Companies evade antidumping
Factories find way to circumvent duties
Thomas Russell -- Furniture Today, November 23, 2010
HIGH POINT - Antidumping duties on wood bedroom furniture have caused many Chinese factories to forgo the U.S. market, but some may be finding another path.
Some U.S. government and industry observers say they suspect that some factories have found ways to circumvent the duties while still shipping bedroom to the United States. And now officials are looking for ways to stop the practice.
Editor's note: This installment concludes Furniture/Today's three-part series on how the antidumping issue has affected the furniture industry.
In our Sept. 13 issue, we looked at the effects the issue has had on domestic producers that supported the initial investigation into the unfair pricing of Chinese-made wood bedroom furniture.
Last week, our stories focused on the effects of the case on importers, and on how Chinese bedroom producers have responded. Retailers discussed the effects on their business, and we looked at how the issue has altered U.S. sourcing of wood furniture.
This week, we look at what might happen in the U.S. government's upcoming sunset review of the wood bedroom furniture antidumping case, examine the issue of cash settlements and administrative reviews, and look at how companies may be evading payment of antidumping duties. We also look at how U.S. workers have been affected as furniture manufacturing has declined because of the rise in imports and the weak economy.
The U.S. Immigration and Customs Enforcement division of the U.S. Department of Homeland Security is involved in 90 investigations on duty orders involving a variety of products, including wooden bedroom furniture. U.S. Senators, meanwhile, have proposed legislation that would allow for the creation of broader tools to enforce the administration and collection of the duties.
Chinese manufacturers have figured out a variety of ways to circumvent antidumping duties.
In interviews with Chinese bedroom producers at Asian trade shows, Furniture/Today has learned that some highduty Chinese bedroom producers ship goods through low-duty factories, paying those factories a commission or fee for the service. Paying the fee is less expensive than paying the higher duty, the factory operators say.
"In China, in terms of bedroom, there are easy ways to pay a small commission and get it (shipped) at a lower duty rate." Sean Regan Axis International
"In China, in terms of bedroom, there are easy ways to pay a small commission and get it (shipped) at a lower duty rate," said Sean Regan, general manager of Axis Industrial, a Chinese supplier of components and building materials for hotels, kitchens and other interior spaces in homes, offices and high rises.
"We have tried to look up these importers of record and every 12 months they change their names. An address can be traced to a house and often, the number listed is a fax number.... These companies can choose to be confidential and it's becoming harder and harder to track them." Wendy Watson Leggett & Platt
Other industry observers say that some factories also ship through other countries or ports. They claim the shippers do this by changing or falsifying bills of lading on the goods, making it appear that the merchandise is shipped from a non-duty country.
On their websites, a number of Asian-based logistics firms offer services to help clients facilitate this process.
"Are you looking to avoid antidumping?" Ningbo, China-based Eversky International Forwarding Agency Co. asks on its website. "Transshipment may be the best way at present. Now we will show you how it helps you to avoid antidumping and how it reduces your costs."
"We feel like our issue is not a political issue - it's strictly a law enforcement issue." Wendy Watson, Leggett & Platt
Transshipment has been called into question by Leggett & Platt and other manufacturers that are part of the Coalition for Enforcement of Antidumping and Countervailing Duty Orders.
In 2007, Leggett & Platt helped spearhead an investigation into the dumping of uncovered mattress innerspring units into the U.S. market. The U.S. government imposed duties on these items in late 2008.
As the case was underway, Leggett found that more and more innersprings were coming into the United States from Hong Kong, a port not covered under the antidumping ruling, at Chinese prices. It hired a private investigator to check out the addresses of the manufacturers and the investigator found one location was just a warehouse. Another site had an innerspring production machine that didn't appear to have ever been turned on.
"The thing that you see in these dumping orders is that almost overnight, there are big volumes (from these other countries)," said Wendy Watson, associate general counsel for Leggett & Platt. "You could not get these factories up and running as quickly as these factories are ramping up."
In the wooden bedroom case and the innerspring case, among others, duties are assigned to the overseas producers and paid by importers of record. However, Leggett said it has even had difficulty identifying importers of record.
"We have tried to look up these importers of record and every 12 months they change their names," Watson said. "An address can be traced to a house and often, the number listed is a fax number.... These companies can choose to be confidential and it's becoming harder and harder to track them. But the market doesn't lie. Our sales guys go out and call on businesses, and their customers get innerspring units at costs lower than production."
Watson also believes producers also have evaded duties by shipping parts into the United States for final assembly. In some cases, she said, producers are simply shipping innerspring units covered by a mattress pad.
"They are calling it a mattress to circumvent duties," she said.
In response to the coalition's concerns, U.S. Sens. Ron Wyden, D-Ore., and Olympia Snowe, R-Maine, have introduced legislation called the Enforcing Orders and Reducing Circumvention and Evasion (ENFORCE) Act.
Officials say this would help the Department of Commerce, which assigns the duties, and Customs and Border Protection, which administers duty collection, fight duty evasion. It would allow better information sharing between the agencies, and would establish a rapid response to allegations of duty evasion.
"The ENFORCE Act will give the Commerce Department and the Customs Service new and powerful tools to deal with the types of circumvention and fraud we have seen in the furniture antidumping case," said Joe Dorn, an attorney with King & Spalding, the Washington law firm that represents U.S. producers in the wooden bedroom furniture case.
Mississippi state lawmakers also have asked the DOC and the U.S. Department of Homeland Security to investigate similar claims of duty evasion.
Leggett & Platt's Watson said such actions will be key in the government's efforts to help U.S. manufacturers injured by unfairly priced imports.
"We feel like our issue is not a political issue - it's strictly a law enforcement issue," she said.
However, U.S. officials may be limited in how well the government can enforce laws in foreign countries like China, other sources said.
"There are a lot of companies that buy furniture and know it is not from a lower-duty factory," said Regan of Axis Industrial. "There is nobody tracing and tracking it and how do you trace and track it? You are going from an unregulated market to a regulated market. The unregulated market acts with impunity and does what it wants. The long arm of the law can't reach over here."
-
Duty Collection in Flux
Jul 12, 2011 -
Antidumping revisited
Oct 4, 2010 -
Settlements emerging as issue in review
Nov 24, 2010
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