Some furniture retailers surprised with high duties on imports
November 1, 2013,
HIGH POINT — High duties assigned to Chinese wood bedroom producers have started to hit some unsuspecting retailers who have purchased goods imported from the factories.
That is causing concern not just for those retailers, but others who could be faced with such bills in the future.
The situation has arisen because when they bought the product, some retailers had allowed themselves to be named as the importer of record. Some were advised by an agent or supplier that they could save money as an importer of record, while others assumed the role as they purchased from the factory directly.
The importer of record in antidumping cases is typically responsible for paying a duty assigned to a particular factory. This classification is normally assigned to importers, but some retailers apparently had signed paperwork that identified them as importers of record.
The duties are aimed at leveling the playing field for U.S. bedroom producers the government has determined have been injured due to unfairly priced imports. Assigning duties to various Chinese producers is one way to discourage people from buying from those companies.
Being importer of record wouldn't normally be a major concern because most initial duties are in the 7% range. But those relatively low duty rates aren't guaranteed over the long term. During an annual review of factories performed by the U.S. Department of Commerce, a factory can be assessed at a higher rate.
That's what happened with Lynchburg, Va.-based Top 100 Retailer Schewel Furniture. Marc Schewel, president, said that his store got hit with duties over 200% when a factory was audited for its 2007 shipments, which were just recently liquidated by U.S. Customs & Border Protection.
That increase in the duty rate - plus interest assessed by the U.S. government - resulted in a six-figure penalty that the store ended up paying, Schewel said.
"It's a pretty unfortunate situation," he said. "You can go on and on about it, but there is a fairness issue that is not being addressed.... We were able to absorb it, but with some smaller retailers, this is a significant expense for them and they are having a hard time."
While it was importer of record for these particular shipments, Schewel said the company hasn't since taken on that designation.
"I think we are out of it at this point," he said. "These last bills we received are the end of it. It was a big hit, but it appears we didn't have any recourse but to pay."
Other Top 100 stores also have been hit with retroactive duties.
Salt Lake City-based R.C. Willey was importer of record for some shipments from around 2007 that were originally in the 7% range. Company President Jeff Child declined to name the factory or say how much of a penalty it was assessed.
He did note that the company has paid one bill already and is dealing with another one now. Eventually, though, he expects the issue to be a moot point.
"We don't think we are getting any more retroactive bills," he said, noting that the original duty was significant. "It wasn't long after the 2007 time frame that we decided not to be importer of record."
Like Schewel, he believes there is a fairness issue involved in applying retroactive duties years after the initial shipments.
"We are fortunate in that we can handle it," he said. "But it is not fair to be told one thing and then go back and retroactively change it."
Keith Koenig, president of Top 100 store City Furniture, based in Fort Lauderdale, Fla., said his company got billed recently for a retroactive duty for one shipment it received years back.
Koenig declined to name the factory or specify the amount he had to pay other than to say that it was a "big hit" since the factory went from a zero percent to a "sky high" duty rate.
"We had to pay the price," Koenig said.
He said he also had a chance to visit the factory and the first product he saw being loaded into a box was a bedroom for Bassett Furniture, one of the original petitioners that supported the antidumping investigation.
"Since they were one of the original petitioners, we mistakenly assumed they would be a favored company," Koenig said of the factory. "As it turns out, my mistake."
Since then, Koenig said, his company has been careful to work with factories with low duties. He also advises other retailers not to be importers of record in situations where it can be avoided.
"The whole administrative review process is not well known across the industry even though it has been written about a lot," Koenig said, adding, "The law, while well intended, is fraught with plenty of curveballs."
Attorneys familiar with antidumping laws say administrative reviews are par for the course in such cases.
"For companies left in the review each year that get a bad result ... sooner or later Commerce instructs Customs to collect the money," said one Washington-based attorney who declined to be named for this story. "It is too late to challenge a Commerce-calculated rate once you get a bill from Customs."
The attorney said that companies mainly need to be aware of the antidumping methodology and their own situation as it relates to imports.
The situation hasn't just caught retailers off guard, but also distributors. That includes Fort Smith, Ark.-based distributor Eads Bros. Furniture Co., which has been in business since 1901 and sells to small retailers in Arkansas, Oklahoma, Missouri and Kansas.
In August, it received two notices that it owed about $50,000 in retroactive duties for bedrooms purchased in 2007.
At the time of the shipments, the groups had duty rates around 7%. Those rates rose to 216% during an administrative review conducted a few years later.
"Never in my wildest dreams did I realize this would come back five to six years later," said Bill Eads III, president.
Eads said the groups were purchased from former case goods supplier Trade Masters, but his company ended up as importer of record for at least two containers. He said that had he known about the situation involving retroactive duties at the time, he would have done things differently.
"I was aware at the time that I would be responsible to pay the (initial) duty through my brokers when I got the container," Eads said. "I didn't realize there was a retroactive duty. If I knew what I knew today, I wouldn't have bought the suite."
He also said that his company can pay the bill, but that it "would sting me a little. I am not going to let something like this put me out of business, but I didn't see it coming."