APEC Senior Officials and Trade Experts Meet in Malaysia
APEC senior officials and trade experts met February 15-25, 1998, in Penang, Malaysia to develop modalities and time tables for the early voluntary liberalization of fifteen sectors, including forest products. The forest products initiative, co-sponsored by Canada, Indonesia, New Zealand and the United States, covers wood products, vegetable/rattan mats and baskets, pulp, paper, printed materials, wooden furniture, and wooden pre-fabricated housing. The initiative calls for the elimination of tariffs in the sector by no later than 2004. The initiative also covers non-tariff measures, standards, and economic and technical cooperation. While some progress was made in reaching an agreement on the initiative, much work still remains, particularly as regards product coverage and staging. Further meetings are scheduled for April 20-25, 1998, in Kuala Lumpur, with the goal of making sufficient progress to achieve an agreement on the sectors by the June 22-23, 1998, Ministerial meeting in Kuchang, Malaysia.

Indonesia Reduces Tariffs on Selected Wood Products
Indonesian tariffs on a wide-range of wood products were reduced effective February 1, 1998, as part of the Memorandum on Economic and Financial Policies (MEFP), signed by Indonesia's President Suharto and sent to the IMF on January 15, 1998. Tariffs on plywood, densified wood, and wooden frames were reduced from 20 percent to 15 percent, tariffs on packing cases/pallets and casks/barrels were reduced from 15 percent to 10 percent, and tariffs on builders' joinery, tableware, wood marquetry and other articles of wood were reduced from 20 percent to 15 percent. Other items in the package included the reduction of (export taxes on logs and lumber to a maximum of 10 percent ad valorem, effective March of 1998, and the dissolution of APKINDO, Indonesia's Hardwood Plywood Marketing Board, effective February 1, 1998. Actual implementation of the latter action remains unclear, as the cartel appears to have retained much of its power even after its dismantling -- a situation seemingly complicated by the inclusion of APKINDO's Chairman in Indonesia's recently announced cabinet following the re-election of President Suharto.

U.S. and Japan Meet Under the Enhanced Initiative on Deregulation and Competition Policy
The second high-level officials meeting under the Enhanced Initiative on Deregulation and Competition Policy, agreed to by President Clinton and Prime Minister Hashimoto in June, 1997, was held March 4, 1998, in Tokyo. The meeting was chaired by Deputy U.S. Trade Representative Fisher and Deputy Foreign Minister Haraguchi. Discussions at the meeting focused on housing, telecommunications, medical devices and pharmaceuticals, and financial services, and structural issues such as competition policy, distribution, and transparency. The United States noted that concrete actions are needed in Japan to stimulate residential housing construction and to reduce housing costs, as is being sought by Prime Minister Hashimoto. The Government of Japan stated that it would submit legislation to the Diet later in the month to revise the Building Standard Law to make it performance-based, a long-standing request of the U.S. It also informed the U.S. that it would promote its new procedures for approving the construction of three-story, wood-frame construction in quasi-fire protection zones (urban areas) to facilitate the introduction of this type of construction. (The first building permit for this type of construction was granted to Mitsui Home, a major 2 x 4 homebuilder, in January 1998.) Japan also agreed to make every effort to resolve outstanding issues relating to test methods for engineered wood products, with follow-up meetings with U.S. experts set for March and mid-April in the U.S.

Korea Announces Products Subject to Temporary Tariffs
The Government of the Republic of Korea has published a list of 108 imported products that are subject to tariff quotas and adjustment tariff rates. Tariff quotas are used to foster the import of selected products while adjustment tariffs are used to discourage imports. The announced tariff quota rate for logs (HS 4403) is zero, down from the current base of 1.2 percent and the rate for veneer (HS 4408) is 2.5 percent, down from the current base of 5. These new rates are effective through June 1998. The adjusted tariff rate, applicable January through December 1998, for non-coniferous wood strips (HS 4409.20) and plywood (HS 4412) has been set at 15 percent, up from the current base rate of 8 percent.

Mexico Imposes Preliminary Dumping Duties on U.S. Bond Paper
The Secretariat for Commerce and Industrial Development (SECOFI) announced in the February 11 edition of the Diario Official its preliminary determination in the antidumping investigation of U.S. cut bond paper. SECOFI announced that it was imposing preliminary compensatory duties ranging from 10.55 percent to 24.12 percent on U.S. bond paper to counter the "threat of damage" to the Mexican paper industry. U.S. exporters and their representatives have 30 days from the date of publication to appeal the finding.

EU Challenges U.S. Foreign Sales Corporation Tax Law
On November 18, 1997, the United States received a request from the European Union for WTO dispute settlement consultations on "Sections 921-927 of the Internal Revenue Code and Related Measures establishing special tax treatment for Foreign Sales Corporations (FSC)." Under the provisions, a portion of export-related income attributable to offshore activities of FSCs is exempt form federal income tax if specific conditions are met, including having a foreign presence and having a minimum percentage of foreign direct costs (defined as materials consumed in the activity, labor costs directly associated with the activity, and incremental costs of facilities or services incidentally related to the FSC activity). The tax savings can be significant.

Canada Eliminates Tariffs on U.S. Goods
On January 1, 1998, Canada eliminated its remaining tariffs on goods of U.S. origin as was agreed to under the terms of the U.S.-Canada Free Trade Agreement, which went into effect on January 1, 1989.

Japan Recognizes U.S.-Grademarked MSR Lumber
On February 2, 1998, the Japanese Ministry of Construction (MOC) recognized U.S.-grademarked machine stress-rated lumber for use in 2X4 construction in Japan. This is the second U.S. building material to be so recognized; MOC recognized U.S. visually-graded lumber in January 1997. Discussions are underway with MOC regarding the possible recognition of U.S. finger-jointed lumber.