​Executive Summary
The overall goal of this study was to develop a better understanding of US residential homebuilders’ and remodelers’ perceptions and use of Green Building Programs (GBPs), Environmentally Certified Wood Products (ECWPs), construction materials (i.e., wood, steel and concrete), and other innovative green technology and products.
Green building refers to a structure built using a process that is environmentally responsible and resource efficient throughout its life-cycle: from design and siting, to construction, operation, maintenance, renovation, and demolition. Since it is difficult to assess the sustainability of houses, a number of organizations have developed standards, codes and rating systems that let regulators, building professionals and consumers embrace green building concepts and practices with confidence. Collectively, these rating systems and standards are known as green building programs (GBPs). In the US, the National Association of Homebuilders’ National Green Building Standard (NGBS) and the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) for Homes have become the two major competing GBPs at the national level.
Each GBP employs a different rating system to award compliance for the use of sustainable materials, building products, and technology. As green building practices in residential housing become more popular in the US, the influence of LEED for Homes and NGBS on the choice of materials by construction professionals is of fundamental interest for forest resource professionals. Since a large volume of wood is consumed by the US building industry, it is important to understand the adoption of green products and technologies by US homebuilders and remodelers.
A survey targeting US homebuilders and remodelers was developed and the probability sampling frame was carefully designed in order to ensure reliable and valid statistical inferences. The results of the survey suggest that a great majority of homebuilding professionals are aware of GBPs in the US. Although less than a quarter of homebuilders had actually used either LEED for Homes or/and NGBS, many non-users were planning to use one of the programs in the future. The main reasons why homebuilders adopted GBPs were: to differentiate their homes in the market, the home buyer specified that they wanted a green house, and there is strong demand for homes built using a GBP. Those builders who have used a GBP favored the NGBS program over the LEED for Homes program, because they perceived NGBS as being less expensive and easier to use than LEED for Homes, although LEED for Homes was rated as being superior in terms of brand recognition and effectiveness in helping to sell homes.
Wood is a renewable natural resource with a smaller carbon footprint than other construction materials, such as steel or concrete. Wood products from responsibly managed forests should be an ideal fit for most GBPs. In order to communicate to consumers that a wood product comes from forests managed in accordance with environmental and social standards, some organizations have launched forest certification systems.
Environmentally certified wood products (ECWPs) are usually associated with eco-labeling and chain-of- custody programs that are designed to ensure that wood products are harvested from sustainably managed certified forests. There are a number of forest certification programs around the world, but several major certification programs in the US have become the de facto standard, including the Forest Steward Council (FSC) and the programs endorsed by PEFC (the Sustainable Forestry Initiative (SFI) and the American Tree Farm System (ATFS)). ECWPs certified by FSC and SFI are considered rival products in the market place. The LEED for Homes GBP has accepted FSC for the forest certification credit, but has not recognized SFI or ATFS. In contrast, the NGBS GBP allows the use of any third party certified wood. Consequently, forestry

experts, government officials and environmental NGOs are interested in how the two major GBPs might influence the demand for certified wood.
The survey results show that only about 10% of homebuilders used environmentally certified wood products (ECWPs) on a regular basis while another quarter of homebuilders used ECWPs occasionally. When asked to compare the two major certification programs, a great majority of ECWP users did not differentiate between FSC and SFI. Roughly 30% of homebuilders were still unaware of major wood certification programs.
As a result of increased interest in green building practices and GBPs, companies continually evaluate a wide variety of new green building products and technologies, including ECWPs. However, the US residential construction industry has long been criticized for being slow to adopt new products and technologies. A variety of attributes can influence a builder’s adoption of green building products and technology. The survey results show that the most important attributes for influencing product specification are the economic or technical performance of the products including, price, availability, durability, low maintenance, ease of installation, energy efficiency and consumer demand. On the other hand, the less important attributes tend to be those related to the environmental performance of the product. Finally, the survey shows that wood is clearly viewed by residential construction professionals as being the most environmentally friendly building material when compared to either steel or concrete across a wide range of performance attributes.
This study offers the first detailed look at residential construction professionals’ perceptions and use of a variety of environmentally oriented building programs and products in the US. It establishes a baseline for the use of GBPs and ECWPs by US homebuilders and remodelers. While the current awareness and use of these programs and products is often low, the results suggest that their use will increase in the future as the awareness of both construction professionals and consumers increases.

​Executive Summary
Green or sustainable building programs incorporate the environment, the economy, and human aspects into the design and construction of a building. Green buildings are created through an integrated process where the site, the building design, the construction, the materials, the operation, the maintenance, and the deconstruction and disposal of a building are all seen as being inter-related with the environment.  As a result of this integrated process, it is thought that buildings can be made more environmentally friendly, more cost-effective and more resource and energy efficient, while providing a healthier living and working environment.  Green building programs are slowly but surely emerging around the world in developed countries.  The focus of this report is on the green building programs in Japan and China.  The Japanese green building program is called CASBEE-Sumai (House) and the green building program in China is the Chinese Evaluation Standard for Green Building (also called the Three Star System).  In addition, two other programs that have the potential to influence materials use in residential housing (the 200 Year House program and the Eco-Points program) have been adopted in Japan.  This report provides an overview of these programs, explains the sections of the programs that relate to wooden building materials, and discusses how these programs could affect the use of wooden building materials in Japan and China.
To better understand builder’s, architect’s and design professional’s perceptions and attitudes towards green building programs in China and Japan, surveys were conducted in both countries.  A total of 406 surveys were collected in Japan and 150 surveys were collected in China.  In addition, a series of informal interviews with building professionals were carried out in each country.  These results of the surveys and interviews are summarized in the following report.
Japan
While Japanese housing starts declined substantially in 2009, they exceeded those in the US for the second year in a row.  With approximately half of its housing starts being constructed from wood, Japan remains an attractive market for US manufacturers and exporters of wooden building materials.  The recent adoption of the CASBEE green building program provides an opportunity to increase exports of wooden building materials from the US to Japan, particularly those that improve energy efficiency.  However, the results of this research suggest that Japanese builders remain reluctant to use the CASBEE program as they perceive that there is little market demand for environmentally friendly houses and even less desire on the part of homebuyers to pay a premium for them, particularly given the slow economy that prevails in Japan.  In contrast, Japanese builders expressed much more optimism about two other programs that could increase the demand for US value-added wood products in Japan, the 200 Year House program and the Eco-Points program.
The results of the survey clearly show that Japanese building professionals perceive wood to be the most environmentally friendly structural building material across all six of the environmental performance measure included in the survey.  In contrast, steel is perceived as being the least environmentally friendly structural building material across most of the environmental performance measures.  Energy efficiency of the house was found to be the most importance environmental attribute and it was rated as being significantly more important than all of the other attributes.  Using water saving appliances and fixtures was found to be the second most important environmental attribute.  Based on the results of this research, it appears that the various green building programs in Japan could provide new market opportunities for a variety of US value-added wooden building materials, including environmentally certified wood, energy efficient windows, water saving plumbing fixtures and insulation materials.
Finally, US government agencies and industry associations should be wary of the potential for CASBEE-Sumai to act as a non-tariff trade barrier by providing preferential treatment for domestic wood products.  For example, the CASBEE program provides preferential points for domestic wood materials while both the national government and an increasing number of prefectural governments provide subsidies to home buyers and home builders for homes built using domestic wood.  These Japanese programs undermine the environmental benefits of wood by promoting an agenda designed to increase the demand for domestic wood relative to imported wood.  In doing so, they ignore the environmental superiority of wood relative to non-wood building materials as clearly demonstrated by a life cycle analysis.  In effect, these programs promote a myopic strategy that pits domestic wood against imported wood in a fight for market share within a fixed market segment.  In contrast, the goal of the wood industries in both countries should be to expand the demand for all wooden building materials by promoting their environmental superiority relative to steel and concrete; an approach which would effectively increase the total market for wood products to the benefit of both domestic and foreign suppliers of wooden building materials.
China
With nearly twice the total floor space of the US and more than four times as much as Western Europe, China was expected to overtake Japan in 2009 to become the second largest construction market in the world. Yet green building in China’s expanding building market is comparatively rare. The China Greentech Initiative, for example, estimates that certified green floor space constituted less that one percent of the new built environment in 2009. Recognizing the benefits of sustainable building, China’s government has set ambitious targets and guidelines for green building, and developers, designers and builders are increasing their use of green materials and building principles.
Set against the backdrop of the global economic downturn, the Chinese housing sector has shown some encouraging signs of recovery. China’s construction industry has grown at an average annual rate of 20% since 1990. Housing markets in major cities have recently started to pick up again thanks in part to the government’s 4-trillion yuan stimulus package. According to China Data Center, investment in new construction between January and May 2009 reached over 2.5 trillion yuan, an increase of 43% compared to the same period last year.
Since 2006, the Chinese government has been working to promote its “4-savings and 1-environmental” housing ideology, which stands for: energy-saving, land-saving, water-saving, raw material-saving and less pollution. The Center for Housing Industrialization was founded in 1998. Since then, it has initiated several key national projects and drafted guidelines for improving productivity of construction and improving the “healthy” and “environmental” properties of residential buildings in urban areas. According to the 11th five-year plan initiated by the Ministry of Housing and Urban-Rural Development (previously, the Ministry of Construction), by the end of 2017 the level of industrialization of the Chinese housing sector will reach 30% from the current 7-8%,  and the average service life of residences will  increase from 50 to 100 years. China has started to develop 10 demonstration housing projects, 10 experimental cities, and 10 model construction enterprises. Currently, most construction in China is concrete and brick, while the market for wood frame construction has been growing very slowly due in large part to the government’s tight restrictions on land use in urban areas. After the Sichuan earthquake last May, the Canadian Wood Association participated in the region’s reconstruction projects and donated $8 million to help build wood frame houses for local residents. This has been reported widely in China and in turn has helped wood frame house win wider market recognition.
The new green building program in China, the Three Star System, has the potential to increase the demand for wooden building materials (both primary and secondary wood products) used in residential construction.  The extent of its impact on demand in China will be influenced by the degree to which it is accepted and utilized by developers, builders, architects and home buyers.  However, the Chinese green building program makes no specific mention of wood as a material of choice, suggesting that the US government and industry groups need to continue working with the Chinese government to encourage the use of life cycle analysis as the basis for future revisions to the green building program.
Despite this shortcoming of the Chinese Green Building Program, green building materials (particularly those related to energy-saving) will be increasingly in demand in China, led by public/commercial buildings and high-end residential projects in major cities such as Beijing, Shanghai and Guangzhou.  These opportunities include energy efficient wood windows for high end apartments and condominiums.  In particular, wood windows with either vinyl or fiberglass cladding on the exterior have strong potential because of their lower maintenance requirements.  Other value-added wood products with strong market potential in China include cellulose insulation, environmentally certified wood, and high quality wood cabinets and flooring produced from certified wood targeted towards high–end apartments, condominiums and detached homes.
In China, almost 95% of respondents have heard of the green building program, a third planned to use the program and just over ten percent have used the green building program.  Chinese builders report that the most important material attribute is using energy efficient products and materials, followed closely by using renewable materials.  Both of these observations suggest that opportunities exist to market energy efficient wood products (e.g., wood windows and cellulose insulation) for use in multi-story, multi-family condominium and apartment buildings.  The survey results obtained for the relative environmental performance of wood, concrete and steel clearly show that Chinese construction professionals perceive that wood and wooden structures provide superior environmental performance across a variety of environmental measures spanning the life cycle of a material.  This trend is similar to the trend observed in Japan.
Finally, it should be noted that the US, Japan and the EU have all passed legislation requiring that importers of wooden products must be able to demonstrate that these products do not contain illegally harvested wood materials.  As a result, we can expect to see the demand for certified wood in China continue to increase, particularly if the Russian government carries through on its intention of increasing its log export tax to 80% in January 2012.
Wood frame houses have increasingly been accepted into the Chinese market. In February 2009, the Shanghai government approved a B.C.-designed roofing system as part of a plan to renovate 10,000 city apartment buildings in the lead-up to the World Expo 2010 in Shanghai. As China moves to develop more and more “green” houses, experts predict that timber structures will continue to gain recognition by the government and construction sectors in China and open up new opportunities for green building materials and engineered wood products. Also, the projects being promoted by the Canadian Wood Association in Sichuan suggest that wood frame houses could be successful in the rural areas of China where land use is less regulated by local governments.
Strategic Recommendations
A number of programs (including green building programs) focused on improving the environmental performance and energy efficiency of homes have been adopted in China and Japan.  At the same time, builders, architects and design professionals in both countries perceive wood to be the most environmentally friendly building material. They also believe that homes built from wood are more energy efficient than homes built from steel or concrete.  These trends set the stage for promoting wood as a superior building technology as well as for promoting the superior environmental performance of value-added wood building materials such as wood windows and doors.  For example, the Eco-Points program in Japan provides a unique opportunity to promote energy efficient US wood windows in both new home construction as well as the growing repair and remodel sector of the housing market (although wood windows must still gain approval under the Japanese fire code to be used within urban fire and quasi-fire zones). 
The results of this research project clearly show that there are a variety of market opportunities for expanding US exports of value-added wooden building materials into both Japan and China.  Perhaps the best market opportunity exists for increasing exports of wood windows given the emphasis in both countries on increasing the energy efficiency of new buildings.  This will be easier to accomplish in China than in Japan where restrictive fire codes require the certification of wood windows used in fire and quasi-fire zones.  In addition, the green building programs in Japan and China provide a good market opportunity to expand exports of cellulosic insulation, structural insulated panels, environmentally certified wood and value-added wood products used in interior applications that are made from certified wood (e.g., wood cabinets and flooring).  Finally, good opportunities exist to increase exports of certified structural wood products such as glue-laminated beams, metric sized lumber, dimension lumber and treated lumber using the new generation of less toxic wood preservatives.
In order to increase the exposure of US value-added wood products among building professionals in Japan and China, US exporters should strongly consider participating in the wide variety of trade shows and trade missions by joining industry associations that are active in international markets and have a proven track record of providing access to qualified buyers in these countries.  For example, the Evergreen Building Products Association offers trade missions to Japan and China several times a year.  Similarly, the State of Washington sponsors trade missions for wood products manufacturers in Japan.  Finally, industry associations such as the Softwood Export Council and the American Hardwood Export Council provide opportunities for US companies to rent booth space within the US Pavilion at trade shows in Japan and China.  All of these associations provide tremendous logistical support for US exporters and manufacturers of wood building materials, allowing them to focus their energy on meeting potential customers for their products (a list of upcoming trade shows and missions is included in Appendix D).

​Executive Summary
 
The purpose of this project was to perform a comparative assessment of the US and Japanese 2x4 construction technologies, evaluate Japanese builders perceptions of US value-added wood building materials and identify opportunities to increase the use of US wood building materials within the Japanese 2x4 construction sector.
 
In 2008, housing starts in the US and Japan totaled 906,200 and 1.05 million units, respectively. Two by four housing starts in Japan totaled 107,747 (up 9.3% from 2007) and reached a record market share of 21.3% of total wooden housing starts and 9.8% of total housing starts. Approximately half of the prefectures in Japan had a ratio of 2x4 housing starts above the national average of 20.8%. However, in many of these prefectures, the total number of 2x4 housing starts is relatively small. The prefectures where the adoption of the 2x4 construction technology is well established, as well as where the housing market is relatively large, include Saitama, Tokyo, Hyogo, Kanagawa, Chiba, Hokkaido, Fukuoka and Aichi. These 8 prefectures represented 51.7% of 2x4 housing starts in Japan in 2008.
 
While the global economy performed poorly in 2008, exports of wood products from the US to Japan increased substantially. Total wood exports from both the US and Washington to Japan, which had been declining since 2004, recorded increases in 2008, with US wood exports growing by 6.6% while Washington exports rose by 5.2%. Softwood logs and lumber remain the primary wood products exported to Japan, although exports of OSB and veneer sheets increased significantly in 2008. Exports of value-added wood products from Washington to Japan were dominated by prefabricated buildings (25.3% of total value-added wood exports), builder’s joinery (44.8%), wooden windows (16.9%) and wooden doors (6.4%).
 
Despite the success of the 2x4 construction system in Japan, imports of US wooden building materials are constrained due to the fact that there is a Japanese version of the 2x4 construction technology that co-exists with the North American-style.  The primary difference between the two systems relates to the size of the basic construction module used in the construction process. The Japanese-style 2x4 system utilizes a 3’x6’ panel size which is based on the size of a traditional tatami mat, whereas the North American-style 2x4 system employs 4’x8’ panels in the construction process. Another difference between the two construction systems is the spacing of studs and joists; 17.9 inches (455 mm) on center in the Japanese system versus 16 inches (405 mm) on center in the North American system. In addition, the Japanese system tends to use more wood in the construction process (particularly in the structural framing) and thus tends to have higher material and labor costs, making the Japanese system less cost effective. Finally there is less labor specialization and efficient scheduling of construction tasks with specialist crews; significantly slowing down the construction process, reducing housing quality and increasing labor costs.
 
Despite the fact that most builders interviewed in this project recognize the cost effectiveness of the North American-style 2x4 construction system, relatively few Japanese builders have adopted it. Discussions with Japanese 2x4 home builders point to a broad range of factors that influence this decision. Perhaps the most important factor is that home builders in Japan are not customer-oriented in the sense that they work closely

with their customers to maximize customer satisfaction and reduce overall cost. Another factor which contributes to the widespread use of the 3x6 module relates to the strong relationship that exists between Japanese 2x4 builders and Japanese manufacturers of wooden building materials, particularly commodity wood products. Home builders interviewed during this study universally emphasized that reliability of supply and just-in-time delivery of building materials to the construction site are very important to them. Domestic manufacturers of structural panels and wood products are willing to provide this service for them whereas few foreign suppliers will.
 
This same bias is somewhat less evident in the use of value-added wood products such as wood windows, door and cabinets. In this case, we found that 2x4 home builders were much more willing to use imported building materials.  However, the biggest concern for them when specifying these products is that they should be readily available in Japan and they must be able to obtain spare parts and installation support in a timely manner. For example, some home builders indicated that they do not use US wood windows because they have difficulty obtaining spare parts and replacement windows in a timely manner and because technical support in Japan is generally not available (although some US wood window manufacturers do have representatives in Japan to handle product and installation issues quickly).
 
Another issue that affects the use of US wood building materials is Japanese home builders’ perception that US manufacturers and exporters are not committed to the Japanese market for the long-term. The perception that US exporters are ‘inners and outers’ is problematic and must be overcome in order to make greater inroads in Japan.
 
This project included a survey of Japanese 2x4 builders, with survey respondents representing 62.1% of total 2x4 housing starts in 2007. Not surprisingly, given the design of the sample frame, almost 85% of the houses built by respondents were 2x4 houses with the remaining houses being post and beam. Virtually all of the P&B builders reported that they used the 3’x6’ module. While over a third of the 2x4 builders reported that they have used the 4’x8’ module, the number of houses that they build using the 4x8 module was less than 5% of the total houses they built in 2008.
 
With respect to the specification and sourcing of value-added wooden building materials, the survey found that home owners specified these products between 17% and 30% of the time, depending on the type of product.
The survey also found that 2x4 homebuilders are quite willing to use imported value-added wood building materials, with their use of these products ranging from 20% in the case of kitchen and bathroom cabinets to almost 50% for hardwood flooring and wood windows. Japanese 2x4 builder’s use of US value-added wood products was highest for hardwood flooring (18.4% of total use), interior doors (16%), wood windows (16%) and exterior doors (14%). It was lowest for kitchen cabinets (4%), bathroom cabinets (6%) and softwood flooring (7%).
 
Survey respondents reported that the most important product attributes for them were high quality (6.6 rating out of 7), reliability of supply (6.4) and low price (6.2). In terms of product quality, they reported that US value-added wood products were perceived as having only average quality. Interestingly, small builders rated the quality of US value-added building materials much higher than did large builders. Respondents also reported that US suppliers provide below average levels of products support, although small builders again reported substantially higher ratings than did large builders.
 
The survey results clearly show that the large, national 2x4 builders have a poor perception of US value-added wooden building materials, both in terms of quality and service, relative to small and medium-sized local builders. This suggests that US manufacturers and exporters should focus their marketing efforts on small and medium-sized 2x4 builders in the short-term. However, long-term success in Japan will require that US manufacturers and exporters understand and address those factors that adversely affect large builder’s perceptions of US value-added wood building materials. This should provide the basis for additional research in the future.

One product for which there is strong market potential is dimension lumber. Many of the 2x4 home builders reported that they were having trouble sourcing 2x8 and 2x10 joist material, as well as most other sizes of dimension lumber. More 2x4 home builders are now willing to accept a “home center” grade of lumber rather than the traditional higher quality J grade. This suggests that now may be a good time for dimension sawmills in Washington to reenter the Japanese market.
 
In summary, the struggling domestic housing market in the US combined with the relatively weak US dollar and strong Japanese yen provide a unique for manufacturers and exporters of wood building materials increase their presence in Japan. However, they must demonstrate a long-term commitment to the Japanese market in order to be successful.
 
The Japanese 2x4 market continues to represent a good opportunity for US manufacturers and exporters of wood products who are confronted with the worst US housing market since 1945. However, re-establishing US wood products in the Japanese market will require substantial effort on the part of manufacturers and exporters, especially those who abandoned the market during the period 1996-2006. US manufacturers and exporters who are returning to the Japanese market or who are new to this market will need to demonstrate a long-term commitment to their Japanese customers if they are going to be successful. They also need to develop a strategy for providing after sales support for their products in a variety of areas, including: timely claims evaluations, assistance with installation questions and providing spare parts and replace

Executive Summary
Japan is a timber deficit country that requires substantial volumes of imported timber to meet its domestic demand for wood. To a large degree, wood demand in Japan is tied to housing starts where approximately 43% of new homes are framed with wood. This reliance on imported wood has always caused a tension in Japan where forests cover two-thirds of the country and there is an extensive sawmill industry skewed heavily to small, rural sawmills using out-dated technology. A high cost structure has made both the forestry and sawmill industries uncompetitive on a global scale and, as a result, imported softwood lumber has come to dominate the Japanese market. Over the years, the Japanese government and the forest products industry have tried a number of strategies to improve the competitiveness of the forestry and sawmill sectors. Despite the closure of more than 10,000 sawmills over the past twenty years, the Japanese sawmill industry remains uncompetitive and plagued by small, inefficient sawmills located in rural areas far from the main demand markets. It is against this backdrop that the most recent regulatory initiatives to protect the domestic sawmill industry from international competition must be viewed. These regulatory initiatives include: 1) providing preferential treatment for domestic timber within the proposed CASBEE-Sumai green home building program, 2) using subsidies at the prefectural level to increase the share of domestic timber used in post and beam wooden homes to at least 50% and 3) and using subsidies at the national level to target an increase in the market share of domestic timber used in the post and beam industry from the current 30% to 60% by 2015.
Concerns about global warming and the environment and their commitments under the Kyoto Protocol have led the Japanese to develop a green building program, called CASBEE, to reduce the environmental footprint of commercial and residential buildings (CASBEE is the acronym for Comprehensive Assessment System for Building Environmental Efficiency). As part of its commitment as a signatory of the Kyoto Protocol, Japan is committed to reduce its emissions of greenhouse gases through a variety of strategies. The Kyoto Protocol was negotiated in Kyoto , Japan in December 1997 and came into force on February 16, 2005 following ratification by Russia on November 18, 2004. The Kyoto Protocol is an agreement under which industrialized countries commit to reducing their collective emissions of greenhouse gases by an average of 5.2% over the five year period 2008-2012 relative to the year 1990 (Wikipedia 2007). Japan , which became the 73 rd signatory to the Kyoto Protocol on May 31 st , 2002, has a target reduction of greenhouse gas emissions of 6% over the five year period. As part of its strategy to reduce greenhouse gas emissions, Japan has mandated that new commercial buildings incorporate energy efficiency in their design and operation.
The Japanese government has moved to improve the environmental performance of residential buildings with the drafting of the CASBEE-Sumai (Home) green building program. While the aim of the CASBEE-Sumai green building program is to reduce the environmental footprint of new homes, the program suffers from a weakness in that it is not based on a comprehensive Life-Cycle Inventory of the construction materials used to build Japanese homes. Additionally, the CASBEE-Sumai program has incorporated criteria which arbitrarily place imported wood at a competitive disadvantage by implying that wood harvested from Japanese forests is environmentally preferable to imported wood. These weaknesses of the draft program could be a source of confusion to architects and home builders regarding the overall environmental superiority of wood relative to other structural building materials. The two specific features of concern with the CASBEE-Sumai draft green building program are: 1) the specification of locally sourced wood (obtained from within a specific, but as yet undefined, distance from the building site) as being preferable to imported wood and 2) the determination that

domestic timber is de-facto defined as being sustainable and harvested from sustainably managed forests without independent third-party verification of forest management practices.
The de-facto declaration that all domestic (Japanese) softwood is assumed to be derived from sustainably managed forests runs completely counter to the fundamental premise of sustainable certification: transparency in certification programs, third-party verification and certification based on objective science. The lack of credible third-party verification of sustainability and legality also undermines consumer confidence since there is no guarantee that the wood being used is, in fact, legal or sourced from a sustainably managed forest. For example, a recent report in the Kyodo News (2008) on illegal logging in the Akan National Park in Hokkaido , Japan , illustrates the need for independent third-party certification programs, even in Japan . The decision to define domestic wood as sustainable violates the principal of reciprocity and places imported wood at a cost disadvantage in the marketplace since domestic lumber producers will not have to pay for the cost of certification for their lumber.
The fundamental reason for the preference of domestic wood over imported wood within the CASBEE-Sumai program appears to be to provide regulatory support for domestic wood processors whose lumber products are uncompetitive against imported wood. However, the blame for this lack of competitiveness cannot be placed at the feet of foreign manufacturers but rather at the reluctance of the domestic sawmill industry to implement the measures and investments required to achieve consolidation and modernization within an overly large and technically inefficient industry. For example, the pre-cutting industry, which manufactures the structural components for over 80% of the post and beam houses built in Japan , requires kiln dried lumber that is straight and machined to highly accurate tolerances as a raw material input to their manufacturing process. In response, most imported lumber now arrives in Japan kiln-dried and cut to the demanding specifications required by pre-cut manufacturers. However, despite this change in material specifications within the largest demand segment for structural lumber, the domestic Japanese sawmill industry has been extremely slow to invest in new kiln drying capacity. In fact, by 2007, less than one-quarter of the structural softwood lumber produced in Japan was kiln-dried (22.6%) and only 16.5% of Japanese sawmills had invested in kiln drying facilities. Examples such as this clearly show that Japanese sawmills remain reluctant to invest in manufacturing technology to improve their competitiveness, preferring instead to rely on government regulation and subsidies to provide protection from more efficient foreign producers.
Some organizations in Japan have advocated using the CASBEE-Sumai program to provide preferential consideration for domestically manufactured wood products under the rationale that the increased carbon emitted during the international transport of lumber to Japan increases the carbon footprint of imported lumber, thereby making domestic softwood lumber a more environmentally preferable material. However, this argument overlooks the fact that most container ships carrying lumber products are returning to Japan on a backhaul leg after having delivered Japanese exports to their foreign destination. In addition, the argument for local wood further ignores the fact that ocean transport is an extremely efficient mode of transportation given the large size of the bulk ships used to transport logs and the container ships used to transport lumber. As a result, the amount of carbon emissions for these two transport modes (on a cubic meter per kilometer basis) are just 2.7% and 5.9%, respectively, of the carbon emissions generated from transporting lumber by truck in Japan. Thus, transporting the volume of structural lumber used in the typical Japanese post and beam house (14 m 3 ) from North America (either Seattle or Vancouver, BC) to Tokyo generates the same amount of CO 2 as shipping this volume of lumber just 112 km by truck in Japan. This analysis suggests that the international transportation of softwood lumber, at least from North America to Japan , might well produce less of an environmental footprint than transporting domestic lumber given the increase in transportation distance resulting from the widespread acceptance of precut lumber within the post and beam industry. A more detailed analysis of the distribution channels for domestic wood from forest to sawmill to wholesaler to precutting facility to building site should be performed to better understand the carbon trade-offs during transportation between domestic wood and imported wood.
Quantitative Impact of Domestic Wood Programs
There are two programs that could adversely affect the value of US softwood log and lumber exports to Japan . The first relates to the favorable consideration of domestic wood while the second relates to a program being supported by MAFF that aims to increase the market share of domestic wood use in the P&B industry from its current 30% to 60% by 2015. An economic analysis of these scenarios demonstrates that favoring the use of

domestic lumber would not only impact the demand for imported lumber, but the demand for imported logs as well. Since the US is a large supplier of logs to Japan (approximately 2/3 of which are Douglas-fir logs), this would adversely impact both log and lumber imports from the US . The estimated impact of the domestic wood programs being proposed on the value of US lumber exports to Japan over the 2007-2015 period ranges from $84.5 million to $95.6 million. In the case of logs, the value of US exports could potentially drop by between $196 and $735 million over the period 2007-2015. The total impact on US softwood log and lumber exports to Japan ranges from $84.5 million and $735 million, depending on the success of these programs in promoting the increased use of domestic wood in place of imported lumber and the extent to which imported logs are replaced by smaller, lower quality domestic logs. Considering the current constraints on the ability of domestic timber to substitute for imported timber (e.g., timber supply, lower timber quality and lower mechanical strength properties, among others), it is more likely that the lower estimate of the reduction in the value of US log and lumber exports to Japan ($84.5 million) is more accurate. While this analysis is sensitive to a number of assumptions, it clearly shows that a program targeted towards substituting domestic wood for imported wood could have a substantial adverse impact on the US forest products industry.
Strategic Implications
The myopic strategy of protecting the inefficient and uncompetitive forestry and sawmill sectors in Japan through preferential regulatory policies (such as the de-facto specification of domestic wood as being sustainable managed) or by providing subsidies to achieve an arbitrary market share for domestic lumber within the post and beam construction sector ignores the superior environmental performance of wood relative to non-wood building materials. More importantly, these types of preferential programs have been specifically targeted to the post and beam market segment; a shrinking segment of the residential construction industry. As a result, these policies distract attention from opportunities to expand the demand for wood products in non- traditional market segments such as wood multi-family housing, hybrid construction and low-rise commercial construction. Housing start statistics clearly show that whereas the ratio of P&B housing starts has been declining over time, the ratio of housing starts in the multi-family (both mansion and apartments) sectors, where steel and concrete dominate, has been increasing.
If the Japanese forest products industry is truly interested in promoting the environmental benefits of wood, encouraging the adoption of a green building program and expanding the demand for domestically produced structural lumber, then they would do well to consider a strategy that grows the overall demand for structural lumber by promoting the increased use of structural lumber in non-traditional sectors of the market rather than encouraging an artificial competition between domestic wood and imported wood within the shrinking P&B segment of the residential construction industry. This promotional effort would utilize LCI data to document the superior environmental performance of wood frame multi-family and commercial (including hybrid) structures relative to non-wood structures. To support this effort, preliminary research should be done to identify: 1) the relative market shares of steel and concrete structural materials within these non-traditional market segments, 2) the material selection process used by architects and builders and 3) the factors that influence the material selection process.
Given the agenda of promoting domestic wood over imported wood, it is important for US wood products associations to maintain open communication with the CASBEE-Sumai committee to reinforce the message that the CASBEE-Sumai program should focus on rewarding the use of any wood over less environmentally friendly building materials. This should be reinforced by the message that wood houses use a broad range of sizes, qualities and wood species in their construction based on specific structural end-use requirements.
Limiting the material selection to only locally produced lumber severely restricts the material options available to builders and may encourage them to use less environmentally friendly non-wood materials in place of other “non-local” wood products so that they can still meet the 50% local building material requirement and therefore qualify for prefectural subsidies. The bottom line is that these subsidy and regulatory programs distort the market and could encourage architects and builders to make material choices based not on the environmental performance of a specific material but on a set of artificial proxies that reflect a political agenda rather than objective scientific environmental data.

Executive Summary
The United States residential construction industry, traditionally the largest end-use market for softwood lumber, has been undergoing a period of change for more than a decade. Builders' acceptance of substitute materials and new innovations has increased, providing a unique challenge to softwood lumber producers. In such a situation, understanding the ways in which residential builders specify and use softwood lumber and lumber substitutes is essential to the success of any softwood lumber manufacturer. The Center for International Trade in Forest Products (CINTRAFOR) completed its first study on material substitution in 1995 (CINTRAFOR Working Paper No. 57), providing a benchmark for softwood lumber use in structural applications in residential construction.
This was followed by surveys looking at material use in 1998 (CINTRAFOR Working Paper No. 73) and 2001 (CINTRAFOR Working Paper No. 93). The current study, undertaken in 2005, represents the fourth in this series and is intended to describe the trends in material use and substitution in the residential construction industry in 2004. The 2005 survey also explores builders' awareness, usage and perceptions of certified softwood lumber and sets a baseline for tracking certified lumber usage in residential construction.
In 2004, single family construction accounted for over three-quarters of construction firms' revenue. The larger firms reported a high proportion of new single family housing than their smaller counterparts. Additionally, there appears to be a negative relationship between firm size and the amount of revenue generated from repair and remodel activities. These findings are consistent with previous survey findings. The 2005 survey also reveals that the larger firms are more involved in non-residential construction. Builders in the southwest region of the US reported significantly less involvement in the repair and remodeling sector and significantly more involvement in the non-residential sector. The share of single family construction reported by builders was found to be consistent across all regions.
A longitudinal analysis (from 1998 to 2004) of substitute material usage revealed that the largest changes occurred in the usage of glulam beams, LVL, steel framing, wood I-joists, open-web trusses, and structural insulated panels, with wood I-joists, LVL, steel framing and glulam beams recording significant decreases between 2001 and 2004. In contrast, structural insulated panels, panelized wall systems and open-web trusses have experienced an increase in use since 2001. Survey respondents in the southeast and southwest regions of the country reported a steady increase in their usage of finger jointed lumber between 1998-2004. However, the usage of finger jointed lumber nationally was found to be constant over this period. The usage of glulam beams decreased substantially in the eastern US while remaining fairly constant in the western US. Nationally, glulam beams recorded the largest drop in reported use (12.6%). Use of wood I-joists declined across all regions, with the exception of the northwest, as solid wood joist prices moderated. In addition, use of Parallam TM remained relatively constant between 1998 and 2004, whereas the use of TimberStrand TM lumber increased in the western US while declining in the eastern US. The use of non-wood material substitutes (steel framing and reinforced concrete) generally declined in the southern regions and increased in the northeast.
An analysis of material usage within specific end-use applications revealed that softwood lumber use has either increased or remained relatively constant in all applications with the singular exception of load bearing walls. For headers, wall framing and roof framing applications, softwood lumber remained the dominant material with a market share of more than 70% in each application. For floor framing, the market is split between softwood lumber, wood I-joists and open-web trusses. However, it should be noted that for all structural applications, softwood lumber recorded the largest market share. The market share for softwood lumber increased in floor and

roof framing applications, remained constant in header and non-load bearing wall applications and declined in load bearing wall applications. In wall framing applications, none of the substitute materials had a market share of more than 6% whereas softwood lumber (both solid sawn and finger-jointed studs) enjoyed a market share of approximately 88.3% and 80.9% in non-load bearing and load bearing wall applications, respectively. The usage of softwood lumber in floor framing increased from 39% in 2001 to 43% in 2004, making softwood lumber the primary material for floor joists. Significantly, the market share for wood I-joists in flooring applications (its major market) declined by almost 12%. The use of wood trusses for roof framing has experienced a steady increase since 1995, rising from a market share of 46% in 1995 to 53% in 2004.
Builders rated strength, straightness, lack of defects and the availability of softwood lumber as the most important attributes of softwood lumber; a result that has been consistent over the course of the four surveys. The importance ratings for two attributes, price and price stability, have begun to decline in importance. On a positive note, home builders consistently expressed higher satisfaction levels with all of the softwood lumber attributes in the 2005 survey. A review of the data shows that the respondents consistently recorded higher satisfaction levels for all the softwood lumber material attributes between 2001 and 2004. The 2005 survey also marks the first time that builders indicated satisfaction with two important softwood lumber quality attributes: lumber straightness and lack of defects. In all of the previous surveys, builders had consistently indicated dissatisfaction with both of these attributes. The fact that straightness and lack of defects are ranked as two of the most important lumber attributes, combined with the large increase in the satisfaction ratings for both of these attributes, suggests that builders have begun to view softwood lumber as a much better value over the past several years.
It appears that builders are becoming more conscious of the environment and that this is beginning to influence the types of materials specified by some builders. Unfortunately, builders are receiving mixed messages about the environmental performance of non-wood materials. The results of this survey suggest that builders perceptions of the environmental performance of non-wood materials improved slightly between 2001 and 2004 whereas it decreased substantially for wood-based structural materials. With the exception of SIP's, all of the substitute materials are considered to be more enviromentally friendly than softwood lumber. This result sugggests that it is important that the forest products industry in general, and softwood lumber manufacturers in particular, continue to educate builders about the environmental benefits of using wood relative to non-wood materials.
A new section of the 2005 survey considered home builders awareness and use of certified lumber. The results of the survey showed that only 40% of homebuilders indicated that they were aware of certified wood. On average, only about 14% of homebuilders indicated that they have used certified wood. Among the users of certified lumber, the average percentage of homes framed with certified lumber was approximately 50%. Almost 15% of the builders who have used certified wood reported that they framed all of their houses with certified lumber.
Further, in looking at certified wood awareness and use within individual states, it was noted that awareness of certified wood was much higher in the states along the west coast of the US relative to states in the central and eastern US. About 77% of builders surveyed on the west coast reported that they were aware of certified wood products. Similarly, among the builders who were aware of certified wood, the percentage of builders who actually used certified softwood lumber was also much higher for builders in the west coast states (70%) relative to builders in other parts of the country. Previous research has shown that the willingness of customers to pay higher prices for certified wood plays a major role in the usage of certified lumber. This research shows that only 17% of the respondents in the eastern states and 29% of the respondents in the central states believe that their customers would be willing to pay higher prices for homes built using certified wood products. The percentage for respondents in the west coast states was higher at 50%. These survey results suggest that the awareness and usage of environmentally certified wood among builders is much higher on the west coast relative to the rest of the country.
The survey results suggest that in the future large home builders may well lead the effort to increase the use of certified wood in building homes. This observation is based on the fact that 67% of large builders have heard of certified wood (this represents the largest segment for this question), 43% have used certified wood to build homes (this is the second largest segment for this question), 50% think that their customers would be willing to pay a premium for a home built from certified wood (this represents the largest segment for this question) and 75% expect that their use of certified wood will increase in the future (this represents the largest segment for this question). Further research is needed to understand home builders' motivation for using certified wood and to

explore the relationship between the use of certified wood and regulatory factors (such as green building codes and efforts to improve the energy efficiency of residential homes).

​Executive Summary
Understanding the ways in which residential builders perceive and use softwood lumber and substitute structural materials is essential to the success of any forest products manufacturer.  CINTRAFOR completed its first study of material substitution in 1995 (CINTRAFOR Working Paper No. 57), providing a benchmark for softwood lumber use in structural applications in residential construction.  In 1998, a second study by CINTRAFOR (CINTRAFOR Working Paper No. 73) found that softwood lumber was slowly losing market share to engineered wood products and non-wood substitutes.  The 1998 CINTRAFOR study also provided a benchmark for wood and non-wood material usage in residential decking applications (CINTRAFOR Working Paper No. 78).  This research represents the third in this longitudinal study and will describe the trends in material substitution in the residential construction industry in 2001.  This study looks at material substitution in structural framing applications and provides a benchmark for structural panel usage in exterior wall sheathing, sub-flooring and sub-roofing applications.
The survey results suggest that firm size (based on annual revenues) within all segments of the industry has increased since 1998, most likely due to a combination of consolidation within the industry and growth of individual firms in response to the strong housing market.  On a regional basis, small firms represented a higher proportion of the industry in the southeast (72%) while they displayed their lowest level in the northeast (49%).
Overall, single family construction represents approximately 53% of total firm revenues, although this was substantially higher in the southwest (63%) and somewhat lower in the northwest (46%).  Small builders revenues were evenly split between single family construction and repair and remodel projects whereas the Top 100 builders focused almost exclusively on single family construction (providing over 90% of total revenue).  In general, large builders had a strong focus on single family construction (70% of total revenue) but they also derived substantial revenues from multi-family construction (9% of total revenues), repair and remodel projects (8% of total revenue) and non-residential construction (12% of total revenue).  The most dramatic change was observed in the Top 100 builders where the percentage of revenue derived from single family construction jumped from 58% in 1998 to 93% in 2001.
Almost 40% of respondents reported that their use of softwood lumber had not changed substantially over the past two years.  More importantly, fewer respondents reported that their use of softwood lumber had decreased substantially in 2001 (4.5%) than was reported in the 1998 survey(11.8%).  The percentage of respondents who reported that they had used a substitute material in place of softwood lumber in structural framing applications increased slightly from 98.9% in 1998 to 99.5% in 2001.  The most commonly used substitute materials were wood I-joists, glue laminated beams, laminated veneer lumber and reinforced concrete.  All of these materials exhibited an increase in reported use since 1998 with the exception of reinforced concrete which saw a slight decline in use.  The largest increase in use was observed for finger-jointed lumber, despite the fact that less than 40% of respondents reported using it.  Small decreases in use were reported for structural insulated panels, wood-steel open web floor joists and reinforced concrete.  The largest decline in use was reported for TimberstrandTM lumber, where almost 20% of respondents indicated that their use of this product had declined in the past two years.
Softwood lumber use in wall and roof framing applications actually increased slightly in 2001 although it decreased substantially in floor framing applications.  Softwood lumbers share in wall framing and roof framing increased slightly to 83.4% and 40.9%, respectively, while it dropped to 38.6% in floor framing.  In header applications (a new category in the 2001 survey), softwood lumber had a 71.9% share while laminated veneer lumber had a 20.4% share.  The survey data also suggests that the share of steel in structural framing applications declined across all end-uses:  to 6.6% in wall framing, to 1.7% in floor framing, and to 1.7% in roof framing.  This data strongly suggests that the steel framing system was used in less than two percent of US housing starts in 2001.
Substitute materials were again perceived by survey respondents as being more environmentally friendly than softwood lumber, continuing a trend established in the 1995 and 1998 surveys.  This continuing misperception on the part of residential builders is troubling.
Builders were asked to rate the importance that a broad range of structural softwood lumber attributes had on their material purchase decision.  The average attribute importance ratings were virtually identical to those obtained in the previous CINTRAFOR, suggesting that the attitudes of builders toward the importance of specific lumber attributes have remained relatively constant since 1995.  Builders were also asked to rate their satisfaction with each product attribute.  Although the average satisfaction scores in 2001 were generally higher than in 1998.  Straightness and lack of defects, the two of the most important lumber attributes, received the lowest satisfaction ratings.  These low satisfaction ratings suggest that builders remain critical of the quality of softwood lumber.  In contrast, the satisfaction ratings for price and price stability continue to increase as softwood lumber prices and price volatility continue to moderate.
A new section on structural panel use in wall, sub-floor and sub-roof sheathing applications was included in the 2001 survey.  While plywood had just over a 50% market share in sub-floor applications, OSB dominated in wall and sub-roof applications.  On a regional basis, plywood use was highest in the northwest and lowest in the southwest.  With respect to firm size, the Top 100 builders reported the highest use of OSB while small builders reported the highest use of plywood. Interestingly, there was a substantial difference observed between the Top 100 builders and the large builders, with large builders using substantially more plywood than the 100 largest builders.  Survey respondents reported that their use of plywood had decreased between 30-50% across the three end-use applications while their use of OSB increased between 40-47% across the three end-uses.
In considering a total of nineteen structural panel attributes, respondents indicated that plywood was generally perceived as having superior performance relative to OSB.  In contrast, OSB was perceived as being superior to plywood in just four structural panel attributes:  price, price stability, presence of panel voids, and resistance to delamination.  Builders rated resistance to delamination, resistance to edge swelling and resistance to thickness swell as being the most important panel attributes.
The results of this research suggest that the pace of material substitution in the residential construction industry has moderated since 1998.  To a large degree this might be attributed to lower lumber prices, less volatility in lumber prices, and the fact that builders have become more accepting of the decreased softwood lumber quality that has been attributed to the younger, faster grown plantation resource.  The exception to this trend is in floor framing applications where wood I-joists continue to expand their market share at the expense of softwood lumber.  The most troubling result is the continuing misperception among residential builders that softwood lumber is the least environmentally friendly material.  This result could have serious implications for the forest products industry in the future as green building programs become more prevalent and home buyers become more assertive in demanding that environmentally friendly materials be used in building their homes.  This misperception clearly shows that further research is required to determine the basis for this misperception and to identify strategies to ensure that information regarding the positive environmental benefits of using wood relative to non-wood substitutes is effectively communicated to home builders and home buyers.
 

​Executive Summary
China Wood and Building Materials Market:  A Sourcebook for Exporters
China's rapid economic development over the past two decades has dramatically changed its position in the world economy. China has emerged from virtual isolation to become the seventh largest trading nation and the sixth largest economy in the world. Policies to encourage international trading relationships and stimulate consumer spending have created a booming economy. Today, trade accounts for nearly 50% of China's Gross Domestic Product (GDP), with imports from the United States making up US$20 billion. In 2001, China's GDP reached almost US$1.13 trillion. While the economies of the US's other leading trading partners such as Japan and the European Union have declined or remained flat in recent years, China's GDP has generally remained greater than 5% for the past decade.
Foremost in the list of reforms that have helped stimulate China's economy is housing reform. The shift from state provided housing to private ownership relieved the government of the financial burden of providing its housing while at the same time creating a leading industry in China's economy. Beijing alone is calling for the development of the housing industry as a means of increasing its current 6% share of GDP in 2001 to 10% by 2010.
Between 1978 and 2000, per capita living space increased from 3.6 square meters to 10.3 square meters and total investment in fixed assets had increased to more than US$387 billion. The Chinese government estimates that approximately 700 million square meters of residential floor space was constructed from 1997 through 2000. The government hopes to increase urban per capita living space to 25 m2, or approximately 72 m2 per household, by 2005. In order to achieve this plan, the government expects to construct 1.5 billion square meters of residential building space from 2001 to 2005. Domestic housing starts, which reportedly reached 22 million last year, are projected to grow to 24 million in 2002 and 26 million in 2003. This could result in approximately four to ten million urban annual housing starts, depending on the rate at which increases in per capita and household living space are achieved.
Because of the high population density of most urban areas, approximately 78% of China's urban residents live in multi-family housing, which ranges from low-end housing to full service apartments. It is estimated that 48% of urban residents live in six-story and under buildings, 28% in high-rise apartment buildings, and 3% live in luxury-style apartments. Less common is low-density housing, which includes high-end luxury villas geared to high income Chinese and the expatriates living in China. These villas, Most of which tend to be western-style architecture, account for only 1% of urban housing.
Concrete, steel and brick, have been the dominant building materials in the modern era. Wood frame construction, popular in traditional Chinese architecture, has not seen much penetration since housing reforms began, and will likely only be attractive or affordable to upper class Chinese and the expatriate community for the foreseeable future. The Foreign Agricultural Service has estimated wood frame construction housing starts to be significantly less than one percent of total housing starts for the next several years, while steel, masonry, and others forms will make up the majority of construction methods.
Wood frame construction faces several challenges. While wood is now recognized in the Chinese building code, consumers and developers repeatedly express concern about price, durability, wind load resistance, fire, moisture/decay, insects/termites, and seismic strength of wood frame construction.
Opportunities exist for US building materials and housing system companies to enter and expand in the Chinese market, but it will require a tremendous amount of work to overcome cultural barriers. Firms should be committed to establishing long-term contacts with whom to develop trading relationships and to make effort to adapt their products to meet Chinese needs. It is estimated that a growth rate of anywhere in the range of 15-30% will be sustained in building materials for several years to come, growing from US$24 billion to $71 billion between 2001 and 2005. The US has managed to increase its exports to China in this market, despite an overall decrease in imports of building materials.
One of the greatest opportunities to enter the market is in the 2008 Beijing Olympics. The government estimates that nearly $22 million will be invested in infrastructure for the Olympics. Furthermore, the government is promoting a "Green Olympics," providing good opportunity for green building and use of wood products in building materials and finishing.
Furthermore, the Ministry of Construction has recently approved "green building" guidelines, and is promoting energy saving, recycled or renewable and pollution-free building materials. This initiative could prove to be a useful marketing tool for imports of wood-based building materials. As of June 2000, clay bricks, a traditional building material in China, have been banned in the construction of all new buildings in medium to large cities by the Ministry of Construction, the State Economic and Trade Commission, and the State Administration of the Building Materials Industry. Coal is China's primary energy source, and in an effort to reduce air pollution the government is targeting brick production, which reportedly consumes a quarter of China's coal. As of June 2003, clay bricks will be banned entirely.
In 2000, the government banned the use of clay brick in home building. Prior to this ban, brick was one of the most preferred building materials and was a major competitor to wood frame housing, composing nearly 70% of Chinese construction materials. The Ministry of Construction is largely promoting the use of lightweight concrete blocks as a substitute to clay bricks and is hoping that the housing boom will carry over to China's steel industry. However, because there are no codes for steel frame houses and they serve a different market than wood frame housing, and because homebuyers in China (like those in the US) do not want to live in a home constructed entirely of steel, experts do not expect steel and concrete to pose much of a threat to the development of wood frame housing in China.
Most of the new housing will likely be built in the form of six-story walkups or high-rise buildings, but there also exists a potential for single, wood-frame homes. Weyerhaeuser's Kent Wheiler has said that China represents the only opportunity in the world to create a large wood frame housing market where one does not currently exist; this is largely because of China's aggressive housing reform policies, low amounts of housing currently available, high savings rates, increasing purchasing power, and a strong consumer desire for better housing. To penetrate the market, however, will require a significant amount of effort and marketing, as there is no current infrastructure to introduce potential Chinese homebuyers to wood frame construction. Despite this tremendous long-term potential, the Foreign Agricultural Service (FAS) estimates that for at least the next several years, wood frame construction will occupy less than half a percent of all housing starts.
It should be noted that China has nearly four times the population of the United States living on almost half the arable the land. The American suburban model of the single-family home with a large surrounding lot is not likely a feasible model for a high percentage of Chinese real estate development. Not only is it not affordable for the majority of the population, but also there simply is not enough land for such expansion. Wood frame construction and single-family homes, in general, will be limited to a small subset of the population and most construction efforts will be focused on multi-family and multi-story buildings.
Other housing reforms that promise to change the current way that building materials are supplied include the newly policy to provide consumers with turnkey housing. Previously, Chinese homebuyers bought only the unfinished shell (maopei) of a home or apartment. Consumer complaints about graft, poor workmanship, and construction delays have prompted the government to require builders to pre-install features. This policy will take effect in Shanghai by 2005 and industry experts expect the policy to expand to other cities. The policy may result in a decline in the number of small interior finish companies as construction companies expand to fill the new niche.
Quality issues are a central area of concern in China's housing industry. The National Bureau of Statistics reports that only 30% of all construction in 2000 was of "high" quality. Many Chinese consumers have expressed concern over issues regarding the safety and durability of their homes, malfunctions, and comfort. As Chinese homebuyers become more selective and acquire more financial resources, quality is certain to become an important factor in consumers' decision-making process.

​Executive Summary
Over 20% of the world’s population, or 1.2 billion people, live in China, and more than 20% of the urban workforce is employed by foreign and private firms. Disposable income is growing, 10% annually since 1991, making imported products more accessible. China continues its transformation from a centralized to a market economy, and gross national product has grown from 10% in 1978 to 36% in 1996 (Luo, 2001). China’s real estate industry is expanding rapidly due to privatization, tax incentives, and plentiful mortgages. Due to housing reforms that encourage Chinese citizens to own homes, there has been a steadily increasing demand for building products.
Though the Chinese market seems promising, relatively few US firms report successful participation, and managers say this is due to a dirth of complete China business information. Current research on interior building products in China falls short of specific market information, concluding only that there is a potential market. There is little information identifying Chinese product-market characteristics, company competitive advantages, entry strategies, and company performance. This study sought to fill this information gap. The research first developed a model depicting the affects of business objectives, product-market, competitive advantages, and entry strategies on firm performance. Based on this model, a questionnaire was developed and administered using in-depth interviews with Chinese firms and foreign firms doing business in China.
Study findings suggest that foreign firms in China successfully leverage competitive advantages to overcome entry barriers. Cost advantage entry barriers were overcome by scale and scope economies; product barriers lowered by customization and broad product mixes; capital barriers by partnering with Chinese firms experienced in global business; switching cost barriers through shared promotion and education; distribution barriers by increasing Chinese representation, and government barriers by acquiring policy knowledge.

Executive Summary
In response to weakened demand for imported wood building materials within the 2x4 segment of the housing industry, a number of US exporters have begun to explore opportunities in the post & beam and prefabricated housing markets. In order to develop a better understanding of the problems and opportunities confronting US wooden windows in the post & beam segment of the Japanese residential construction industry, this project was designed to integrate with the ongoing market development programs being undertaken by OTED. The objectives of this project are to: 1) describe the factors driving technological change in the Japanese post and beam industry, 2) characterize and describe the major construction technologies used in the post and beam industry, 3) document the technical specifications and construction details required for wooden windows within the post and beam industry, and 4) recommend strategies for increasing the competitiveness of US wooden windows in the Japanese post and beam industry.
This results of this project support the idea that standard US wooden windows can be incorporated into the post and beam construction system used in Japan. However, product design and accessories as well as the range of support services offered by Japanese window manufacturers have a substantial impact on the competitiveness of US windows in Japan. US wooden window manufacturers (including clad wood windows) need to ensure that their windows are properly installed, finished, and maintained in order to ensure that their long-term durability and performance meets Japanese expectations. Significant technical and installation issues exist and US manufacturers must take the initiative to develop training programs and strategies to effectively address these issues so that window performance meets homeowner expectations.
While the fire codes in Japan describe the performance standards that windows must meet, it is interesting to note that the fire codes specify that aluminum is a non-combustible material and therefor exempted from the performance standards. Several people in Japan noted that, although it is difficult for wooden windows to meet the performance standards specified in the fire codes, to date approximately 15 wooden windows have been certified as meeting the fire code criteria. In contrast, they noted that most aluminum windows used in Japan, if exposed to the test criteria described in the fire tests, would melt and fail early on in the test process. It is obvious that the exemption of aluminum as a non-combustible material has played a critical role in providing aluminum window manufacturers with their dominant position in the industry.
During our visits to construction sites it was noted that the majority of windows had not been sized to fit the rough opening between adjacent posts. Rather, the rough opening for these windows was often framed in between the posts to accommodate the size of each window. Given this practice of in-fill framing for windows, it would be no more difficult for Japanese carpenters to frame in US standard size windows than Japanese metric size windows, a fact that our discussions with Japanese builders and carpenters confirmed. However, the different post sizes used in post and beam construction means that the casing width used to frame out the window in the wall varies based on the size of post being used. To address this complication, Japanese carpenters usually rip the window casing from a wide piece of casing after the window has been installed in the rough opening. So what is limiting the specification and use of US wood windows in Japan? Certainly price is one factor. But beyond this, product design and the range of services offered are equally important factors.
Another factor that impacts the window specification decision relates to the fact that Japanese home builders are usually provided with a range of services by domestic window manufacturers and wholesalers that are often not available from US manufacturers and exporters. These services include extended credit (tegata), on-site product delivery, on-site installation crews, and locally available parts and replacement windows.
This research suggests that standard US window sizes can be easily accommodated within the post and beam construction system used in Japan. However, product design and the range of services being offered have a substantial impact on the competitiveness of windows in Japan. US wood window manufacturers should at least consider the following factors to increase the competitiveness of their products in the future: 1) establishing of training and education programs for Japanese builders and carpenters, 2) developing a certification program for Japanese window installers and carpenters, 3) producing and distributing a generic window installation manual in Japanese, and 4) maintaining technical support, parts and product inventory in Japan. This research clearly shows that with a well thought out strategy, US wood window manufacturers could be competitive in the Japanese post and beam segment of the residential construction industry.

Executive Summary
The US residential construction industry, traditionally the largest market for softwood lumber, has undergone a period of uncharacteristically rapid change over the past decade. The effects of timber harvest restrictions in federal and state forests on softwood lumber price, price volatility, and product quality, combined with technological advances by producers of substitute materials, have contributed to increased use of material substitutes in residential construction. The objective of this research was to assess the extent of material substitution in residential construction and provide insight into the factors driving these changes. The results offer convincing evidence that softwood lumber has continued to lose market share in the residential construction industry and that builders remain concerned about its quality and price. The study also shows a shift on the part of builders towards a more favorable impression of the environmental impacts of substitute products, including steel and concrete, relative to softwood lumber.
This study is based on a random sample of 2,400 residential construction firms segmented by geographic region and firm size. The survey was also mailed to the 100 largest home builders, as reported in Builder magazine. The overall response rate was 12.8% (12.1% of the random sample and 37.1% of the 100 largest firms). The results show that residential builders have steadily increased their use of substitute structural materials since 1995. Respondents reported increased use of all of substitute materials included in the survey. Almost all respondents reported using at least one substitute material (compared to 91% in 1995) and over 80% of the respondents reported using glulam beams, wood I-joists, and laminated veneer lumber (LVL).
While use of steel, reinforced concrete and plastic-fiber lumber increased, engineered wood products emerged as the clear winners. On a regional basis, builders in the western US reported higher usage of all substitute products. In addition, the survey data suggest that large firms were more likely than small firms to try new substitute products, particularly finger jointed lumber, structural insulated panels, laminated veneer lumber, as well as newer engineered wood products such as parallel strand lumber and laminated strand lumber.
The survey data were analyzed to assess the extent to which various structural products were used in walls, floors, and roofs, the three end-use applications that consume the greatest volume of structural lumber. The most commonly used products were softwood lumber, steel lumber, finger-jointed lumber, wood trusses, LVL, and wood I-joists. While softwood lumber still dominated wall framing in 1998, with an 83% market share, it has lost market share (down from 93% in 1995), particularly among large firms. Softwood lumber’s share of the floor framing market declined from 59% in 1995 to 42% in 1998. While it is still the most widely used product, with a 42% market share, the market share of wood I-joists has increased from 23% in 1995 to 39% in 1998. Softwood lumber used to frame roof rafters is no longer the dominant material used in residential roof systems. Survey data show that wood trusses increased slightly from 46% to 48%, while softwood lumber declined from 51% to 40%.
To assess builders’ satisfaction with softwood lumber, respondents were asked to rate the level of the importance, and their corresponding level of satisfaction, with 13 softwood lumber attributes. The importance ratings obtained in 1998 were virtually identical to those reported in 1995. Softwood lumber straightness, strength, availability, and lack of defects were rated as the most important attributes. The survey data suggest that price is much more important to large firms than small firms. Builders reported that, while they were more satisfied with the price and price stability of softwood lumber in 1998 relative to 1995, they remained unhappy with softwood lumber quality, particularly with respect to lumber straightness and overall occurrence of defects.

A gap analysis highlighted the difference between the mean importance ratings (where 7 indicates “extremely important” and 1 indicates “not important at all”) and the mean satisfaction ratings for each product attribute (where 7 indicates “extremely satisfied” and 1 indicates “extremely dissatisfied”). Survey findings indicate that while builders are less concerned with price issues than in 1995, they remain very concerned about the perceived decline in softwood lumber quality. The data provide clear evidence that residential home builders are least satisfied with product attributes they rate most important, suggesting that builders are dissatisfied with the value (defined as the ratio of price/quality) of softwood lumber.
To provide a more concise interpretation of the importance and satisfaction of the different softwood lumber attributes, a factor analysis was performed to group together those softwood lumber attributes that are highly correlated to each other. The results of the factor analysis are almost identical with the results obtained from the 1995 survey and suggest that the 13 product attributes used to describe softwood lumber can be summarized into three factors: quality attributes, economic attributes, and technical attributes.
Finally, the survey assessed builders’ perceptions of the environmental impact associated with using substitute products relative to softwood lumber. Although environmental marketing is not prevalent in the US forest products industry, most industry observers believe that it will become more important. While reduced environmental impact had the lowest importance rating of the 13 softwood lumber attributes, survey findings revealed that more builders in 1998 had a favorable perception of the environmental impact of substitute products, including steel and concrete, over softwood lumber than in 1995.
This survey clearly indicates that softwood lumber has continued to be displaced by substitute materials in segments of the residential construction industry that it has traditionally dominated: walls, floors, and roofs. To a large degree, this loss of market share can be attributed to a perception among residential builders that the value of softwood lumber has declined: a direct result of rising prices and a perceived drop in lumber quality. Much of the loss in market share experienced by softwood lumber can be attributed to the increased use of engineered wood products. Many would argue that this is a normal process of product evolution within the forest products industry, attributed to technological advances in manufacturing processes driven by the changing forest resource. However, this study identified two trends that should concern managers in the forest products industry. First, the use of non-wood substitute building materials has increased significantly since 1995. Second, there is a growing perception among home builders that using non-wood building materials (including steel and reinforced concrete) is better for the environment than using softwood lumber. This trend away from wood products is likely to continue unless there is an effective response to the challenge posed by substitute materials.

Executive Summary
The market for residential siding materials has become increasingly competitive over the past two decades. An increasing assortment of substitute materials, coupled with aggressive promotional and product-service campaigns of competitors, prompted the Western Red Cedar Lumber Association (WRCLA) to focus on marketing programs which would enhance the image and market share of western red cedar siding in the North American market. In 1995, the WRCLA commissioned the Center for International Trade in Forest Products (CINTRAFOR) to conduct an in-depth study of the Puget Sound residential siding market. The results of the 1995 CINTRAFOR study became a component for implementing the WRCLA’s Puget Sound test market strategy in 1996.
The current study was commissioned by the WRCLA and reports the results of a mail survey conducted during the fourth quarter of 1996 examining the Puget Sound residential siding market. The fundamental purpose of this study was to assess the impact of the WRCLA’s residential siding promotional strategy in the Puget Sound market over the period of November 1, 1995, to November 1, 1996. The results of this survey were combined with the results of the 1995 survey in order to assess (1) residential siding usage patterns over time, (2) consumer perceptions of residential siding materials before and after the WRCLA promotional campaign, and (3) consumer exposure to the WRCLA promotional campaign and the effects of exposure.
The survey results indicate significant instability in the Puget Sound residential siding market, with most of the instability being caused by a huge decline in the use of OSB siding and a considerable gain in the use of wood-fiber cement siding. OSB experienced a 32.6% decline in market share in the one year time period between the two surveys; this decline represents over 5.362 million square feet of siding material. Most of OSB siding’s market share decline was compensated by wood-fiber cement, which increased its market share to 18.3% from 3.21%. The average number of different siding materials builders are utilizing from one year to the next also measures instability. Results from the first survey indicate that builders used an average of 2.66 siding materials in 1994. This average increased to 3.56 the following year.
Western red cedar’s 1995 market share in the Puget Sound residential siding market was 6.05% as compared to 8.86% in 1994, representing a decline of 31.7%. We must stress that lower overall market share does not signify that the WRCLA promotional campaign was ineffective.  Market share can always be “bought” through several means (e.g., selling high volumes of low quality and low priced cedar in the lower-end home market), but higher market share does not necessarily translate into higher margins and profitability. Additionally, we were not overly surprised to see a decline in western red cedar’s market share since (1) cedar was being heavily utilized in the lower-end home market (while the promotional effort of the WRCLA was targeting the high-end market) and (2) there has been a steady rise in the price of western red cedar siding over the past year which has priced many low-end builders out of the cedar market. Note that the lack of price and shipment data from association membership has made analysis and interpretation of demand effects for western red cedar siding somewhat difficult.
Despite the decline in market share, several favorable changes were seen in western red cedar siding usage patterns. The 1995 survey results indicated that for every builder who increased use of cedar siding between 1990 to 1994, 15.3 builders decreased their use. Over the past year, however, this negative pattern

reversed; for every builder increasing use of western red cedar siding, only 0.7 builders decreased their use. Furthermore, survey results indicate that western red cedar siding use has been declining in the lower- end housing market while increasing in the upper end. Combined, the market share and usage pattern results suggest that western red cedar siding is beginning to hit an upswing. Unfortunately, the instability of the Puget Sound siding market has played havoc with estimating reliable market share trends. It is very likely that at least one or two years will have to pass before market shares for the various siding materials lose their volatility.
Survey results from the past two years clearly reveal that builder preferences for western red cedar on upper end homes have increased, while preferences for western red cedar siding on lower-end homes have declined. In other words, as the price of a new home increases, builders increasingly display a preference for western red cedar siding. These results are one indication that the WRCLA promotional strategy has been effective in changing builder perceptions.
The WRCLA promotional campaign was also successful in the level of exposure that it achieved among Puget Sound builders. Nearly 50% of all Puget Sound builders recalled having seen at least three WRCLA promotional advertisements over the past year. Furthermore, the survey results indicated that the purchasing decisions of approximately 12.5% of all builders in the Puget Sound market were influenced by the WRCLA promotional advertisements. This percentage of purchasing decision influence is very high for an industrial product; past market research for other industrial products indicates that advertising generally influences only 3 to 5% of all purchasing decisions within a given market.
Approximately 9% of all builders indicated that they perceived that western red cedar siding had decreased in overall quality over the time period covering the two surveys. Over 14% of all builders, however, indicated that they perceived an increase in overall western red cedar siding quality over the same time period; the remaining 77% of builders indicated that they perceived no change in western red cedar quality. These numbers are even more encouraging when the data is disaggregated and applied only to builders who have used western red cedar siding over the past two survey periods. Nearly 65% of actual users of western red cedar siding perceived that the overall quality of western red cedar siding material had increased and 12% perceived a decrease.
In sum, the results of the survey presented in this report suggest that the WRCLA promotional strategy was effective. Overall builder perceptions of western red cedar residential siding have improved significantly in less than a one-year time span, especially in the higher-end home market. These results bode well for manufacturers, wholesalers, and retailers of western red cedar siding since higher margins are typically achieved in the higher-end home market. It is expected that the improving builder perceptions of cedar siding will begin to pay off as high-end builders start to shift to a product that possesses an increasingly high-status image and reliable quality.

​Executive Summary
Introduction
The Japanese market for prefabricated homes and wooden building materials has tremendous potential for US firms, particularly those located in the Pacific Northwest.  For example, exports of prefabricated housing to Japan increased by 51% from 1994 to 1995, with 81% of these exports originating from the Pacific Northwest.  Despite this success, Japan is a relatively new market to most US firms and more information is required before US firms can fully take advantage of the opportunities that exist.  This research project was developed to provide a broader understanding of the Japanese market for prefabricated homes and wooden building materials, and to identify the problems that exporters must overcome in order to compete effectively in Japan.
The objectives of this project were:  (a) to perform a competitive assessment of the Japanese market for imported prefabricated housing and wooden building materials,  (b) to identify those marketing strategies that are being employed by US manufacturers to compete successfully in Japan, and  (c) to identify the tariff and non-tariff barriers that are perceived to adversely impact the competitiveness of US firms in Japan.
The results of this research study were derived from a census of prefabricated housing manufacturers, export consolidators, and Japanese trading companies currently exporting their products to the Japanese market.  The final sample frame included sixty-six firms:  fifty-one in Washington and fifteen in Oregon.  Sixteen of the companies manufactured prefabricated housing, while thirty-four were export consolidators, and sixteen were subsidiaries of Japanese trading companies. The final response rate for the survey was 70%, with responses being received from 75% of the prefabricated housing manufacturers, and 79% of the export consolidators, but just 47% of the Japanese trading companies.
Results
Prefabricated housing exporters in Washington and Oregon can be characterized as being small to medium-sized firms with annual sales of less than $10 million and employing less than 25 employees.  Most of the firms have been exporting to Japan for a relatively short time, usually less than five years.  However, prefabricated housing manufacturers appear to be highly involved in the Japanese market, as indicated by the fact that approximately half of the respondents generated more than 50% of their annual sales revenue from exporting to Japan.
The promotional strategies used by the survey respondents were fairly limited, a fact which might be attributed to the small size of the respondents and their limited financial resources.  A majority of the respondents indicated that they relied on product brochures, word-of-mouth referrals, and trade shows to promote their products.  Promotional strategies that required a higher commitment of financial resources, such as establishing a model home or product showroom in Japan, were employed less frequently than the other strategies.
In general, the distribution channels for wood products exports in Japan are complex, consisting of several layers of intermediaries.  However, the results of this research indicate that many of the prefabricated housing manufacturers and export consolidators have been successful in bypassing the traditional Japanese distribution channels.  Approximately half of the respondents indicated that their primary channel of distribution involves selling their products directly to Japanese home builders.  This strategy provides these firms with substantial cost savings, helping to increase the competitiveness of US prefabricated homes and building materials in the Japanese market.
Most respondents considered the establishment of a strong personal relationship with their Japanese customers as one of the most important factors for succeeding in the Japanese market.  This factor was rated as being more important than any other single marketing factor by each of the three groups of respondents included in the study.  Other marketing factors that were perceived to be important included providing after-sales service, short delivery times, and technical assistance to the customer.
Product adaptation was also considered to be an important factor for succeeding in Japan.  In fact, all of the prefabricated housing manufacturers and 88% of the export consolidators reported that they modify their product to some extent for their Japanese customers.  The most common types of product adaptation included changing the design of the home to include a tatami room and/or a genkan (Japanese-style entryway), utilizing higher quality materials in those products exported to Japan, and translating product brochures, installation instructions, and technical information into Japanese.
JAS and JIS product certification of building materials and the Japanese building code were perceived to be non-tariff trade barriers that had a substantial negative impact on the competitiveness of US prefabricated houses and building materials in Japan.  Two other factors, the difference between US/Japan construction technology and inefficient transfer of US construction technology, were also perceived to be non-tariff barriers that restricted the competitiveness of US firms in Japan.  It is interesting to note that in many cases the US subsidiaries of Japanese trading companies perceived the various trade barriers as having a greater impact on competitiveness than did the US firms.  This was particularly true with respect to the complexity of the distribution channels in Japan and the import tariffs for prefabricated houses and building materials.
The vast majority of the prefabricated housing units exported from the US to Japan are manufactured using 2x4 construction technology.  This poses a problem given the fact that most of the survey respondents reported that Japanese architects, contractors, and carpenters do not possess a strong understanding of 2x4 technology.  In addition, many respondents stressed the fact that Japanese residential contractors seldom utilize the construction management techniques that are widely used in the US residential construction industry.  As a result, construction costs are more than twice as high in Japan as in the US.  But perhaps more important from a long-term strategic market development perspective is the fact that this basic lack of understanding regarding 2x4 construction technology can adversely impact the quality of 2x4 homes built in Japan and reduce their long-term performance.  Either of these factors could potentially erode the competitive position of US prefabricated housing and wooden building materials in the event that substandard products and/or product performance adversely affect Japanese consumer perception of US products.
Not surprisingly, survey respondents indicated that the efficient transfer of 2x4 construction technology was an important component of their marketing mix, with approximately 85% of the respondents utilizing some type of strategy to address the issue of technology transfer.  The three most widely employed types of technical assistance were:  providing customers with installation instructions and/or product brochures, providing customers with seminars and/or on-site technical training, and sending over carpenters and/or construction site supervisors to ensure the quality of the construction work.  Unfortunately, current Japanese immigration law makes it very difficult for US contractors and carpenters to obtain the work visas that are required to work in Japan.  When asked to indicate what strategy would be most effective in transferring 2x4 construction technology to Japan, almost half of the respondents indicated that they favored providing training for Japanese construction professionals.
The results of this study indicate that prefabricated housing manufacturers and export consolidators in the Pacific Northwest are strategically poised to take advantage of current housing policies in Japan that promote imported housing and building materials.  Despite the fact that many of the participants in these industries are relatively new to the Japanese market, a large number are already experiencing success.  In particular, these firms have demonstrated the ability to take advantage of the new competitive environment in Japan by developing strong business relationships with their customers and partners and developing distribution channels that bypass the traditional extended and costly distribution system.  Given the strengthening Japanese economy, the opportunities for imported housing and building materials in Japan appear to be bright.

Executive Summary
The market for residential decking and siding products in North America has become increasingly competitive over the past two decades.  Given an increasing assortment of substitute materials, coupled with aggressive promotional and product-service campaigns of competitors, the market share for western red cedar residential decking and siding products has become stagnant.  To determine those factors that influence the selection and utilization of western red cedar as a residential decking and siding material relative to substitute products, the Western Red Cedar Lumber Association (WRCLA) commissioned the Center for International Trade in Forest Products (CINTRAFOR) to conduct an in-depth analysis of the market for western red cedar residential decking and siding products in North America.  This study brings together all available secondary sources of information known to exist for these two classes of products.  Furthermore, this study reports the results of a mail survey regarding the Puget Sound residential siding market.  The mail survey provides the WRCLA with baseline data on a potential test market.
Residential Decking Market
Treated lumber, western red cedar, redwood, and a wood-polymer composite (Trex™) manufactured by Mobil Chemical Company clearly dominate the residential decking market.  Extremely aggressive price competition, modest product differentiation, economies of scale, and well-developed marketing and distribution systems characterize the residential decking industry.  All four major residential decking materials are essentially marketed and distributed in a similar fashion.
The residential decking market in the United States is extremely large.  Government statistics reveal that over 85 percent of all single family homes include either a deck or deck-like structure (e.g., porch, balcony).  Annually, over 4 percent of all households either add a deck or replace an existing deck, leading to more than 3.5 million new decks being constructed onto existing single family structures.  Deck construction activity should increase substantially in the deck replacement market given that economic conditions are anticipated to improve or remain stable.
Unfortunately, no accurate market share estimates exist for the various decking materials available on the market.  One source estimates that treated lumber commands 82.5 percent of the residential decking market on a board foot basis, with redwood at 11.5 percent, western red cedar at 3.2 percent, and other deck materials at 2.8 percent.  This same source, however, also estimates in a different study that western red cedar controls 23.3 percent of the residential decking market.  Regardless of the estimates, it can be concluded from this source that the market share of western red cedar decking materials has been eroded by treated lumber and redwood substitutes, especially in regions of the US where western red cedar materials once dominated the market (e.g., US West).  Furthermore, the western red cedar market share is likely to continue to decline as Mobil Chemical Company increases promotional campaigns for its Trex™ wood fiber-plastic composite decking material.
The relative difference between the various products in material, installation, and maintenance costs has become the primary basis for product differentiation in the residential decking market.  After cost considerations, the choice of decking material individuals utilize when constructing a deck is mostly dependent on product quality factors (e.g., structural properties, durability, susceptibility to wear) and manufacturer and retailer service factors (e.g., product availability, price incentives, moisture content).  Unlike the residential siding market, image, beauty, and social status factors are not seen as fundamental determinants in consumer choice for decking materials.  Western red cedar does not “sell itself” on its image and beauty characteristics alone since consumers generally perceive all residential decking materials to be about the same (i.e., commodity products).  If the past holds true, marketing efforts designed to promote only image and beauty characteristics of western red cedar residential decks will likely have a limited impact on changing consumer perceptions.
Firms producing residential decking materials can implement several strategies in order to create product differentiation for materials that consumers perceive as commodities.  For instance, western red cedar producers could physically differentiate their decking products by making them easier to use, improving product quality, grade consistency, and durability characteristics, providing additional accessories, or providing additional elements of service (e.g., improved packaging, installation instructions).
Western red cedar producers could also differentiate their product through properly designed marketing efforts.  Changing price, providing discounts, offering guarantees or warranties, improving service levels, changing advertising strategy, devising promotions, and changing the image of the product are several market-oriented strategies that could be utilized to increase sales and market share of western red cedar decking materials.  The treated lumber industry has successfully used a branding strategy to create consumer awareness and knowledge of their products.  This branding strategy transformed the image of a product once viewed as substandard to that of a naturally decay-resistant product.  The result of the treated lumber industry’s branding strategy has been a decline in the use of western red cedar as a residential decking material.  The lack of a well-formulated, market-oriented strategy in the western red cedar residential decking industry will likely lead to further decline.
Residential Siding Market
Fifteen different materials have a considerable impact in the residential siding market.  Vinyl, structural panels (i.e., OSB and plywood), brick, and hardboard, however, are the dominant residential siding materials installed.  Aggressive price competition, low product differentiation despite significant contrasts between the physical attributes of the products available, economies of scale, well-developed marketing and distribution systems, and an intensification of competition among manufacturers and distributors characterize the residential siding industry.
Demand for residential siding materials is a function of two factors; namely, the level of new residential home construction starts and the level of replacement, repair, remodeling, and addition activity taking place on existing residential housing units.  While residential siding demand increases and declines with changes in the cycle of residential home building, it is relatively stable compared to many other building products.  This stability is an outcome of the size of the replacement and remodeling markets, which have accounted for anywhere from 25 to 33 percent of all residential siding use (square foot basis) during the past decade.  Despite the replacement and remodeling markets’ impressive and growing size, vinyl siding firms have been the only residential siding material manufacturers to target this market successfully.
According to market share estimates prepared exclusively for this study, vinyl siding products control 36.7 percent of the residential siding market.  Trailing vinyl siding in market share are structural panels (27.9 percent), brick (17.2 percent), hardboard (13.2 percent), western red cedar (2.5 percent), and aluminum (2.4 percent).  In the past eight years, the total residential siding market has grown at an average annual rate of 0.46 percent.  Vinyl siding use has grown at an average annual rate of 10.25 percent.  The only other residential siding material to experience growth in this same period has been western red cedar, which has grown at an average annual rate of 3.52 percent.  The market share growth of vinyl siding has come at great expense to the producers of aluminum siding, as well as to hardboard and structural panel siding producers.
Relative differences in material and installation costs typically establish the competitive relationships between the materials used in the residential siding market.  Unlike decking materials, however, products in the residential siding market, especially brick and western red cedar, are differentiated to a much greater degree by the image that they project.  Past research has shown that consumers perceive vinyl, aluminum, hardboard, and plywood residential siding materials to be close substitutes for one another.  Therefore, these four residential siding materials compete primarily on price and installation cost.
Relative to competing residential siding materials, consumers tend to see western red cedar as being expensive and time-consuming to install.  Western red cedar residential siding material is also seen as possessing price instability and poor grade consistency.  However, consumers believe that western red cedar has a tremendous curb appeal and a high status image, being nearly equal to that of brick.  Unfortunately, the image and beauty characteristics of western red cedar residential siding are neutralized by consumer perception of western red cedar’s high cost.
It appears that the competitive position of western red cedar is not optimal relative to other residential siding materials.  Promotional literature for western red cedar siding stresses heavily its quality image, while other important characteristics such as price and durability tend to be mentioned infrequently.  While the actual cost of installation for western red cedar siding is greater than that of competing residential siding materials, there is speculation that most consumers perceive the cost as being substantially more than it actually is.
Survey of Puget Sound Residential Siding Market
The demand for residential siding in the Puget Sound market should increase over 1994 and 1995 levels since, according to survey respondents, there is an expectation for new home construction to increase substantially.  Survey results clearly reveal that the 8.9 percent market share for western red cedar in the Puget Sound residential siding market has declined over the past five years.  Unfortunately, this study cannot determine at what rate the market share has declined or what factor(s) triggered the decline (e.g., higher prices, lower quality of material, lack of product availability).
The following four residential siding materials have a significant presence in the Puget Sound market: OSB, hardboard, plywood, and western red cedar.  Builders indicate that their use of wood fiber-cement residential siding has increased substantially over the past five years.  This may be the result of the increased promotional effort on the part of a major producer of wood fiber-cement siding (Hardi Plank) in the US West. 
The Puget Sound market represents a disproportionately large share of the national market for OSB residential siding.  Two factors may be working either independently or together in creating this disproportionate market.  First, OSB residential siding manufacturers (namely, Louisiana-Pacific) may be specifically targeting the Puget Sound market through promotional efforts due to distribution advantages associated with the market and its port access.  Second, builders may simply have a preference for OSB residential siding due to its ease of installation and their preference for a material that has the “curb appearance” of real wood.
While installation of western red cedar siding occurs more often as new home prices increased, the effect was found to be not significant.  In fact, installation of western red cedar siding occurs in nearly equal proportions (square foot basis) on new homes across all price ranges.  This suggests that western red cedar is being accepted more readily as a siding material for new lower-end-priced homes.  If this is the case, then builder perceptions of western red cedar’s high status/quality image and beautiful appearance may be eroding.
Analysis of the survey data reveals that western red cedar siding’s very low rating in product consistency and uniformity, as well as its low rating along the easy/low cost maintenance attribute, is disturbing.  However, it offers western red cedar siding manufacturers, wholesalers, and retailers considerable opportunity, since alterations in these perceptions can be made with relative ease with changes in manufacturing methods, quality control practices, and distribution.
Western red cedar manufacturers should make a concerted effort to change the quality of their shipped product.  In particular, the survey results suggest that manufacturers address issues dealing with product consistency and uniformity.  The WRCLA should actively manufacture and promote high-grade western red cedar residential siding products in such a manner that the product consistency and uniformity perceptions of their products are nearly equal among builders to that of brick, hardboard, stucco, and OSB residential siding materials.  Improving western red cedar siding’s product consistency and uniformity, or creating a high-grade branded western red cedar residential siding product, will at the same time improve the perception that builders have of western red cedar’s image status and beautiful appearance.  As such, an improved, high-end western red cedar residential siding product may warrant a premium price.
A promotional effort should be made to address western red cedar siding’s poor perceptual rating on the low cost and easy maintenance attribute.  How can the perception of this attribute be improved? First, the material can be prefinished using a high grade stain or primer and a reliable and consistent application process.  In addition, the material should be grade-consistent and not placed on the market in green condition.  Third, promotional literature addressing long-term maintenance issues should be considered.  This literature should accompany every lift of western red cedar sold, and it should also address the proper method of installing western red cedar residential siding.
Finally, western red cedar siding manufacturers, wholesalers, and retailers should make a strong attempt to avoid price competition.  The results of this study indicate that price competition conflicts with builders’ perception of a residential siding product’s high status/quality image and beautiful appearance attributes.  Creating a conflicting image of western red cedar siding has likely decreased its demand among high-end home builders while at the same time increased demand among lower-end home builders.  This shift in the market, however, has not been substantial enough for western red cedar siding manufacturers, wholesalers, and retailers to recoup profits that have historically been made in the high-end market.
 

​Executive Summary
Material substitution in the residential construction industry is driven by a variety of factors including product availability, product performance, price, price stability, and in-place costs.  As competition between softwood lumber and substitute products increases, managers need to understand end-users’ changing perceptions of softwood lumber and the competitive position of softwood lumber vis a vis substitute products.  Despite the relative availability of product literature describing substitute building materials, the extent of substitute product diffusion remains unclear.  Perhaps more importantly, virtually no information exists regarding the diffusion process for substitute products in the residential construction industry, including the impact of specific product attributes and end-user characteristics in promoting the diffusion process.  This exploratory study was developed to the competitive relationship between softwood lumber and substitute products in structural end-use applications in the US residential construction industry.  In particular, the study was designed to identify those product attributes that are perceived by residential contractors to be important in influencing the substitution process.
Empirical data for this exploratory study was obtained from a cross-sectional mail survey of 1,500 residential contractors in the United States.  The sample frame for the study was derived from the membership of the National Association of Home Builders (NAHB).  In order to obtain a uniform geographical representation, equal numbers of participants were randomly selected from the northeast, southeast, southwest, and northwest regions of the US.  176 usable questionnaires were returned, providing an effective response rate of 11.7%.
Over 90% of the respondents indicated that they had used at least one substitute product for softwood lumber in a structural end-use application.  The use of specific substitute products varied considerable, with 72.2% of respondents reporting that they had used glulam beams while none of the respondents reported using plastic lumber.  Only two products (glulam beams and wooden I-beams) were use by more than half of the respondents.  Adoption/trial curves for several substitute products show a rapid increase in their use, particularly over the past five years.  Despite this, respondents indicated that their use of structural softwood lumber is changing only moderately.
Respondents were asked to rate the importance of various product attributes in influencing their purchase decision regarding structural building materials.  The analysis of the data indicates that product strength and straightness were rated the most important factors.  Price and price stability were also rated highly, while environmental factors generally received the lowest importance ratings.  A principal components factor analysis of the twelve product attributes indentified three underlying factors that influence the material substitution process: the physical characteristics of the product, the technical characteristics of the product, and economic/supply characteristics of the product.
When asked to rate their satisfaction with softwood lumber, respondents indicated that they were satisfied with only two product attributes:  lumber strength and lumber availability.  Of the remaining product attributes, respondents were neutral regarding three and were dissatisfied with the remaining five product attributes.  Lumber attributes with which respondents expressed dissatisfaction included:  lumber straightness, number of defects, overall lumber quality, price, and price stability.
To explore the impact of environmental issues on the substitution process, respondents were asked to compare the perceived environmental impact of substitute building materials with that of softwood lumber.  Surprisingly, almost all of the substitute products were perceived to produce a lower environmental impact than softwood lumber.  No product was perceived to have a greater environmental impact than softwood lumber and only two products, plastic lumber and plastic/fiber composite lumber, were perceived to have a similar environmental impact.  Finally, a statistical analysis of the research data indicated little variation in the responses based on the geographic location of the firm or the size of the firm.
The residential construction industry is extremely fragmented and competitive and the results of this research indicate that residential contractors are quite willing to experiment with new substitute products.  To counter the competitive threat posed by aggressively promoted substitutes, softwood lumber manufacturers must become market-oriented.  Only by adopting a strong market orientation can they hope to place themselves in a position to understand the needs of residential contractors and develop marketing strategies to meet those needs, thereby increasing customer satisfaction.  It is only by thoroughly understanding and responding to residential contractors needs that the softwood lumber industry can effectively reduce market penetration by the wide range of substitute products currently by offered in the marketplace.
 

​Abstract
 
Despite Japan’s relatively small size, residential housing starts have exceeded those in the US throughout the 1990s, totaling 1.57 million units in 1994.  However, the cost of residential housing in Japan is substantially higher than in other developed countries.  In an effort to address this problem, the Japanese Ministry of Construction (JMOC) recently announced an action program to reduce the cost of residential housing 33% by the end of the century.  Numerous factors have been cited as contributing to the high cost of residential housing in Japan, including high labor costs and low labor productivity, a lack of skilled carpenters familiar with the 2x4 system, non-standardized building materials, a lack of competition in the construction industry, restrictive building regulations, high building material costs, inadequate construction management systems, and an inefficient and extended distribution system from imported building materials.  Many industry observers in both the US and Japan feel that one way to reduce residential construction costs would be through the adoption of North American 2x4 construction technology as an alternative to the more traditional but less efficient post-and beam construction technology.
US construction professionals familiar with the Japanese construction industry indicate that the small segment of Japanese contractors currently building 2x4 houses have modified the 2x4 system to fit their traditional construction system.  These modifications have resulted in a hybrid construction technology that fails to achieve the production and cost efficiencies inherent in the North American system.  Exploratory interviews with building professionals who have worked on residential construction projects in both the US and Japan identified a number of areas where the Japanese 2x4 construction system differs from its US counterpart in terms of these efficiencies.  The primary areas where significant differences were noted included foundations, interior wall finishing, ceiling framing techniques, finish carpentry, labor specialization, and project management skills.
In order to take full advantage of the efficiencies inherent in the North American 2x4 construction system, it is important that Japanese designers, contractors, and carpenters develop a basic understanding of the North American 2x4 system.  This implies that the transfer of 2x4 technology should occur at a variety of skill levels within the Japanese residential housing industry.  At a minimum it is important that four groups be included in a any 2x4 technology transfer programs:  designers/architects, carpenters, construction site supervisors, and project managers.
The process of effectively transferring 2x4 construction technology requires that US contractors and carpenters be allowed to work with their Japanese counterparts.  However, the perceived and real difficulties involved in obtaining work visas for US construction professionals in Japan have effectively restricted this component of technology transfer.  A review of existing policies related to the issuance of work visas for US construction professionals and skilled workers would support total technology transfer and provide benefits for both the residential construction industry and home buyers in Japan.  This strategy would provide the basis for rationalizing construction costs and management systems within the Japanese residential construction industry.

Executive Summary
Anecdotal information from US architects and contractors with experience in residential construction projects in Japan indicates that Japanese construction professionals often do not fully understand the North American-style 2x4 construction system and often employ construction techniques that can compromise the structural integrity and/or long-term performance of these homes. A recent study by CINTRAFOR estimates that 2x4 construction costs in Japan range from 2 to 2.5 times higher than in the US (Eastin et al. 1995), partly due to differences in the way that the technology and construction management practices are implemented in Japan. The CINTRAFOR study suggested that Japanese construction professionals could improve their cost effectiveness and improve the quality of 2x4 homes built in Japan by increasing their understanding of North American-style 2x4 construction technology and construction management practices.
This research project was designed to provide specific information about how North American-style 2x4 homes are built in Japan. The specific objectives of this research project were to:

1. provide information to help Japanese construction professionals rationalize and reduce 2x4 construction costs through a more efficient transfer of North American-style 2x4 construction technology;
2. identify areas where a more efficient transfer of North American-style 2x4 construction technology could help improve the structural integrity and long-term performance of 2x4 homes in Japan; and
3. provide information to support the development and implementation of the 2x4 technology transfer program administered by the Washington State Department of Community, Trade and Economic Development.

While the tone of this report might appear to be negative, this is not the intention. The reader should keep in mind that the primary purpose of this project was to identify construction practices that negatively impact the structural integrity and long-term performance of North American-style 2x4 homes in Japan.
Given the emphasis of this project, it is unavoidable that the tone of the discussion could easily be construed as being overly negative. However, it is important to emphasize that in many of the projects visited, particularly those being built by large construction companies, the technical team observed that the quality of construction was very good. While it is always dangerous to generalize, the technical team found that larger home builders, and the home builders with more experience with the 2x4 construction technology, generally were building good quality North American-style 2x4 homes. In contrast, the team observed that the projects with the lowest quality ratings were managed by smaller construction companies or companies with little or no experience in building North American-style 2x4 homes.
The results of the construction cost assessment and the technical assessment indicate that technical training seminars should focus on the following areas:

• rough framing techniques and lumber specification
• construction detailing
• specification of imported building materials

• exterior finish details
• interior finish details
• insulation and energy efficiency details
• construction management and planning
• architectural design and details

Another important consideration in the design of a technology transfer program relates to the long-term maintenance of 2x4 homes in Japan. In order to ensure that North American-style 2x4 homes built in Japan provide the long-term performance that is expected of them, a strategy must be developed to ensure that they receive routine maintenance. It is critical that routine maintenance services be provided, whether by the homeowner, the building contractor, or an independent maintenance contractor.
Finally, some sort of independent certification of North American-style 2x4 homes built in Japan should be considered. The certification process could focus on the structural components of the home or could be extended to include the routine maintenance of the home as well. A certification program would not only ensure that North American-style 2x4 homes are built using the correct construction techniques but it could provide a forum to facilitate the provision of technical training programs in Japan.
It is critically important, from the US perspective, that the structural integrity of North American-style 2x4 homes in Japan is not compromised by the incorrect application of North American-style 2x4 construction technology. From a long-term strategic market development perspective, it is imperative that Japanese builders and carpenters be properly trained in 2x4 construction technology in order that the growth of this important segment of the Japanese housing market not be jeopardized by substandard product performance.
Given the Japanese expectation of high quality, the long-term growth potential of the 2x4 market is dependent on maintaining the quality of the North American-style 2x4 houses being built in Japan. From a marketing perspective, the role of quality is more important than low price in Japan and every effort should be made to ensure that the North American-style 2x4 construction technology is implemented correctly by Japanese contractors and carpenters. Failure to ensure the correct transfer of North American-style 2x4 construction technology would contribute to a perception by Japanese home buyers that 2x4 housing is poor quality, and would undermine efforts by North American companies and industry associations to further develop this growing segment of the Japanese housing market.
Over the long-term it is equally important that US value-added manufacturers and exporters work to gain greater acceptance of US wooden building materials in the other segments of the Japanese housing industry: post-and-beam and pre-fabricated housing. This includes learning how building materials are specified, by whom, what factors affect the specification process, and how to influence the specification process effectively to increase the use of US building materials in these segments of the Japanese residential construction industry. Similarly, it is equally important that US exporters better understand the role of maintenance and product support factors (e.g., local inventory, product installation instructions and support services, and product maintenance literature) on the competitiveness of US building materials in Japan. Other factors such as product distribution and product support affect the overall success and acceptance of North American-style 2x4 projects, although these were not a part of the terms of reference of this project.