Settlements emerging as issue in review
Thomas Russell -- Furniture Today, November 24, 2010
HIGH POINT - Until now, alleged cash settlements between Chinese manufacturers and a law firm representing supporters of the wooden bedroom antidumping case have been kept largely private.
That is starting to change as part of the International Trade Commission's five-year sunset review that will determine whether to continue the imposition of antidumping duties on Chinese-made wooden bedroom furniture.
The subject of settlements is addressed on questionnaires the ITC has issued to U.S. producers, as well as furniture retailers, importers and Chinese manufacturers.
Specific information on those questionnaires isn't available to the public, so it is not known how fully the industry is answering the questions. However, the ITC may include information it garners on the subject in reports it makes public at the conclusion of the investigation.
The issue involves alleged settlement agreements paid by Chinese manufacturers to King & Spalding, the law firm representing U.S. bedroom producers, or petitioners, that support antidumping duties.
Some Chinese manufacturers have told Furniture/Today that they have made payments to King & Spalding in order to avoid an annual audit, or administrative review, that determines if they should receive a higher retroactive duty beyond their initial cash deposit rate. Some importers have said they have paid some of the settlement fees on behalf of their source factories.
Under trade law, the petitioners can choose to exempt factories from review, meaning those producers wouldn't face the threat of higher rates.
It is unknown how many Chinese manufacturers have participated and whether any of that money collected has gone to the petitioners.
Petitioners Furniture/Today has contacted on the issue have declined to comment, in some cases saying they didn't know enough about the issue to adequately address it.
On behalf of some concerned industry importers and retailers, Seattle-based law firm Garvey Shubert Barer began an inquiry into the issue in June 2009. However, a source familiar with the matter said that effort waned partly due to lack of funds. Others initially interested in supporting the investigation started focusing their efforts on the sunset review process.
But another firm has done research into the matter and has reported some of its findings. Squire, Sanders & Dempsey, a Washington law firm representing the Guang- Dong Furniture Assn. Trade Committee, estimated in an Aug. 23 brief it filed with the ITC that King & Spalding has received an estimated $50 million to $100 million from the alleged settlements.
In a separate brief, it said these agreements are so pervasive that King & Spalding and the petitioners are in effect "deciding amounts owed to import subject product into the U.S.," arguing that the law firm and its clients - rather than the U.S. Department of Commerce - were in effect administering the antidumping statute.
King & Spalding denied the allegations and others made in the Squire Sanders briefs. ITC staff also has rejected those submissions, saying that the firm did not show good cause for submitting the briefs and that the ITC is continuing its full sunset review.
The ITC also has noted that the firm can address the issue of settlements in its prehearing briefs due Sept. 24.
Peter Koenig, an attorney with Squire Sanders, said the issue will likely be addressed in those briefs but declined to comment further.
As part of the review process, the GuangDong Furniture Assn. is supposed to submit its completed questionnaires to legal counsel representing the parties in the case. That includes King & Spalding.
However, the association's members say they don't want to share information with the firm because they fear it will be used against them in future administrative reviews, should the antidumping order continue. Since the manufacturers haven't agreed to share the information with King & Spalding, the ITC has not accepted the completed forms.
Joe Dorn, an attorney with King & Spalding, has declined to comment on the alleged settlements due to their private nature. However, in a June 8 brief his firm filed with the ITC, he suggested that the ITC questionnaires should not address the issue of settlements related to administrative reviews because "settlement agreements of administrative reviews conducted by Commerce have no relevance to any issue before the Commission."
Regarding the administrative review process, he wrote: "Private agreements to settle administrative reviews are not unusual, because they serve the interests of the settling parties and are a natural outgrowth of the retrospective assessment system."
He said such settlements were fairly common given their ability to minimize legal fees and business risks. He added that the DOC has never expressed any reservation about such agreements.
He noted that in the context of antidumping cases, some domestic parties and foreign producers may wish to "avoid legal fees and business risks posed by participation in an administrative review. The risk faced by the domestic interested parties is that a review would result in the assessment of antidumping duties lower than the cash deposit rate. The risk faced by the exporters/ foreign producers and their U.S. importers is that a review would result in the assessment of antidumping duties higher than the cash deposit rate."
When asked by Furniture/ Today about the issue of alleged settlements in the past, the DOC has denied knowledge of such activities. It also declined further comment because such settlements would be private.
Some in the furniture industry, however, have criticized the settlement process openly. One is Keith Koenig, president of Fort Lauderdale, Fla.-based Top 100 store City Furniture and a leader of Furniture Retailers of America, a group organized to oppose the antidumping duties on wood bedroom furniture.
"I think it needs to be made clear to the retail community that there are several of us that feel it is not right and it is not consistent with the spirit of the antidumping law," he said. "There has not been one person I have spoken to about this that, when they understand the process, has felt it is appropriate or fair. The Chinese companies feel as if they are being held up."
-
ITC member scrutinizes settlement agreements
Jan 18, 2011 -
Settlement payments an issue in antidumping case
Aug 26, 2010 -
Why antidumping duties stand
Jan 7, 2011
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