HIGH POINT — Case goods sources long have heard retailers blame the pent-up consumer demand being caused by uncertain times as a reason for postponing new product placements.
This week, sources are hoping they don't face a new version of this scenario. Call it the petition syndrome.
With an initial ruling due by June 17 from the U.S. Department of Commerce on an antidumping petition targeting Chinese-made wood bedroom, times are indeed uncertain for importers, manufacturer/distributors — which includes some petitioners — and retailers alike.
Draining resources, nerves
Originally, importers were bracing for possible duties as soon as April 28, but the petitioners requested a 50-day extension of the deadline from the DOC.
Contigency plans to hold pricing steady in the event of duties, such as sourcing alternatives to China and build-up of stateside inventories before the ruling, have helped assuage the concerns of importers and dealers. But there's no question that the amount of time spent developing and implementing these plans has been a drain on nerves and resources.
The good news for importers is that they've had months to prepare for any duties, and they remain confident that their work will pay off.
"We haven't lost one suite, and we haven't lost any retailers," said Jeff Cook, president and chief executive officer of Magnussen Home Furnishings. "They hear our contingency plans for shifting production to Malaysia and Vietnam, and they're satisfied."
After premarket last month, Magnussen made another visit to Vietnam, and also took its first exploratory visit to Brazil, to check sourcing possibilities in that country, a growing player in the U.S. market.
Keller will introduce six bedrooms and six dining rooms, all sourced in China.
"All the manufacturers we're working with in China have facilities in Vietnam if we need to switch the bedroom component of our introductions," said Ken Fonville, president of Keller Design Center.
Global, which has imported a growing amount of bedroom in China, backed off from the category there, for this market anyway.
"We're showed bedroom from Indonesia at premarket, and I'll have samples from Brazil for April," said Jack DeBonis, president.
Some Chinese plants, such as Fine Furniture in Shanghai, tried hard to get on the DOC's mandatory respondents list, and thereby get judged on their own merits instead of remaining subject to a weighted average of any duties that are imposed.
"One of our strongest advantages — vertical integration — turns out to work against us in the antidumping arena," said Geoff Beaston, president and chief executive officer of Fine Furniture Design & Marketing, the U.S. arm of Fine Furniture. "The fact we use native species in China makes us subject to surrogate values that we feel are excessive."
FFDM has done all it can to respond to the petition and its potential impact, he said.
"One, we've gone way beyond the call of duty in answering the government's requests for information. We've supplied everything that was required of the mandatory respondents, and we did it by the deadline," Beaston said.
"Two, we are reviewing our options, and when we understand what the tariff is, we'll examine, within legal limits, what we can do to soften the blow for our retail partners.
"Three, we are in the process of seeking a location for another bedroom facility," he said.
Universal gets all its wood products from parent company Lacquer Craft, a Chinese manufacturer and one of seven mandatory respondents to the Commerce Department's investigation. The investigation evaluates each of those companies individually, and Universal President Harvey Dondero is confident that Lacquer Craft will face no duties on its goods.
"We're calling these our 'no duties' bedrooms," Dondero said of Universal's introductions at premarket.
Better to be bigger?
While no one can predict for certain, a company like Lacquer Craft — run by management well-versed in Western business practices, with plants involving a high level of private investment — might well stand more scrutiny than more marginal players and face lesser tariffs, perhaps not any.
The result of any tariffs could end up good news for such manufacturers in the long run, giving them increased market share, as smaller Chinese competitors lose their price advantage.
"If I'm Lacquer Craft I'm saying, 'I'm going to get the least amount of tariff, which is going to put the price predators out of business'," said industry analyst Keith Hughes, vice president of equity research at Suntrust Robinson Humphrey. "If the tariff is 5%, it's irrelevant. If it's substantial, it knocks out the marginal bedroom players in China. It also will keep some marginal players in the U.S. in the game for some time."
Among the petitioners, concerns of a retail backlash from major customers angry with efforts to curb imports of Chinese bedroom have indeed come to pass, to an extent. But as the deadline for a government decision nears, practicality has overcome that displeasure, at least among some accounts, said Wyatt Bassett, executive vice president of Vaughan-Bassett.
"Recently we've had a couple of our biggest customers pick up extra suites from us," he said. "They want to make sure they're getting product … Any backlash we'd felt about the petition, we'd already felt before Christmas."
In an effort to meet that demand with timely delivery, Vaughan-Bassett scaled back on introductions this market in order to concentrate on service. Bassett also said his company has rehired around 70 workers, and is running its manufacturing operations full-time, with the ability to add another shift should demand warrant.
Meanwhile, the DOC and International Trade Commission continue sorting out the investigation spurred by the antidumping petition.
Rumors abound of how much the duties will be, but if the scramble to line up sourcing alternatives is any indication, it appears everyone expects at least some amount to be placed on Chinese-made bedroom.
"Anyone who claims they know what will happen doesn't know," Bassett said. "We don't know, our lawyers don't know, and the retailers and importers don't know. DOC doesn't know right now."
And whatever toll duties might place on the Chinese market share for bedroom, the major manufacturers there are grimly determined to ride out the results of the DOC/ITC investigation.
"This is a marathon, not a sprint," said FFDM's Beaston. "To me, the antidumping petition process is an attempt to win a sprint."
