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petitioner's boiler. The cooked wood is sliced while warm by a
veneer slicer. The sliced sheets of veneer are placed on a
conveyor belt that goes through a veneer dryer. Depending on the
type of wood, the veneer dryer reduces the moisture content of
the sheets from as high as 70 percent to approximately 10 percent
within 1 or 2 minutes. The veneer dryer contains fin radiators,
which are also heated with steam piped into the plant from
petitioner's boiler. Air is blown across the fin radiators and
used to dry the veneer. After drying, the veneer is crated for
sale and shipment.
II. Agreement Between Petitioner and Washington Trade Co.
On September 20, 1988, petitioner and the Washington Trade
Co. (WTC), an unrelated party, entered into a 1-year written
contract (the Agreement). The stated purpose of the Agreement
was to allow WTC to furnish and install specified veneer-
processing equipment (the WTC Equipment) at petitioner's mill and
to train some of petitioner's employees in the production methods
preferred by WTC. Petitioner was to use the WTC Equipment to
produce veneer to WTC's specifications, furnishing the requisite
personnel and incidentals, including utilities and insurance
coverage. WTC's process required the cooking of whole logs, the
use of WTC's dryer, and the cutting of the veneer to a thickness
greater than that generally used in the United States.
Paragraph 4 of the Agreement is captioned "Testing". It
provided that WTC could conduct tests at petitioner's mill to
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