Antidumping tradeoff would allow manufacturer to escape review
Petitioners offer to take a cash payment
Thomas Russell -- Furniture Today, May 21, 2007
HIGH POINT — U.S. furniture makers that supported a petition for an antidumping investigation into Chinese-made wood bedroom furniture have received millions of dollars in duties collected on those imported goods.
Now they stand to receive a second source of funds from the same case.
A document obtained by Furniture/Today shows the petitioners offered to take a cash payment in exchange for letting one Chinese manufacturer off an annual administrative review list that would assign new duties on goods shipped to this country.
The letter, sent by the petitioners’ attorney, Washington-based King & Spalding, to an attorney representing a Chinese manufacturer, said the manufacturer could pay an amount exceeding $50,000 to have its name taken off the list. That, in turn, would lock the factory into a duty rate assigned at the time it shipped the goods.
Staying on the review list would make the factory’s importer of record susceptible to paying a higher duty on the shipments, if that’s what the review determines.
In exchange for the cash payment, the company also had to promise that it would not do anything to hold up or diminish the distribution of duties collected by the U.S. government and in turn given to the petitioners through the Byrd Amendment. Thus far, the petitioners have received more than $20 million in Byrd monies. More will be distributed once an administrative review of the 2004 and 2005 shipments and duties is completed this summer.
Legal experts and industry experts say such cash settlements in exchange for removal from a review list are legal, and occur in other antidumping cases.
Furniture/Today was unable to determine whether the Chinese manufacturer in question actually paid the settlement monies. But the petitioners did ask the U.S. Department of Commerce to take the company off the review list.
Citing client confidentiality, petitioner attorney Joseph Dorn of King & Spalding declined to comment. Thus, it was unclear how many other Chinese manufacturers were offered similar arrangements or paid to be removed from the review list. A number of petitioners that make up the American Furniture Manufacturers Committee for Legal Trade also have declined to comment on or acknowledge that such cash payments were taking place.
During the first administrative review begun last year, 41 factories were taken off the review list, according to the DOC. The review covers goods shipped between June 24, 2004, and Dec. 31, 2005.
Still, furniture importers have told Furniture/Today that a number of their Chinese source factories paid sums ranging from $15,000 to $100,000 to get off last year’s review list.
Gary Cacioppo, a case goods buyer with retailer Rooms To Go, said his company knew of factories that paid to get their names off the list. He declined to reveal their names or how much they paid.
Joe Elmore, executive vice president of marketing, sales and product development at case goods importer Master Design, said he was aware of at least two factories that paid $75,000 each to get off last year’s review list. He also declined to reveal the factory names.
"They were told that you could continue to litigate it, or we’ll give you a one-time offer to buy your way off the list," he said, adding that the negotiations took place while he was visiting the factories. "Two we had already placed product assignments with for samples were going through with the process…. They were simply trying to cut their exposure, which in turn mitigates my exposure. They were just trying to buy their way out of trouble."
The 41 factories removed from the list include some prominent names, among them Dalian Huafeng Furniture, a company that officials leading the 2003 antidumping petition deemed among the most egregious dumpers of wood bedroom furniture onto the U.S. market.
Other prominent names included Dongguan Sunrise Furniture Co., Rui Feng Woodwork, Art Heritage International, and Yihua Timber Inds., which produces goods for New Classic Home Furnishings.
A number of Chinese manufacturers and industry officials queried by Furniture/Today on the subject declined to comment on the alleged payments.
One manufacturer said he would not say anything due to the sensitive nature of the issue. He also feared his factory would be hit with a higher duty during a later review if he discussed the matter openly.
The DOC has denied having any information about such cash settlements. .
"Commerce has no direct knowledge of any such agreements," wrote DOC spokesperson Brittany Eck in an e-mail to Furniture/Today. "If they exist, they are solely between private parties with no involvement by Commerce. It is not uncommon, however, for either a domestic or foreign interested party to withdraw a request for an administrative review."
Initially, some importers told Furniture/Today they believed that paying cash settlements would have their names removed from all future administrative reviews.
But that’s not necessarily the case. For example, most of the companies released from the first review are now on the second, begun earlier this year. That review, which is targeting 196 factories, relates to shipments made in 2006.
Those manufacturers have until early June to negotiate or buy their way off the list.
In a letter released in early May, Dorn, of King & Spalding, told U.S. Secretary of Commerce Carlos M. Gutierrez that the petitioners agreed to release 20 names from the second review. It was unclear whether any of those firms have paid to get their names off the list.
But at least three furniture importers told Furniture/Today this spring that their manufacturers were negotiating cash settlements with the petitioners.
One reason so many importers are reluctant to talk on the record is that they fear retribution from the petitioners. In other words, if they openly criticize the process, they believe their source factories would be penalized in future annual reviews.
Still, a number have voiced frustration and concern about the process. In particular, they claim it abuses the government’s administrative review process and raises questions about the integrity of the entire antidumping case, which was touted as a way to protect U.S. jobs.
"It doesn’t surprise me that anybody who could get off the review list, it would be in their best interest to do it," said Richard Tomkins, a vice president of Cresent Furniture, noting that he wasn’t aware that any of his source factories had paid the settlement monies last year.
"In my opinion, it seems morally questionable," Tomkins said. "I think the whole scenario is an unfortunate chapter in the history of global trade."
Others simply view it as a cost of doing business, or a way to avoid high legal expenses they would face if they decided to remain in the review.
For some importers, the process provides a similar sense of security.
"That’s what their money was buying them," said Master Design’s Joe Elmore of the factories that allegedly paid money to get off the review list. "You can spend attorney fees and maintain your position, or you can take your name off the list…. Instead of spending their money or litigating, they took the one-price-cures-all option. That’s good business."
Cash settlements believed common
By Thomas Russell
HIGH POINT — The furniture industry isn’t the only one where foreign producers are believed to pay cash settlements to be excluded from an antidumping review list.
Last month, The Wall Street Journal reported on similar agreements between Asian shrimp harvesters and U.S. petitioners supporting an antidumping case in that industry.
The petitioners in that case sought cash settlements from overseas shrimp producers in exchange for not subjecting them to potentially higher duties that could arise from an annual administrative review by the U.S. Department of Commerce, the paper reported. It said 104 foreign shrimp suppliers paid millions of dollars to the petitioners, who removed the companies’ names from the review list.
The petitioners didn’t reveal the exact amount collected, but said some of the money went toward legal expenses, promotional efforts to raise consumer awareness of the domestic shrimp industry, and lobbying efforts to protect the industry.
John Greenwald, a Washington attorney who has been active in international trade law and represented the Furniture Retailers of America in the Chinese wood bedroom furniture case, told Furniture/Today that cash settlements are commonplace and legal in antidumping cases. He declined to comment on the furniture case, but said that, in general, such settlements may raise concerns.
"It is fair to say that there is a smell factor to this," said Greenwald. "If you went back 10 years ago, it would be extremely rare. Now it is more common and it leaves a bad taste for outside observers about what the law is all about."
He added that it implies a "cynical use (of trade laws) to maximize the profitability of petitioners, rather than being a pure instrument of enforcing fair trade. There is no doubt about that."
At the same time, he said the opportunity to settle gives foreign producers a level of security about future duty rates they would not have if they were subject to the review process.
"The business dynamic pushes you to get that level of certainty," he said.
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Antidumping tradeoff
May 20, 2007
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