan-invested factories (regarding such issues as installed equipment,
order receipt / scheduling, changes to capacity, and raw material
purchases \[including wood\]) tend to remain in the hands of
Taiwan-based executives. Based on this practice, and estimating that
roughly 1/3 of China, Vietnam, and Philippine furniture exports benefit
from Taiwan investment, the power of Taiwanese log and semi-finished
wood buyers greatly exceeds the value derived by considering only
Taiwan's wood furniture production or wood import / export figures.

**Taiwan Wood and Wood Product Imports and Exports (HS44): 1998 --
2004**

![](media/image2.wmf)

According to survey data last updated in 2001, nearly 2,500 firms are
licensed to operate wood processing / production facilities in Taiwan.
Most are small (for example, approximately 2/3 of all furniture makers
employ 10 staff or less) and many likely have most or all production
overseas. In terms of numbers, Taiwan has 752 furniture manufacturers,
490 lumber manufacturers, 187 plywood manufacturers, 47 \"composite\"
wood products manufacturers (e.g., flooring, special-use composite
woods), 84 wood container manufacturers (e.g., crates, jewelry boxes,
storage boxes), and 908 firms manufacturing \"other\" wood products.

######## [TRADE]{.smallcaps}

######## Overview and Outlook

Slightly over US\$1.23 billion worth of wood and wood products (under HS
code 44 \[excluding furniture\]) cleared Taiwan Customs during 2004, a
28% rise over 2003 levels.

![](media/image3.wmf) Wood imports across most subcategories are
continuing to claw their way back from lows hit around 2000, with
increases largely driven by a rebounding domestic economy, continued
investment in the island's "recreational" infrastructure, and rising
demand for home remodeling materials. While opportunities for sales
growth continue to be attractive in certain subcategories (engineered
wood and softwood lumber in particular), Taiwan imports today represent
just over half of the \$1.9 billion in wood that arrived in 1993. A
general preference toward relocating wood processing operations
offshore, coupled with continued anxieties about the domestic economy
(which is highly dependent upon income from IT product exports), rule
out any serious rise in broad-based demand for either finished or raw
material wood products in the coming 2\~3 year period.

However, it seems clear that the depressed market for wood "bottomed
out" and began recovering in 2000-2001. Key segments such as softwood
lumber (used for packing material, cement construction braces, interior
design framing, and wood frame structures), plywood, and temperate
hardwood lumber (mostly used in furniture, flooring, and wood product
manufacturing) have returned to modest to a pattern of moderate
year-to-year growth due to improvement of the general economy.

Exports of furniture and wood consumer products continue to drop
precipitously. Furniture exports during 2004 continued to decline due to
continued shifting production offshore and sluggish US market demand.
Exports can only be expected to pick up somewhat with a recovery in US
market demand, which account for upwards of 3/4 of Taiwan's wood
furniture exports, although Taiwanese furniture manufacturers have
already largely evolved into transnational enterprises and most have
primary production facilities located in southern China, Vietnam, the
Philippines or elsewhere.

The bulk of Taiwan's wood imports continue to be low-value softwood
lumber and plywood destined for industrial uses and hardwood paneling
and veneers used for decorative purposes. This is expected to remain
true through at least the coming several years.

*Hardwoods*: Both Taiwan and Chinese cultures appreciate the aesthetic
value of hardwoods and, as incomes rise and quality of life issues
increase in importance, families are increasingly likely to purchase
hardwood interior decoration products including parquet flooring, wall
panels, solid wood dining tables, and other decorative items. Temperate
and tropical hardwood species seem to be equally well received by
consumers.

For most segments of the hardwood market, consumer preferences should be
researched and addressed prior to pursuing market opportunities. For
example, more than 90 percent of dining tables sold in Taiwan are round,
while the market for rectangular wood tile parquet flooring is
particularly hungry for tiles made of unique species (i.e., not
currently sold in volume in Taiwan) or in unique configurations. Also
please note that general demand for do-it-yourself (DIY) remains
shallow - extending little beyond assembling simple furniture out of a
box or laying down flooring tiles from a kit. DIY demand is still
expected to become more sophisticated gradually and US suppliers of
hardware materials and more sophisticated DIY kits may see increased
opportunities over the coming years. The time for market contact and
development work, however, is now.

[A Note on Flooring]{.underline}: The profitable local parquet flooring
industry manufactures wood flooring tiles to a standard 1.5cm (finished)
thickness. Flooring lumber exporters able to offer rough hardwood lumber
in approx. 1.7cm (unfinished) thickness specifications will help
minimize processor waste and provide an important edge over competing
suppliers. The 1.5cm (finished) standard is also widely used in China,
Japan, and other Asian markets for domestic consumption.

With a well-developed regional wood processing network and growing
demand for wood furniture and decorative products (particularly designed
to Chinese/Asian-specifications), the highest value sector should
continue to be semi-processed wood products, such as hardwood dimension
lumber and hardwood veneer. Such intermediate products can be final
processed at facilities in Taiwan or elsewhere, ensuring products meet
local market expectations and leveraging lower labor costs.

*Softwoods*: Much of the softwoods imported into Taiwan continue to come
in as plywood and dimension lumber. A significant percentage of
dimension lumber is consumed by the construction industry to create the
temporary supports and casts around which cement is poured to form
building foundations, frames, and walls. Around 95 percent of new
buildings, both residential and commercial are constructed of reinforced
concrete (RC). Plywood sheets are used in many applications including
interior decoration, as backing for billboards and signs, and as facing
on temporary structures. This is a high volume and low unit-value
segment.

The market for wood frame and timber frame homes remains in its infancy.
However, changes in consumer attitudes and government policies offer
good potential for growth in this sector over the coming years. Note
that the ferocious Formosan termite and Taiwan's humid climate
underscore a need for pressure treated wood in nearly all outdoor /
structural applications. Laminated wood imports from the US grew
slightly in 2003 (specific figures are unavailable) and is believed
largely attributable to higher value glue-laminated (glulam) beams. With
concerted effort on the part of industry, this positive trend is likely
to continue.

Stable economic growth coupled with a rising income base can be
expected, over the coming 3 - 5 years, to return healthy growth in
demand for imported finished wood products (including the \"high end\"
furniture, DIY, hardwood flooring, and other decorative products where
US makers have competitive strength) and for treated softwood lumber for
wood-frame construction (single and multiple dwelling homes, small
business / academic office buildings, glulam long-span structures, and
park / recreational area structures). Imports of items in these
categories have grown significantly in value over the past decade in
comparison with other forest products industry items. Demand for plywood
and second-grade softwood lumber should pick up with any re-ignition of
the traditional (reinforced concrete) construction sector.

**Import Regulations**

On 1 January 2005, Taiwan began requiring that phytosanitary
certificates accompany imported wood in response to the risk of Asian
Longhorned Beetle (*Anoplophora glabripennis*). At present, Taiwan
requires that an appropriate phytosanitary certificate accompany the
following wood products imported from the United States and other
countries (see table below):

# Table of Commodities Subject to Legal Animal & Plant Quarantine

  ------------------------------------------------------------------------
  **CCC (Taiwan          **Description of Goods**
  Tariff)                
  Code**                 
  ------------- ---- --- -------------------------------------------------
  44 01                  Fuel wood, in logs in billets, in twigs, in
                         faggots or in similar forms; wood in chips or
                         particles; sawdust and wood waste and scrap,
                         whether or not agglomerated in logs, briquettes,
                         pellets or similar forms.

  44 01. 10.00           

                90   6   

  44 01. 21              

  44 01. 21. 00 00   2   

  44 01. 22              

  44 01. 22. 00 00   1   

  44 01. 30              

  44 01. 30. 00 90   2   

  44 03                  Coniferous wood in the rough, whether or not
                         stripped of bark or sapwood, or roughly squared

  44 03. 20. 10 00   9   

  44 03. 20. 90 11   9   

                12   8   

                13   7   

                14   6   

                15   5   

                16   4   

                17   3   

                18   2   

                19   3   

  44 03                  Other wood (tropical and temperate deciduous) in
                         the rough, whether or not stripped of bark or
                         sapwood, or roughly squared, including: various
                         tropical, Oak, Beech, Garoowood, Sandalwood,
                         Maple, Ash, etc.

  44 03. 91              

  44 03. 91. 00 00   5   

  44 03. 92              

  44 03. 92. 00 00   4   

  44 03. 99              

  44 03. 99. 11 00   4   

  44 03. 99. 12 00   3   

  44 03. 99. 19 00   6   

  44 03. 99. 90          

  44 03. 99. 90 10   6   

                20   4   

                30   2   

                90   9   

  44 04                  Hoopwood; split poles; piles, pickets and stakes
                         of wood, pointed but not sawn lengthwise; wooden
                         sticks, roughly trimmed but not turned, bent or
                         otherwise worked, suitable for the manufacture of
                         walking-sticks, umbrellas, tool handles or the
                         like; chipwood and like

  44 04. 10              

  44 04. 10. 00 00   2   

                         

  44 04. 20              

  44 04. 20. 00 00   0   

  44 06                  Railway or tramway sleepers（cross-ties）of wood

  44 06. 10              

  44 06. 10 00  00   0   

  44 07                  Coniferous wood sawn or chipped whether or not
                         planed, sanded or finger-jointed, of a thickness
                         exceeding 6 mm

  44 07. 10              

  44 07. 10. 10 00   7   

  44 07. 10. 90          

  44 07. 10. 90 11   7   

                12   6   

                13   5   

                14   4   

                15   3   

                16   2   

                17   1   

                18   0   

                90   1   

  44 07. 24 \~  00   2   Various tropical woods, sawn or chipped
  29                     lengthwise, sliced or peeled, whether or not
                         planed, sanded or finger-jointed, of a thickness
                         EXCEEDING 6 mm

  44 07. 91              Various temperate woods, including Oak, Beech,
                         Garoowood, Sandalwood, Maple, Ash, etc, sawn or
                         chipped lengthwise, sliced or peeled, whether or
                         not planed, sanded or finger-jointed, of a
                         thickness EXCEEDING 6 mm

  44 07. 91. 00 00   1   

  44 07. 92              

  44 07. 92     00   0   

  44 07. 99              

  44 07. 99. 11 00   0   

  44 07. 99. 12 00   9   

  44 07. 99. 19 00   2   

  44 07. 99. 90          

  44 07. 99. 90 10   2   

                20   0   

                90   5   

  44 15                  Packing cases, boxes, crates, drums, pallets, and
                         similar packings, of wood

  44 15. 10              

  44 15. 10. 00 00   9   

  44 15. 20              

  44 15. 20. 00 00   7   
  ------------------------------------------------------------------------

**COMPETITION**

As with many sectors in Taiwan, price is frequently *the* key driver in
purchasing decisions. US competitiveness has been boosted recently due
to a decline in value of the dollar *vis a vis* key competitors in
Europe for softwoods (veneers, framing lumber, etc.) and cost increases
for some tropical hardwoods.

Taiwan importers tend to be familiar with the range of wood products
available and major supplier countries. End-users typically rely upon
importers for such information. This makes the importer the principal
\"gatekeeper\", determining which wood species to promote and from which
suppliers to purchase. While Taiwan/Chinese preferences tend toward
darker tropical hardwoods, availability concerns, rising prices, and
recent fashion trends toward lighter / brighter wood colors have helped
diversify applications for US hardwoods such as maple, cherry, oak, and
others.

Competition to supply traditional market segments (such as logs,
plywood, veneer, furniture, decorative, etc.) focuses heavily on
relationship-building and price negotiations due to the strength of
Taiwan importers and Taiwan's open trade policies (unlike many product
categories, most wood and wood products may be imported from Mainland
China). However, in new product areas, such as wood frame housing and
wide-span structural (glulam) wood construction, education and
promotional efforts not only present opportunities to develop
significant new export revenue but are absolutely essential to address
local market constraints including architect/builder unfamiliarity with
wood construction principles and consumer concerns regarding the
longevity and safety of wood frame vs. concrete structures (e.g.,
performance against termites, rot, fire, and other elements).

During 2004, both the US (through FAS, the Engineered Wood Association,
the Evergreen Building Products Association, and others) and Canada
organized programs for Taiwan construction authorities targeting
international regulatory standards for wood frame construction and wood
materials and for architects and builders promoting development of a
wood frame housing market in Taiwan. Japan has been actively promoting
\"light-gauge steel\" frame construction which also incorporates plywood
and some lumber in its construction.

**Market Development Strategies**

[Manage customer relations well and know your competition]{.underline}:
Taiwan remains a price competitive market for both business-to-business
and retail consumer transactions. A well-developed relationship with
your Taiwan buyer should help secure for your business some price buffer
against competing suppliers, but in general, unless you supply a unique
product or have other specific supplier advantages, purchase price is
likely to be a recurring topic of discussion. To address price concerns
effectively, maintain a good understanding of what competitors can (and
cannot) provide in terms of products and services as well as of your own
products and services.

A small circle of a dozen or so importers handles most log and lumber
imports. Most have historical roots in Taiwan's early logging industry
and are typically private, family-controlled enterprises. This makes
relationship building and responsiveness to client requests
exceptionally valuable tools in building your log/lumber exports into
this market (and - as noted above - to China, Vietnam, and other
markets) and to secure a steady sales relationship.

[Education]{.underline}: Use of structural wood is expected to continue
to increase, under its own inertia, slowly over the coming 5-year
period, fueled by individual developers' exploitation of niche
opportunities. International industry and association support of
promotion and basic skill training programs will be, however,
[essential]{.underline} to position wood as an effective challenge to
reinforced concrete (rc) and steel in the large number of proposed and
ongoing recreation infrastructure projects (*100s of projects of varying
sizes at national, county, and local levels*), in the market for single
home / low-rise apartment community developments (*10\~30 per year*),
and in the market for vacation hotel / retreat construction.

In interior design and furniture production segments, US suppliers are
encouraged to assist Taiwan buyers (agents and importers) to better
understand the range of temperate hardwoods available and wood
performance characteristics.

![](media/image4.jpeg){width="2.847244094488189in" height="4.0in"}Due to
the \"local\" nature of most wood end-users in Taiwan (and Greater
China), exporters and associations are encouraged to prepare and print
promotion and education materials in Chinese for broadest coverage. When
limited to preparing materials in one Chinese character format only,
traditional Chinese (rather than simplified) is still deemed the format
most widely accepted in both Taiwan and China.

[Ecolabeling]{.underline}: At present, consumer awareness / concern
regarding ecolabeling and sustainable forest management practices end,
in the main, when product cost increases as a result. While there exists
future potential for selling premium-valued wood products based on
ecolabeling/environmental concepts, such will require significant up
front investment in brand development. The government does not have an
active certification or labeling program to recognize wood harvested
from well-managed sources. To date, the international home products
chain B&Q (UK) is the only supplier of wood products (lumber, outdoor
furniture, parquet floor tiles, etc) into the market reportedly
requiring suppliers to certify that wood used is sourced from
well-managed forests (as certified by the Forest Stewardship Council).
Their success with sales to date is believed attributable as much to
their unique position in the marketplace (the only DIY superstore) as to
consumer preference for the FSC label.

**Market Segment Analyses**

**Construction Sector**

**Overview**

Spending by central, county, and local governments was a principal
factor that helped Taiwan find a base and then see some lift in demand
for solid wood products. Successful beautification projects completed
during the late 1990s in places like Hualien, I-Lan, and Nantou are now
being replicated around the island, spurring demand for treated SYP and
western species for outdoor applications. The trend seems set to
continue through the coming several years, with local governments
securing and implementing budgets for civic improvement projects in the
run-up to local and national elections.

Continued concerns regarding the stability of the current economic
recovery, a relatively high rate of multiple home/apartment ownership,
and the large inventory of available housing in the suburbs of major
metropolitan areas are factors which currently weigh upon the
construction sector at large and promise to continue doing so through
the foreseeable future. The single bright spot is the flurry of
construction, which is now going up near the future stops of Taiwan's
high-speed rail (currently under construction). Public and private
construction linked to the high-speed rail project, coupled with several
particularly large single-building projects in Taiwan's metropolitan
areas, accounted for upwards of 1/2 of building licenses issued during
2002.

Uncertainties regarding the long-term value of real estate holdings, an
uptick in the number of mortgage defaults, and a relatively high level
of multiple residence ownership (i.e., family owns more than one house
or apartment) continues to weigh upon real estate and depress
transaction prices. In general, there is nothing on the foreseeable
horizon that would spur a sustainable rise in property prices. Prices
may be expected to see further drops or remain the same over the coming
several years.

![](media/image5.jpeg){width="7.083464566929134in"
height="2.3874015748031496in"}The combination of lower prices and
attractive interest rates is likely to help primarily sales of
apartments in already-constructed reinforced concrete (RC) / steel
girder buildings and to improve slightly demand for new high-rise
construction in suburban areas. While wood used in interior design
should benefit as a result, structural wood should not experience any
particular benefit from these trends.

Taiwan's generally improving economy is boosting overall construction
and raising orders for wood frame homes, D-log cabins, glulam wide-span
structures, and outdoor recreational and park facilities. Wood
construction should continue to show positive growth, based on reports
from Taiwan wood construction industry sources. Wood frame home starts
were roughly estimated at 875 in 2003 and 870 in 2004. Wood frame
construction is expected to benefit in the near term from policy
changes, some already implemented, that put structural wood on an equal
footing with concrete and steel in the regulations.

**Marketing**

Due to the generally high price of land, a predilection toward urban
living, and a host of entrenched builder and consumer suspicions about
wood structures, Taiwan holds little prospect of becoming a huge export
market for wood frame construction. However, convergence of several
factors highly favorable to wood frame construction makes prospects
bright for steady and healthy growth. These positive growth factors
include (1) increasing awareness regarding earthquake resistance /
safety of wood frame versus reinforced concrete structures, (2) the glut
of unimaginative, cookie-cutter residential complexes of reinforced
concrete currently on the market, (3) quality-of-life expectations
amongst the top 5-10% of Taiwan society that may include consideration
of a vacation or second home constructed of wood, and (4) the successful
approval and construction of wood-frame homes and other buildings based
on building codes recently altered to accommodate wood frame structures.

Demand for wood frame single family and multi-story townhouse dwellings
is greatest in three principal market segments, namely (1) vacation
homes for those in Taiwan's top income bracket, (2) residential
developments executed on the outskirts of major urban centers (designed
in wood for a particular purpose such as earthquake resistance or
practical appeal to an overseas-educated middle class), and (3)
principal homes for families in rural areas. If these three opportunity
areas were aggressively developed, the resulting market potential is
estimated to be an additional 1,750 housing units built within a 3 to
4-year time frame with steady market growth afterward.

To realize the above market potential requires that material suppliers
and their Taiwan partners provide initial development projects with
practical technical and educational support. Lack of general architect
and builder familiarity with wood frame construction techniques is the
key supply-side constraint and consumer unfamiliarity with structural
wood \"products\" is the key demand-side constraint to stronger market
growth. The latter includes consumer concerns regarding structural wood
covering fire safety (\"wood burns, concrete does not\"), rot and
insects (\"wood homes deteriorate quickly in Taiwan's environment\"),
typhoon resistance, and so on. Concerns can be minimized, and contrasted
with the many problems associated with reinforced concrete, through
appropriately designed education and promotion programs.

**Policy**

The Ministry of Interior's Construction and Planning Administration
(CPA) is responsible to draft and implement construction regulations and
standards. Revisions to building codes published in 1996 and revised in
2003 permit construction of wood and timber frame structures of 4
stories (14 meters) or less[^2]. Structures of greater height can be
built, but plans require special CPA review and approval.

Inspection and approval of completed structures fall under the
jurisdiction of the county (or municipality) in which a building has
been constructed.

[Bringing Wood to the Masses]{.underline}: Underscoring commitments to
make Taiwan a \"greener\" island and less vulnerable to frequent
tremors, Taiwan authorities have partially completed an update of
building codes with the stated objective of classifying wood as a
\"normal\" construction material \-- on a par with steel and concrete.
While long approved, in practice, for constructing single-family homes,
structural wood was proscribed from use in multi-family or scale
developments without special central government committee approval. This
was due to fire code regulations which forbad the use of *any*
\"flammable\" material as a load-bearing member.

The revised building code was approved in the spring of 2003, albeit
without a finalized methodology for determining fire resistance. As of
the new code's date of announcement (1 May 2003) builders in Taiwan are
permitted to proceed with construction of multiple home residential
communities and townhouse developments provided that individual
residential units are separated either by a suitably wide open space or
a non-wood fire barrier (firewall). The as yet unresolved issue of
calculating fire resistance for either 2x4 or timber frame structures
continues to require that plans for public buildings (such as office /
shopping structures, auditoriums, and other such enclosed structures)
must be approved by the central government's construction committee
prior to construction and use.

The current fire code permits developers to construct legally multiple
home wood frame developments and should gradually remove the previous
reluctance (due to lack of legal framework) of banks to finance such
projects and insurance companies to cover residences approved under the
new code.

Taiwan construction industry officials are in the process of researching
fire code revisions to incorporate wood structures. Research and draft
code submissions to the CPA continue to be anticipated.

The slow economy and newness of the regulations are expected to hinder
any burst of activity with multi-home developments in wood. However, a
number of developers already have draft plans to use structural wood for
both townhouse and single home residential communities when the economic
situation again warrants.

Passage of the Agriculture Development Act in January 2000 opened the
door to convert around 160,000 hectares of working farmland[^3] to
non-agricultural (including residential) use. This new regime eliminates
the long-standing ban on farmland re-zoning and should open up
substantial tracts of prime real estate around the island to commercial
development. Officials have paced conversion work initially at around
6,000 ha. per year. Already many recreational farm developments (*nong
she*) have been set up to attract domestic tourism. Most use wood
(treated SYP, redwood, etc.) in outdoor facilities and some are using
structural wood in their main buildings. Opportunities are significant
in this sector for both wood suppliers and architects able to provide
consulting services on optimal landscaping and structural designs.

**Furniture and Interiors Sector**

**Overview**

As noted previously, Taiwan has 752 firms registered to manufacture
furniture and related products in Taiwan. Many specialize in certain
woods, styles, or furniture items. In addition to local manufacturing,
Taiwan has investment interests in furniture and wood products
production overseas worth many times the value of domestic production.

An improved economy that is lifting general consumer spending and a
continued reduction in domestic production is driving domestic furniture
product sales, which were up by 12 percent in 2004 to US\$103 million.
Anticipated moderate economic growth should see continued moderate
growth for furniture sales through the coming few years. The
predilection of Taiwan consumer products manufacturers to set up
production operations offshore will similarly continue to reduce
furniture export volumes. Exports of wood furniture and chairs held
fairly steady in 2004 -- at US\$844 million.

**Marketing**

The furniture business, along with other well-established wood
processing industries, relies on importers for information on wood
species, performance characteristics, and availability. As nearly all
are small-scale producers in Taiwan, few (if any) firms purchase wood
directly from exporters; relying instead on importers for supplies of
lumber and other semi-finished wood products.

Therefore, supporting importer efforts to provide furniture-maker
customers with information on species, production techniques, and design
trends has proven an effective approach to expanding furniture, and
interior design segment, sales.

**Policy**

The combination of high relative labor costs and tightening
environmental protection conditions will continue to encourage Taiwan's
furniture makers to send production overseas. Less impacted by labor
costs, the higher value categories of furniture will continue to be
produced in Taiwan and Taiwan will continue to have a broad base of
furniture \"manufacturers\" that focus principally on assembling
furniture components manufactured overseas.

**Materials Handling Sector**

**Overview**

The materials handling sector in Taiwan is not formally tracked by
production or consumption statistics. Based on an estimate from the
Taiwan Lumber Association that over half the imports of second-grade
spruce, pine, and fir (SPF) are used in material handling, market
consumption during 2004 totaled roughly 150,000 m^3^. The industry is
expected to grow moderately over the next 2\~3 years due to an improving
export outlook. Future growth will depend on solidification of an
economic recovery.

Wooden pallets are still preferred in the market due to low cost,
despite the fact that Taiwan's humid climate and termite problems make
wood a less than ideal material. Damaged wooden pallets are not
generally repaired due to Taiwan's relatively high cost of labor. Wooden
pallet scrap is either recycled as support / repair material or disposed
of as garbage.

**Tables and Statistics**

**[Tariff Rate Schedule for Wood and Wood Products]{.smallcaps}**

+-------+-----------------------------+----+----+--------+------+----+
| F     |                             | Ta | Ta | Other  |      |    |
| OREST |                             | ri | ri |        |      |    |
| PR    |                             | ff | ff |        |      |    |
| ODUCT |                             |    |    |        |      |    |
| TA    |                             |    |    |        |      |    |
| RIFFS |                             |    |    |        |      |    |
| AND   |                             |    |    |        |      |    |
| TAXES |                             |    |    |        |      |    |
| (per  |                             |    |    |        |      |    |
| cent) |                             |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| T     | Product Description         | 20 | 20 | Import | T    | Ex |
| AIWAN |                             | 01 | 02 |        | otal | po |
|       |                             |    |    | Taxe   | US\$ | rt |
|       |                             |    |    | s/Fees | Cost |    |
|       |                             |    |    |        | of   | T  |
|       |                             |    |    |        | Im   | ax |
|       |                             |    |    |        | port |    |
|       |                             |    |    |        | (d)  |    |
+-------+-----------------------------+----+----+--------+------+----+
|       |                             |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4401  | stems and roots, fuel wood, | 0  | 0  | 0.4    | 0.4  | 0  |
|       | chips, bark, sawdust, and   | .0 | .0 |        |      |    |
|       | waste                       |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4403  | wood in the rough (all      | 0  | 0  | 0.4    | 0.4  | 0  |
|       | varieties)                  | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4404  | hoopwood, split poles,      | 0  | 0  | 0.4    | 0.4  | 0  |
|       | piles, pickets, and stakes  | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4405  | sandalwood and other wood   | 0  | 0  | 0.4    | 0.4  | 0  |
|       | flours                      | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4406  | railway sleepers            | 0  | 0  | 0.4    | 0.4  | 0  |
|       |                             | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4407  | wood sawn or chipped        | 0  | 0  | 0.4    | 0.4  | 0  |
|       | lengthwise                  | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4408  | veneer and sheets for       | 0  | 0  | 0.4    | 0.4  | 0  |
|       | plywood                     | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4409  | edge/face shaped wood (as   | 0  | 0  | 0.4    | 0.4  | 0  |
|       | for parquet flooring,       | .0 | .0 |        |      |    |
|       | molding, etc.)              |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4410  | wafer/particle board of     | 3  | 3  | 0.4    | 3.4  | 0  |
|       | wood                        | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4411  | fiberboard                  | 3  | 3  | 0.4    | 3.4  | 0  |
|       |                             | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4412a | 4412 subcategories of       | 12 | 10 | 0.4    | 12.9 | 0  |
|       | UNFINISHED plywood or       | .5 | .0 |        |      |    |
|       | veneered/laminated wood     |    |    |        |      |    |
|       | panels, excepting           |    |    |        |      |    |
|       | subcategories 1910,         |    |    |        |      |    |
|       | 9221,and 9910               |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4412  | 4412a with coniferous wood  | 7  | 7  | 0.4    | 7.9  | 0  |
| .1910 | on both faces, each ply not | .5 | .0 |        |      |    |
|       | exceeding 6mm               |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4412  | other 4412a with coniferous | 5  | 5  | 0.4    | 5.4  | 0  |
| .9221 | wood on both faces          | .0 | .0 |        |      |    |
| /     |                             |    |    |        |      |    |
| 9910  |                             |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4412b | 4412 subcategories of       | 17 | 15 | 0.4    | 17.4 | 0  |
|       | FINISHED plywood or         | .0 | .0 |        |      |    |
|       | veneered/laminated wood     |    |    |        |      |    |
|       | panels, excepting           |    |    |        |      |    |
|       | subcategories 1920,         |    |    |        |      |    |
|       | 9222,and 9920               |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4412  | 4412b with coniferous wood  | 10 | 9  | 0.4    | 10.4 | 0  |
| .1920 | on both faces, each ply not | .0 | .2 |        |      |    |
|       | exceeding 6mm               |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4412  | other 4412b with coniferous | 7  | 7  | 0.4    | 7.9  | 0  |
| .9222 | wood on both faces          | .5 | .5 |        |      |    |
| /     |                             |    |    |        |      |    |
| 9920  |                             |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4413  | densified/compressed wood   | 2  | 2  | 0.4    | 2.9  | 0  |
|       | blocks, plates, strips,     | .5 | .0 |        |      |    |
|       | other shapes                |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+

+-------+-----------------------------+----+----+--------+------+----+
| TA    |                             | Ta | Ta | Other  |      |    |
| RIFFS |                             | ri | ri |        |      |    |
| AND   |                             | ff | ff |        |      |    |
| TAXES |                             |    |    |        |      |    |
| (per  |                             |    |    |        |      |    |
| cent) |                             |    |    |        |      |    |
| \--   |                             |    |    |        |      |    |
| ***CO |                             |    |    |        |      |    |
| NTINU |                             |    |    |        |      |    |
| ED*** |                             |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
|       | Product Description         | 20 | 20 | Import | T    | Ex |
|       |                             | 01 | 02 |        | otal | po |
|       |                             |    |    | Taxe   | US\$ | rt |
|       |                             |    |    | s/Fees | Cost |    |
|       |                             |    |    |        | of   | T  |
|       |                             |    |    |        | Im   | ax |
|       |                             |    |    |        | port |    |
|       |                             |    |    |        | (d)  |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4414  | wooden frames for painting, | 2  | 2  | 0.4    | 2.9  | 0  |
|       | photography, etc.           | .5 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4415  | wooden crates, drums,       | 2  | 2  | 0.4    | 2.9  | 0  |
|       | boxes, pallets, other       | .5 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4416  | staves, casks, barrels,     | 2  | 2  | 0.4    | 2.9  | 0  |
|       | vats, tubs, etc.            | .5 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4417  | wood handles, tools, etc.   | 2  | 2  | 0.4    | 2.9  | 0  |
|       |                             | .5 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4418  | fitted wood structural      | 2  | 2  | 0.4    | 2.9  | 0  |
|       | products (doors,            | .5 | .0 |        |      |    |
|       | windows/frames, parquet     |    |    |        |      |    |
|       | panels, shuttering,         |    |    |        |      |    |
|       | shingles, cellular panels,  |    |    |        |      |    |
|       | other joinery/carpentry)    |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4419  | bamboo chopsticks, wood     | 2  | 2  | 0.4    | 2.9  | 0  |
|       | kitchen/tableware           | .5 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4420  | wood statues/ornaments,     | 2  | 2  | 0.4    | 2.9  | 0  |
|       | marquetry, ornamental       | .5 | .0 |        |      |    |
|       | boxes, other furniture      |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4421  | 4421 subcategories covering | 2  | 2  | 0.4    | 2.9  | 0  |
|       | wood clothes hangers,       | .5 | .0 |        |      |    |
|       | ships, braille boards,      |    |    |        |      |    |
|       | moulds/dies, and \"other\"  |    |    |        |      |    |
|       | articles of wood            |    |    |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4422  | this category omitted from  | 2  | 2  | 0.4    | 2.9  | 0  |
|       | Taiwan tariff code          | .5 | .5 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4423  | this category omitted from  | 2  | 2  | 0.4    | 2.9  | 0  |
|       | Taiwan tariff code          | .5 | .5 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4424  | this category omitted from  | 2  | 2  | 0.4    | 2.9  | 0  |
|       | Taiwan tariff code          | .5 | .5 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 4425  | this category omitted from  | 2  | 2  | 0.4    | 2.9  | 0  |
|       | Taiwan tariff code          | .5 | .5 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+
| 9406  | prefabricated buildings     | 8  | 8  | 0.4    | 8.4  | 0  |
|       |                             | .0 | .0 |        |      |    |
+-------+-----------------------------+----+----+--------+------+----+

\(d\) based on CIF landed value of US\$100

**PRODUCTION, SUPPLY and DEMAND (PSD) MATRICES**

**by Product Group**

![](media/image6.wmf){width="6.916666666666667in"
height="2.0131944444444443in"}SOFTWOOD LUMBER

SOFTWOOD LUMBER **IMPORTS** SOFTWOOD LUMBER **EXPORTS**

![](media/image7.wmf){width="3.3625in" height="2.9277777777777776in"}

HARDWOOD LUMBER (TEMPERATE)

![](media/image9.wmf){width="7.166666666666667in"
height="1.9423611111111112in"}

TEMPERATE HARDWOOD LUMBER **IMPORTS** TEMPERATE HARDWOOD LUMBER
**EXPORTS**

![](media/image10.wmf){width="3.3625in" height="2.9277777777777776in"}

![](media/image12.wmf){width="6.9375in"
height="1.9479166666666667in"}HARDWOOD LUMBER (TROPICAL)

TROPICAL HARDWOOD LUMBER **IMPORTS** TROPICAL HARDWOOD LUMBER
**EXPORTS**

![](media/image13.wmf){width="3.3625in" height="2.9277777777777776in"}

HARDWOOD VENEER

![](media/image15.wmf){width="7.00625in" height="2.04375in"}

HARDWOOD VENEER **IMPORTS** HARDWOOD VENEER **EXPORTS**

![](media/image16.wmf){width="3.3625in" height="2.9277777777777776in"}

![](media/image18.wmf){width="7.00625in" height="2.04375in"}SOFTWOOD
PLYWOOD

SOFTWOOD PLYWOOD **IMPORTS** SOFTWOOD PLYWOOD **EXPORTS**

![](media/image19.wmf){width="3.3625in" height="2.9277777777777776in"}

HARDWOOD PLYWOOD

![](media/image21.wmf){width="7.00625in" height="2.04375in"}

![](media/image22.wmf){width="3.3625in"
height="2.9277777777777776in"}HARDWOOD PLYWOOD **IMPORTS** HARDWOOD
PLYWOOD **EXPORTS**

[^1]: Ten China fir trees, all around 30 years of age, felled for a
    separate 1999 study revealed an average trunk diameter of 25 cm and
    an average ring growth rate of 5.5mm per year.

[^2]: Relevant regulatory documents include \"Technical Construction
    Code\" (CPA, January 2000 revision) and

    \"Technical Standards for Wood Frame Building Design and
    Construction\" (CPA, May 2003 revision)

[^3]: The Council of Agriculture was reported to have set this number as
    a target.