Closing 'loophole' could raise cut-and-sew costs
By Susan M. Andrews -- Furniture Today, August 27, 2006
Washington — A U.S. Senate bill backed by the National Textile Assn. could significantly raise the cost of imported cut-and-sewn upholstery kits for U.S. upholstery producers.
The bill would close what its supporters say is a loophole in the U.S. tariff code that classifies the kits as "furniture parts," thus exempting them from special textile tariffs, which typically range from 7% to 17% on roll goods.
Fabric supplier Weave Corp.'s Roger Berkley called the classification an "enormous loophole."
The bill, S.3240, is sponsored by Rhode Island Sens. Lincoln Chafee, a Republican, and Jack Reed, a Democrat. It would make cut-and-sew kits subject to textile tariffs unless they are "permanently attached to the furniture framing parts or sections."
In a statement, NTA said the current situation "is severely damaging to U.S. upholstery fabric manufacturers. In 2005, the U.S. imported $1.2 billion in textile parts for chairs and other furniture, of which ... $336 million were of Chinese origin (for home furnishings). While it is not possible to calculate precisely the loss in tariff revenue to the U.S. Treasury due to this duty circumvention, it is undoubtedly several tens of millions of dollars annually."
"Plain and simple, cut-and-sew kits are roll goods with a loophole. We need to close it!" said Irwin Gasner, president and CEO of Wearbest Sil-Tex Mills.
On the other side of the issue, Rob Culp, chairman and CEO of fabric supplier Culp Inc., which has both U.S. and China-based operations, said the legislation would lead to more domestic job losses.
"We are against all tariffs of any nature," Culp said. "We must learn to compete in a global world, and the fewer restrictions to free trade the better. Specifically, if the tariff is applied to cut-and-sewn parts, the result will be more finished furniture produced in China, which will mean further loss of U.S. jobs in our industry."
Jerry Epperson, an industry analyst and partner in investment banking company Mann, Armistead and Epperson, said the issue is a complex one.
"While U.S. upholstery manufacturers want to access low-cost foreign components, they don't want to close their domestic factories — and their reason for existence," he said.
To read the bill, go to http://www.senate.gov/~finance/sitepages/2006MTB.htm and scroll down to S.3240.
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Closing 'loophole' could raise cut-and-sew costs
Aug 29, 2006
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