Furniture manufacturers and retailers face off: representatives of each side of the antidumping dispute present their cases for or against imposing import duties on Chinese wood bedroom furniture.

As furniture retailers and manufacturers waited for the next chapter to unfold in the investigation of dumping charges against Chinese wood bedroom furnituremakers, representatives on each side of the hotly contested issue remained optimistic of the outcome.

The U,S. Department of Commerce decided Dec. 10 that the petition filed by the American Furniture Manufacturers Committee for Legal Trade had the required industry support to allow the investigation to continue. By law, the petition must have the support of domestic manufacturers that account for at least 50% of U.S. wood bedroom furniture sales. The DOC recently canvassed all domestic companies believed to be "significant" manufacturers to determine if the 50% criteria was met.

Because the DOC ruled in favor of the petitioners, ITC will continue its investigation. It will make a preliminary determination of injury the week of Jan. 5.

Should the ITC determine injury has occurred, preliminary duties could be imposed as early as spring 2004.

About a week after the Oct. 31 filing of the antidumping petition with the ITC and DOC, seven majar retailers united as the Furniture Retailers Group to oppose the petition. The ad hoc group sent a Nov. 10 memo to other furniture retailers urging them to convince non-aligned, domestic manufacturers they do business with not to support the petition.

"We, as retailers, must make a strong push to convince domestic producers that the antidumping petition will have a negative impact on everybody in the industry, and should not be supported," the retailers group wrote in the memo.

A form letter and list of U.S. wood bedroom furniture manufacturers that did not sign the antidumping petition was attached to the memo. The letter was designed to sway manufacturers to oppose the petition when contacted by the DOC. The form letter listed the retailers group's arguments against the petition--the main ones being duties would be passed onto consumers in the form of price hikes, and retail jobs would be lost.

The battle has become no longer solely about Chinese wood bedroom furniture manufacturers causing U.S. furniture manufacturing jobs to disappear. It has escalated into a war between U.S. furniture manufacturers and retailers, with each side claiming jobs are at stake.

Escalating Tensions

The grumblings amongst domestic retailers and wood bedroom furnituremakers has led to the disintegration of some manufacturer-retailer business relationships. Englewood, CO-based American Furniture Warehouse Co. Inc. and Value City Furniture of Columbus, OH, recently stopped doing business with domestic companies that signed the petition.

"We've decided that these are companies we don't want to do business with," Andrew Zuppa, vice president of marketing for American Furniture, told The Business Journal of North Carolina. "It's just protectionism. It's an archaic concept, especially in today's global marketplace."

According to the Business Journal, American Furniture had spent, more than $1 million a year with Vaughan-Bassett Furniture Co. of Galax, VA.

Vaughan-Bassett's vice president of sales, Doug Bassett, a spokesperson for the Committee for Legal Trade, seemed unfettered a few days before American Furniture announced it would drop Vaughan-Bassett's line. "A couple of dealers have threatened to drop us (coalition members) of cut us because of the petition, but we have a duty to our workers and shareholders (to ensure) that we are not forced to (deal with those who trade illegally)," Bassett said.

Vaughan-Bassett and the 30 other companies that are part of the Committee for Legal Trade contend Chinese wood bedroom furnituremakers have violated international trade laws by "dumping" unfairly low-priced products in America. Their petition seeks duties that range from 158% to 440%.

"We've told (dealers) that if China has done nothing wrong, then (they) had nothing to worry about," Bassett said. "Of course we don't like to upset any of our customers. Reasonable people can disagree on the merits of the case."

In addition to battling the Chinese manufacturers and Furniture Retail Group, the Committee for Legal Trade must contend with strong opposition from the nation's largest bedroom manufacturer, Furniture Brands International. St. Louis-based FBI owns Broyhill, Lane, Thomasville, Henredon and Drexel Heritage. The companies operate domestic showrooms and some American plants, but a majority of FBI's wood bedroom furniture is imported.

"The only meaningful effect of a successful antidumping effort will be an increase in the price of furniture for the retail furniture consumer," W.G. "Mickey" Holliman, FBI's chairman, CEO and president, wrote in a Nov. 4 statement. "As a manufacturer, we will add the amount of the tariffs to the price we charge our retailers, and the retailers will likely add that additional cost to the price they charge the consumer. In an industry now showing signs of emerging from one of the most sustained downturns in its history, we do not need the threat of sharp price increases to dampen demand."

Holliman said its tariffs are imposed and Chinese wood bedroom furniture too expensive, his company will "expand (its) sourcing initiatives to Indonesia, the Philippines, Malaysia, Vietnam, and india--and we may look to other countries as well."

The National Retail Federation, a Washington, DC-based trade group that represents 1.4 million U.S. retail establishments, echoed Holliman's price concerns. "This could make it virtually impossible for retailers to provide American consumers with a quality product at affordable prices," said NRF Vice President and International Trade Counsel Erik Autor. "If the antidumping petition were approved, many families world not be able to buy bedroom furniture at a price they could afford.

"If retailers can't sell the furniture, then there aren't going to be any orders and there won't be any manufacturing jobs," Autor said. "No one wins in that situation."

Nevertheless, the petitioners maintained China has violated U.S. and international trade laws because it has sold prices at artificially low prices. As a result, the petitioners said many U.S. plants have been forced to close and many others are in danger of being shuttered if the petition is not successful. They pointed to U.S. Department of Labor statistics that at least 34,700 U.S. wood furniture manufacturing jobs lost in the last 2 1/2 years.

"We're losing hundreds of jobs. They (domestic manufacturers) can't compete (with the Chinese)," said Bill Miller, financial secretary of California's Local 721 of the Cabinetmakers, Millmen and Industrial Carpenters Union. The union represents production employees at Sandberg Furniture Mfg. Co. and Michels/Pilliod Furniture Co. It joined the Committee for Legal Trade to file the antidumping petition.

The Committe for Legal Trade contends the petition will help turn things around by leveling the playing field.

"This antidumping petition is about preserving U.S. factories and U.S. jobs," said Joe Dorn, the committee's legal counsel and an attorney at Washington, DC-based King & Spalding. Dorn said the petition "presents very compelling evidence of the serious injury suffered by the U.S. wood bedroom industry and its workers from a surge of unfairly priced imports from China."

"Injury" by Dumping or Uncompetitiveness?

Representatives for the Committee for Legal Trade, Furniture Retailers Group, FBI and the Committee for Fair Trade, a coalition of Chinese wood bedroom furnituremakers, participated in the Nov. 21 ITC hearing.

At the hearing, John Bassett III, president of Vaughan-Bassett Furniture, spoke on behalf of the Committee for Legal Trade. Steve Kincaid of Kincaid Furniture, Irwin Allen of Michaels/ Pilliod, Rob Spilman of Bassett Furniture and Wyatt Bassett of Vaughan-Bassett Furniture Co. also spoke in favor of the petition.

Jeff Seaman, an executive of Rooms to To Go, and a J.C. Penney Purchasing Corp. representative testified against the petition. Both are members of the Furniture Retailers Group. John Greenwald, an attorney who represents Chinese furniture manufacturers, and Lynn Chipperfield, senior vice president and chief administrative officer of FBI, also spoke in opposition to the petition."

Spokesmen for each side of the dispute said they were pleased with the hearing. "I thought the hearing went really well," said Michael Veitenheimer, spokesperson for the Furniture Retailers Group and vice president, secretary and general counsel of The Bombay Co, of Ft. Worth, TX. "We have to keep in mind the issue being determined really favors the domestic industry. They just have to show (there is) threat (from the Chinese)."

Veitenheimer and others who oppose the petition contend the ITC's investigation will ultimately determine that Chinese wood bedroom furnituremakers are not guilty of dumping.

Doug Bassett also said he thought the Nov. 21 hearing went well, and he maintained injury to domestic manufacturers will be found. "The law is specific," Bassett said. "Seven points have to be shown to prove injury."

For instance, Bassett said to show injury, it would need to be displayed that wood bedroom furniture imports front China have grown significantly in the past three years. They have grown by $750 million, to more than $1.2 billion, Bassett said. Meanwhile, from 2000 to 2002, domestic sales of wood bedroom furniture declined 20%, and operating profits dipped by 75%.

"There was virtually nothing in the other side's statement to (refute injury)," Bassett said. The antidumping investigation will also seek to determine if there were outside factors, other than China's alleged dumping, that have contributed to the decline of the U.S. wood bedroom furniture industry. That point is open to contention.

"Is it price ... or quality (of domestic products) that is causing it," Veitenheimer asked.

Autor also suggested the growth of imported Chinese products is not just about price. He said retailers have had quality and service problems with domestic-made furniture. Spokesmen for the Committee for Legal Trade dispute the claim that their products are of lesser quality.

Some also contend the domestic wood bedroom furniture industry has had problems because it is not taking advantage of the international opportunities. Chipperfield said domestic manufacturers have suffered because of their unwillingness to "embrace the global marketplace. They need to do that rather than try to build walls around an industry that is changing," he said.

Clupperfield said adapting to the changing marketplace is what has kept FBI competitive. He said the import issue has put pressure on smaller, domestic companies to compete. Some simply cannot, he said. Chipperfield and Holliman both said they foresee a consolidation of the domestic industry in its future.

An Uncertain Future

Retailers are wary the antidumping petition, if successful, will breed more petitions. "No one knows where it stops," Veitenheimer said. "What's next? Occasional? Glass table tops?"

In October, Bassett said of the furniture industry, "We consider ourselves the test case and think if we are successful, others will follow suit."

A spokesman for the ITC said it is in economic downturns that the number of dumping petitions that are filed increased. The ITC is currently investigating a number of allegations of dumping against the Chinese brought by a variety of industry groups.

Retail Group Grows

Veitenheimer said the Furniture Retailers Group has gone from seven to at least 35 members in less than a month.

The retailers group has requested $5,000 for every $100 million of each member company's revenue. The funds are being used to retain economist John G. Reilly of Washington, DC's Nathan Associates, "to analyze numbers and put our economic theory together," Veitenheimer said. It was also used to hire the law firm of Hunton & Williams of Washington, DC, to help importers fill out questionnaires that gathered information for the dumping case. Importers were asked the prices and quantity of wood bedroom furniture they buy from China.

The Committee for Legal Trade has solicited an unspecified amount of financial support from member companies and industry suppliers. It said its legal battle will cost approximately $1.5 million. If the investigation continues and duties are imposed, Bassett said he believes none of the injured companies would see duty money until 2007. He added it generally takes that long, because of an appeals process that would follow the imposition of duties. The government could also decide to do away the the Byrd Amendment, which allows injured parties to divvy up the money, because of the budget deficit, Bassett said.

"None of us is counting on seeing the money," Bassett said. "But that's not why we filed in in the first place. If we prevail, we're going to benefit so greatly (in other ways)."

Major Players in the Wood Bedroom Furniture Anti-Dumping Petition Battle

FOR

American Furniture Manufacturers

Committee for Legal Trade Members

American Drew, Greensboro, NC

American of Martinsvile, Martinsville, VA

Bassett Furniture Ind., Bassett, VA

Carolina Furniture Works, Sumter, SC

Century Furniture Co., Hickory, NC

Copeland Furniture Co., Bradford, VT

Crawford Furniture Co., Jamestown, NY

Crescent Mfg. Co., Gallatin, TN

Durham Furniture Co., Canfield, OH

The Good Furniture Cos., Carson, CA

Harden Furniture Co., McConnellsville, NY

Harden Mfg. Corp., Haleyville, AL

Hart Furnture Co., Collierville, TN

Higdon Furniture Co., Quincy, FL

Hooker Furniture Corp., Martinsville, VA

Johnston/Tombigbee Furniture., Columbus, MS

Kincaid Furniture, Hudson, NC

Lea Furniture, Morristown, TN

Michels/Pilliod Furniture Co, Linwood, CA

Mobel Furniture Co., Ferdinand, IN

Moosehead Furniture Mfg. Co., Los Angeles, CA

Palliser Furniture Co., Winnipeg MB

Pennsylvania House, Lewisburg PA

Sandberg Furniture Mfg. Co., Los Angeles, CA

Shermag Inc, Sherbrooke, QU

Stanley Furniture Co., Stanleytown, NC

Stickley Furniture Co., Manlius, NY

Vaughan Furniture Co., Galax VA

Vaughan-Bassett Furnture Co., Galax, VA

Vermont Tubbs Inc., Brandon, VT

Webb Furniture Ent, Galax, VA

California's Local 721 of the Cabinetmakers, Millmen & Industrial Carpenters Union, joined the committee as co-petitioners in the antidumping action. The union represents production employees at:

Michels/Piliod Furniture Co

Sandberg Furniture Mfg. Co.

Notes:

(1.) Keller Mfg. Co. of Corydon, IN, and Lexington Home Brands of Lexington, NC, pulled out of the Committee for Legal Trade prior to the filing of the antidumping petition. Keller had been a founding member of the committee.

(2.) American Drew, American of Martinsville, Kincaid. Lea and Pennsylvania House are divisions of La-Z Boy Inc. of Monroe, MI. LaZ-Boy is not a member of the Committee for Legal Trade nor is Hammary Furniture of Lenoir, NC another one of La-Z-Boy's divisions that serves the wood bedroom furniture market.

AGAINST Committee for Fair Trade

The Committee for Fair Trade is comprised of Chinese wood bedroom manufacturers that import products to the United States and are defendants in the antidumping case.

Furniture Retailer Group

The Bombay Co., Ft. Worth, TX

City Furniture, Tamarac, FL

Crate & Barrel, Naperville, IL

Havertys, Atlanta, GA

J.C Penney, Plano, TX

Rhodes Furniture, Atlanta, GA

Rooms to Go, Seffner FL

This ad hoc group of U.S. furniture retailer claims to have grown to more than 35 companies. It was formed to contest the antidumping petition filed by the Committe for Legal Trade.

National Retail Federation

Based in Washington, DC, the NRF is the world's largest retail trade association, representing more than 1.4 million U.S. retail establishments with more than 20 million employees. Most of the Retail Furniture Group members belong to the NRF.

Furniture Brands International, St. Louis FBI, the nation's largest home furniture manufacturing company, has voiced strong opposition to the antidumping petition. Its furniture divisions that market wood bedroom furniture include:

Broyhill Furniture Ind. Inc., Lenoir, NC

Drexel Heritage Furniture Ind. Inc., High Point, NC

Henredon, Morganton, NC

Lane Home Furnishings, Altavista, VA

Thomasville Furniture Ind. Inc, Thomasville, NC

Antidumping Petition Highlights

The 305 page "Petition for the imposition of Antidumping Duties Against Wooden Bedroom Furniture from China" was filed Oct. 31 by the American Furniture Manufacturers Committee for Legal Trade and Cabinet Makers, Millmen and Industrial Carpenters Local 721 of California to the International Trade Administration, U.S. Department of Commerce and the U.S. International Trade Commission. Excerpts follow:

* Definition of bedroom suite: "generally consists of at least a bed, one or two nightstands, and a dresser with a mirror. Other typical pieces in the suite include a chest or armoire."

* The petition seeks the imposition of antidumping duties on U.S. imports of wooden bedroom furniture from China (ranging from 158.74% to 440.96%) pursuant to sections 731 and 732(b) of the Tariff Act of 1930 ... The petition presents evidence that wooden bedroom furniture from China is being sold in the United States at less than fair value, within the meaning of section 731 of the Act, and that the domestic industry producing a domestic-like product wooden bedroom furniture--is materially injured, or threatened with material injury, by reason of dumped imports of wooden bedroom furniture from China."

* The estimated dumping margins for wooden bedroom furniture from China are based on (1) actual invoices from six different products purchased from one Chinese exporter during the period of investigation and (2) factors of production information obtained from petitioning companies for the very same products for which price quotations were obtained."

* India is the appropriate surrogate country for valuing the factors of production for China in this investigation because (1) its economy is at a level of economic development that is comparable to China, and (2) is it is significant producer of comparable merchandise."

* Dumped imports were equal to 44% of the value of domestic production and 25% of the value of apparent domestic consumption in 2002. Dumped imports were equal to 67% of domestic production and 30% of apparent consumption during January-June 2003.

* The rapidly increasing imports from China have clearly displaced domestic sales and output, causing domestic producers' market share to drop from 68% in 2000 to 46% in 2002 and from 58% in January-June 2002 to 40% in January-June 2003.

* "(T)he Chinese producers have simply copied the exact designs of numerous domestic bedroom suites. Accordingly, competition is based primarily on price. Dumped imports from China have increased their share of the U.S. market by underselling domestic wooden bedroom furniture by very wide margins. In fact, in some instances, domestic producers have themselves been forced to import wooden bedroom furniture from China, because their own cost of production exceeds the dumped import prices from China."

* "The dumped imports have taken a very large share of the U.S. market from domestic producers, which has forced domestic producers to close numerous plants notwithstanding strong demand for wooden bedroom furniture in the U.S. market. The industry's workforce has been drastically reduced. The industry's operating income and cash flow have all but vanished. It is no exaggeration to say that the subject imports from China have single-handedly forced the industry into a tailspin so swift and deep that it may soon become irreversible."

* "Spokesmen for China's national furniture trade association and for individual Chinese producers have made plain beyond any doubt that the Chinese industry has very ambitious growth plan--plans that are largely predicated on export growth ... As has been the case historically, the Chinese industry will use the weapon of low prices to expand its presence in this market. The strategy has worked successfully in the past, and there is reason to believe that it will be employed with equal success in the future, unless antidumping duties are imposed."