Chinese plants eager to open books to U.S.
By Powell Slaughter -- Furniture Today, January 25, 2004
HIGH POINT — The U.S. Department of Commerce investigation of wood bedroom furniture manufacturers in China has many plants there clamoring to open their books to investigators.
The words "audit" and "investigation" usually are as welcome to a businessperson as the sight of a camera crew from "60 Minutes." But the Chinese are hoping a thorough look at their operations will clear them of allegations they're dumping product in the U.S. market by illegally selling it below free-market cost.
The 27-member American Furniture Manufacturers Committee for Legal Trade filed the antidumping petition, which could lead to steep duties on Chinese wood bedroom furniture.
Hundreds of Chinese plants are responding to the DOC inquiries, according to lawyers for Fine Furniture Design & Marketing, the U.S. marketing arm of Shanghai-based manufacturer Fine Furniture Group.
Geoff Beaston, FFDM's president and chief executive officer, said FFDM is one of the companies lobbying for attention from the DOC. He worries the investigation might be limited to just the few largest bedroom furniture producers in China, and would leave out Fine Furniture. While the company has a modern plant of more than 2 million square feet, it has only been shipping for two years and is running at 50% capacity, still growing into its potential.
That's not enough to get FFDM on the A-list if the DOC investigation is based purely on volume. But the agency may choose other "voluntary" audit targets.
"We know we're not dumping, but the fact that we're not dumping doesn't matter," Beaston said. "We were named in the petition, and we would love to be audited, but Commerce has had hundreds of applications."
If the company isn't chosen to be audited, it may well have to pay higher duties. For companies not audited, the DOC would impose either a weighted average of the duties imposed on the big-volume manufacturers, or punitive "all-China" rates. The latter could range up to 453%, the highest sought by the petitioners, and could apply to companies that either don't submit information to investigators or can't prove they are not state controlled.
FFDM expects to learn in late February whether it will be audited, Beaston said.
Preliminary duties could be imposed as early as April, although that may not happen until June.
Beaston said that in an audit, Fine Furniture could show that its competitive advantages over most U.S. manufacturers go far beyond low labor costs and are based on a business model of efficient manufacturing and a streamlined, low-overhead operation.
"Our sales force is five people — they're top-caliber and they can call on anyone from the sales floor to the head office," Beaston said.
"We have no national advertising. Our motto is, 'The store is the brand.' But we're spending a lot of money on this petition, and that's not in the model."
As with many manufacturers in China, the petition raises unknowns about the immediate future of FFDM's bedroom business, currently 60% of sales. The company is examining contingency plans in case the petition succeeds.
"We have to think in terms of, 'Do we buy a plant in Vietnam? Do we convert our factory in Shanghai to dining room or other products?' We've put on hold any plans to expand our factory in China, but at the same time upped our interest in exploring other countries," Beaston said.
Another question involves pricing.
"Can we introduce something in April and hold that price? We have to let the chips fall where they may with that," he said. "If the petition succeeds, we're going to be looking at lower volume in the bedroom arena if we haven't shuffled (manufacturing) somewhere else."
Moving production to other countries won't be like flipping a switch.
"Quality for everyone will take a hit," he said. "When I was at Lexington, we couldn't shift a product from Plant 7 to Plant 8 without issues."
Beaston said he sympathizes with petitioners he believes are sincere — which he characterizes as those who haven't relied on Chinese goods themselves.
"As far as I'm concerned, a Stickley has a gripe," he said. "We ought to punish any company that's dumping, and on the other hand, you punish those companies that are importing from them. If those 27 petitioners did not buy a stick from China I could support them. If I thought they could bring jobs back to the United States, I could help them. If I thought this company was dumping, I'd resign."
Beaston said the good news for Fine Furniture is that it has sound finances and can afford to post the necessary bonds if preliminary duties are imposed.
"We have to plan for the worst," he said. "Obviously it depends on which side of the table you're sitting on as to what 'the best' would be.
"These (petitioners) need to be planning for the worst, because no matter how it turns out, we will weather this storm."
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