China decision looms
Preliminary duties, if any, to be revealed late this week
By Powell Slaughter -- Furniture Today, June 28, 2004
High Point — With a preliminary ruling due Thursday on an antidumping investigation of wood bedroom furniture from China, importers are holding their breath while some of their customers hold onto their wallets.
The June 17 deadline for a Department of Commerce initial ruling on the case, which could impose preliminary duties, gets at least part of the blame for a slowdown in wholesale furniture orders last month. With import lead times of several weeks, some retailers apparently held off on placing orders on Chinese bedroom that might arrive after preliminary duties were imposed.
"May has turned out to be relatively slow, especially coming off a good first quarter, a decent April and a strong (High Point) market," said Ken Smith, national director of furniture industry services at BDO Seidman, which tracks furniture shipments.
Retailers may have been ordering more because they believed price increases were coming, both because of the possible duties and rising raw materials costs, he said.
But that worry about rising prices seemed to ease in May, said industry analyst Jerry Epperson. He believes that any duties will be lower than had been feared earlier, and that there's less urgency among retailers to stock up.
"A lot of people were buying up product in anticipation of (preliminary duties) being announced right after April market," he said. "Many have come to the conclusion that, yes, there will be tariffs, but they're going to be relatively small."
None of the seven largest Chinese bedroom manufacturers — the ones required to respond to the DOC investigation — was mentioned among the more egregious examples cited by U.S. manufacturers in their antidumping petition, Epperson noted.
"You also have around 150 (other) Chinese companies that asked to be investigated," he said. "Commerce certainly won't investigate all those companies, but when you have that many manufacturers wanting to open their books, that could have an effect on the general rate."
Opponents of duties hope that such a willingness to provide information will lead the investigators to believe that most Chinese companies aren't dumping.
Epperson added that pricing and sourcing alternatives importers outlined for customers at the April market, as well as recent moderation in steel and oil prices, also has had a calming effect on buying patterns.
At Atlanta-based Rhodes, a member of the Furniture Retailers of America, which opposes the antidumping petition, buying patterns have remained fairly typical, said CEO Bill Kimbrell.
He said the retailer only bought a little more Chinese bedroom in response to the DOC investigation.
"We aren't really hedging, since we believe most of our resources are going to come out of this OK," he said.
There's no escaping, however, that the antidumping investigation has caused headaches for importers and retailers.
"We've spent an incredible amount of time, energy and expense" to shift production of bedroom items out of China, said Mike Veitenheimer, vice president of The Bombay Company in Fort Worth, Texas, another Furniture Retailers of America member. "Any time you move a proven item from one factory to another, you have quality and delivery issues."
Bombay still hasn't found alternative sourcing for some of its Chinese-made bedroom and has stocked up on those goods in anticipation of potential duties.
"Based on conversations we've had, we certainly aren't the only ones," Veitenheimer said.
Bombay's existing relationships with source plants throughout Asia — including Vietnam, where capacity is rapidly growing in response to the China investigation — are paying off.
"It's hard to say you feel good, but I feel we've successfully located alternative sources for most if not all of our key bedroom items," Veitenheimer said.
Manufacturer and importer Standard said its import bedroom sales are up year-to-date, although orders have slackened in recent weeks, said Don Mecke, executive vice president.
Standard is sourcing all the new import bedroom it introduced this year in countries other than China.
"The goods we're sourcing elsewhere are progressing better than planned" in quality and delivery, Mecke said. "It's not completely flawless, but better than anticipated."
For their part, the U.S. manufacturers that brought the petition say they simply want the law enforced and are prepared to live with the results of the investigation.
"If they determine there's no dumping, you won't see us going back to the government for another avenue of help," said Wyatt Bassett, executive vice president of petitioner Vaughan-Bassett.
He added, however, that the DOC's ruling this week will be based purely on information supplied by responding Chinese manufacturers.
"Any numbers you see at this stage are not the result of an investigation," he said. "It's the starting point for an investigation on the ground in China. Whatever figures you get on June 18 are based on the honor system."
