Chinese Furniture May Face U.S. Tariffs

Washington, DC, June 17--The U.S. government is expected Friday to propose new tariffs on certain kinds of Chinese-made bedroom furniture, siding with a group of more than two dozen American furniture makers that allege factories in China have been illegally flooding the U.S. market with beds, dressers and nightstands at artificially low prices. The government could impose as many as nine different rates -- some for individual Chinese factories and some for groups of manufacturers, according to officials at the U.S. Department of Commerce. The duties could apply to a total of $1.2 billion of annual imports, making it the largest antidumping investigation the U.S. has ever conducted against China. But the full impact of the new duties on consumers and the U.S. furniture industry will depend on how big they are, which could range from near zero to more than 50%. Appeals from both sides can take place until early next year, when any tariffs could be adjusted. If the new duties are high, the retail price of bedroom furniture could rise significantly, as the cost pressure on the Chinese-made products allows U.S. manufactures to impose their own price increases. A sharp drop in Chinese production seen in recent weeks also could free up floor space in furniture stores that have relied heavily on imports, opening the door for U.S. manufacturers to reclaim lost market share. That scenario would be a major victory for the U.S. furniture makers that petitioned for the tariffs last October, saying imports from China have sent the U.S. industry into a tailspin, battering their sales and operating income. Potentially most threatening for U.S. factory owners is that the debate over the tariffs that has roiled their industry and embittered many of their most important customers is spurring development of modern furniture-making plants in other low-labor countries, such as Vietnam and Brazil. Many economists say that phenomenon underscores how the cumbersome U.S. dumping laws are out of date and ineffective, particularly in the case of China's fast-evolving economy. The case also touches on a delicate political issue in the current U.S. presidential campaign. The tariffs on furniture would increase the number of Chinese-made products with antidumping duties to 57, ranging from paintbrushes and brake rotors to crawfish tails and television sets. Those measures are popular with factory workers and opponents of global outsourcing, but also risk irritating voters as prices on popular consumer goods rise. U.S. furniture makers that support the tariffs say they have no choice but to pursue the dumping case. They say that at least some Chinese factories, fueled by government subsidies and a devalued currency, are selling products at or below what it costs to make them. Since a wave of Chinese-made wooden furniture swamped the U.S. market beginning in 2000, about 35,000 employees, or 27% of the total work force at U.S. woodworking factories, have lost their jobs. The mere specter of tariffs is accelerating the development in furniture production in other low-wage countries that aren't under attack for unfair pricing. During the first three months of the year, bedroom-furniture imports to the U.S. from Vietnam tripled from a year earlier, while those from Brazil grew by about 27%, according to the U.S. Census Bureau. Taiwan entrepreneurs who revolutionized furniture-making in China by building huge, state-of-the-art factories there are dipping into Vietnam. Art Heritage International Ltd., based in Dongguan, China, just bought a factory near Ho Chi Minh City that is about the size of four American football fields, plus a parcel of land in southern Vietnam that is seven times bigger. Jack Wang, Art Heritage's general manager, said the company plans to immediately start building a factory on that tract if the proposed tariffs are steep. "We're pretty much right on schedule," he said. The owner of a factory in the northern Chinese city of Yichun that makes bedroom furniture for Global Furniture Inc. of Mooresville, North Carolina, recently moved part of those operations across the Russian border about 95 kilometers away to escape any trade duties on Chinese-made products. Bedroom sets churned out at the new Russian plant by workers brought in from Yichun were being touted two months ago at the furniture industry's big spring buyers' market in High Point, North Carolina. Still, China remains by far the biggest exporter of bedroom furniture to the U.S., accounting for roughly as many furniture imports as the next 10 countries combined. Tariff supporters are skeptical that its furniture production can be quickly replaced in less advanced countries. Lobbyists for the retailers, importers and Chinese factories have denounced the U.S. furniture makers as selfish opportunists looking to cash in. Under a U.S. measure known as the "Byrd Amendment," the duties collected as a result of a dumping case can be paid to the U.S. companies hurt by the dumping. Some retailers helping bankroll and/or lending their name to the lobbying and legal campaign are household names with deep pockets, including Crate & Barrel, J.C. Penney Co. and Berkshire Hathaway Inc.'s Nebraska Furniture Mart and RC Willey Home Furnishings units. Some of those big retailers are most concerned that large duties on bedroom furniture could lead to a push for similar tariffs on sofas and other types of furniture.

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