how much is the custom duties rate on the prefabricated log houses?

1 ANSWERS

1. Ali Abdullah
   

   Hi, INDUSTRY SNAPSHOT The prefabricated wood components industry includes many products, including premade panels and sections for chicken coops, farm buildings, geodesic domes, marinas, sauna rooms, hotel rooms, and decks. The industry is fragmented and entrepreneurial and is represented by a wide range of companies. Total industry shipments in 2000 reached $3.58 billion, compared to $3.02 billion in 1997. Over the same time period, the total number of industry employees grew from 23,187 to 26,363. By far the biggest segments of this industry are single-family homes, multifamily units, and institutional buildings, including hotels and motels, schools, hospitals, and prisons. With a strong economy pushing construction booms in both residential and nonresidential building, prefabricated wood buildings and components manufacturers experienced steady growth in many areas, most notably in larger, upscale homes and upscale log homes. Apart from the economy, factors influencing the growth of this industry during the late 1990s included the availability of wood, advancements in design technology, and a move toward smaller classroom sizes in education. A more accepting attitude towards prefabricated wood buildings and components—the result of improvements in quality and flexibility—was also a key factor in driving sales for this industry. ORGANIZATION AND STRUCTURE The advantage of prefabricated wood building products is that they save builders money. Because large pieces of the structure come from a factory and are designed for quick and easy assembly on-site, builders reduce on-site costs, such as labor, workers' compensation, and insurance. Assembly-line production also allows prefab manufacturers greater quality control. The cost advantage of prefabricated buildings shows in the price gap between site-built and manufactured homes, which come to the site completely built. In 1997 the median price of a site-built, single-family home was $120,000, while the average price of a manufactured home was $40,000. Most prefabricated homes fell somewhere within this range. The largest segment of the prefab wood products industry is single-family homes. Homes built using prefab units are called component, or prefabricated, housing. Typical prefab housing products include roof trusses, wall frames, and floors. Many builders also use pre-made wall units complete with insulation, plumbing, wiring, ventilation systems, and doors. Builders of both detached and attached homes with prefab products use a systems approach to building, which is a hybrid of site-built and manufactured housing. The four types of systems-built housing include precut homes, for which all lumber and materials come to the site already cut; panelized homes, for which the main wall panels are shipped to the site, often with plumbing and wiring already installed; sectional, or modular, homes, which are 80 to 90 percent complete when they leave the factory and have cabinets and flooring already installed; and log homes, which are factory-made kit homes. BACKGROUND AND DEVELOPMENT Assembling wooden building components off-site has been practiced for centuries. The modern concept of prefabrication, which mass produces uniform panels and components, dates back to the early 1900s. Builders of that period, often the homeowners themselves, bought lightweight, premade frames and trusses to simplify construction. The use of gasoline-powered trucks in those early years boosted sales of prefab products and allowed manufacturers to build larger, heavier components. The fledgling prefab industry grew during the post-World War II economic boom. As the economy and population grew, housing starts soared. Also, government housing programs, such as the Veteran's Administration Home Loan Guarantee Program of 1944, prodded demand for new construction. Single-family housing starts went from 139,000 per year in 1944 to 1.9 million in 1950. Throughout the 1950s and 1960s, as the postwar economy thrived, families flocked to the housing market in a buying frenzy. Thousands of tract subdivisions were built on the edges of urban America, typically offering quality detached homes for less than $10,000 in the 1950s, with mortgage payments less than $100 per month. To keep up with demand, both residential and commercial builders sought more efficient production methods, including prefabrication. New construction techniques and standard components made construction more viable during the 1950s, 1960s, and 1970s. New federal and state regulations were enacted, for example, mandating structural integrity and uniform building practices. Plywood, plastics, and aluminum, which all eventually went into wood prefab units, also increased sales. Although demand for new construction remained high through the 1980s, several factors, including higher construction costs, slowed demand compared to past decades. As housing affordability and home ownership rates fell, many builders used component construction to cut costs. At the same time, higher quality components gave the industry a share of upscale markets. In addition, demand for heavy-duty commercial and industrial units rose. Industry sales rose to nearly $2.5 billion by 1987, reflecting average annual growth of more than 12 percent between 1981 and 1987. Although commercial and residential construction markets stalled in the late 1980s and early 1990s, prefab industry revenues fell only marginally as the search for less-expensive production methods escalated. Sales slipped to about $2.3 billion in the early 1990s, but demand rose with better construction markets in the mid-1990s. The industry shipped goods worth $2.7 billion in 1995, down slightly from 1994. CURRENT CONDITIONS Total value of product shipments in this industry increased by roughly 18 percent between 1997 and 2000, according to the U.S. Census Bureau, reaching $3.58 billion dollars. Over half of that figure came from prefabricated stationary wood buildings shipped in three-dimensional assemblies, rather than in panel form, as packaged units, or as components. Three-dimensional assemblies, including both residential and nonresidential buildings, proved to be the area of greatest growth in the industry. Other areas experiencing notable growth included prefabricated wood buildings shipped in panel form, particularly for structures other than single-family homes (although shipments in that area also increased). Shipments of multifamily residential units and nonresidential units, including motels and hotels, also increased significantly. Rapid growth in residential construction meant increased sales for several segments of this industry. In mid-1999, ENR reported a very tight market for premade wall panels as demand threatened to outrun supply. As a result, prices rose sharply in 1999, although industry experts also forecast an eventual drop in price as the market corrected itself. Traditional builders increasingly used panels for custom-built residential construction, as technological improvements in computer-aided design made the number of design options nearly limitless—once a drawback of using premade panels rather than building walls on-site. Other benefits of prefab wall panels include savings in cost and time. The growth of the modular home industry was dramatic through the latter half of the 1990s. The widespread acceptance of manufactured homes in the late 1990s—with one in three new single-family homes begun being fully factory-built—suggested the potential for increasing growth of modulars as well. As modular homes became more popular, bigger and pricier houses became more common in the industry. A sign of the growing acceptance of modular homes was the construction of one of the largest single-family homes ever built from prefabricated segments. Made by Westchester Modular Homes, the Greenwich, Connecticut, mansion encompassed 9,000 square feet. The house was 80 percent complete upon leaving the factory and was shipped to the site in 20 boxes. According to the builder, using prefabricated segments took off at least three months from the building schedule and saved between 10 to 12 percent of the final cost of the home. In such larger—and more upscale—projects, the actual cost of materials may not be less than it is for conventional site-built homes, but the amount of time saved—sometimes a matter of years—still translates to a substantial cost savings. Log Homes. Aside from more demand for prefabricated traditional homes, one large and growing segment of the industry was log homes. Log homes represented close to 7 percent of custom homes built in the United States in the late 1990s; exports of prefabricated log homes also increased. Like modular homes, log homes became more upscale. Because they use more wood than traditionally built housing—10 to 20 percent more—the wood favored for their construction continues to grow more scarce. Red cedar, which is especially popular in Southeast Asian markets, grew increasingly difficult to come by in the early 2000s. Some makers have looked to other woods, including plentiful pine, to meet the demand. Office and Schools. A shortage of office space was also a boon to manufacturers in this industry, as vacancy rates fell below 5 percent in some major cities. Modular office space allowed maximum flexibility for a business's growth and restructuring. In addition, the need to rewire or install additional wiring for rapid changes in technology made modular and panel-built offices an increasingly popular choice. Along with this trend, smaller panels came into favor in the United States for their increased flexibility. Prefabricated building manufacturers aggressively pursued the school-building market in the late 1990s, but as of 1999, modular construction accounted for less than 1 percent of all new construction of educational facilities. Manufacturers battled against old stereotypical images of mobile trailers as temporary annexes to the brick-and-mortar school buildings. Some educational architects became proponents of using modular solutions, successfully lobbying school systems to adopt them. Advantages of using prefabricated buildings for school use included minimal disruption to classes and the ability to disassemble the structure and reassemble it at another site in the future. The nationwide push for smaller classroom sizes was also a positive factor for the industry. One of the most notable educational projects undertaken in 1999 was the construction of Bedford, Massachusetts-based Middlesex Community College, an entire college campus constructed from modular buildings encompassing over 126,000 square feet. According to a report in School Planning and Management, which is a major advocate for modular building, "The new buildings, each two and three stories, are designed to model true New England neo-Georgian architecture with its classical brick exteriors and quoin work on the corners, and a running Flemish bond, as well as roof dormers, brick chimneys, and cupolas." INDUSTRY LEADERS About 709 companies participated in the prefabricated wood component industry in 1997. Because it is a localized industry by logistic necessity, most companies were small—only 249 had more than 20 employees. Pennsylvania was by far the leader in the production of three-dimensional assemblies; Wisconsin was the clear leader in production of buildings shipped in panel form. Top Pennsylvania producers in 1999 included Muncy Building Enterprises, Deluxe Homes of Pennsylvania, Simplex Industries Inc., and Haven Homes. Leaders in Wisconsin were Wausau Homes Inc. (which ranked sixth in the nation by sales), Wisconsin Homes Inc., and Stratford Homes Inc. Wisconsin is also a leader in log homes, home to leading companies Wilderness Log Homes, Greatwood Log Homes, and Pine Ridge Log Homes. Firms leading the industry overall as of 1999 were Skyline Corp., with $612 million in sales and 3,500 employees; Horton Homes, with $250 million in sales and 1,500 employees, Liberty Homes, with $168 million in sales and 1,300 employees; and Cavco Industries, with $168 million in sales and 1,400 employees. Several industry leaders in this sector also had revenues from mobile and manufactured homes. WORKFORCE For production, the industry employed many assemblers, fabricators, and woodworkers. In 2000, 26,363 people worked in this industry, with 19,351 jobs in production, reflecting a slow but steady increase in employment for this industry. Total payroll for 2000 was $748 million, of which $446 million paid production wages. Given the tight labor market in this industry and the overall economy, prefabricated buildings have been a blessing to contractors, as they require very little on-site labor. RESEARCH AND TECHNOLOGY Most technological advances throughout the mid-1990s centered around prefab housing's advantages of low cost, ease of construction, and uniform quality. Prefab makers also developed products to compete with traditional construction markets, such as high-rise buildings. For instance, component makers in Japan marketed sections and panels for medium-rise apartment buildings as high as five stories tall. Japanese companies were leading technological advances in other areas of the industry, as well. Shimizu Corporation's Smart System, introduced in 1993, was designed to cut the number of man-hours required to complete a 20-story office building by 30 percent. The Smart System uses a network of nine computer-controlled cranes that scale the frame of the building and automatically attach components. Technological developments that competed with the wood component industry in the 1990s included advances in wood substitutes. Producers in Saudi Arabia, for example, mass-produced prefab aluminum houses and buildings. Similarly, manufacturers in Poland shipped prefab metal and reinforced plastic components.

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