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Vietnam Duties Likely?

Heath E Combs , Thomas Russell -- Furniture Today, September 23, 2011

HIGH POINT - Vietnamese government officials met with furniture manufacturers in Vietnam in mid-August, advising them to be prepared to cooperate if the U.S. government comes calling.
     They discussed the possibility that an antidumping case could be filed against bedroom furniture from Vietnam, similar to the one that was filed against China in 2003 and has led to U.S. importers paying duties on certain Chinese-made wood bedroom furniture for the past six years.
     But while action against Vietnam has long been a topic of speculation, the question remains: Is it likely?
     Furniture/Today has learned that while there may be makings of a successful case, there also would be hurdles - such as raising millions of dollars to cover legal fees and finding enough support among U.S. manufacturers, many of which also are importers that might have to pay the duties. And because the China case was so divisive, observers wonder whether the industry can stomach a rerun.
     Since 2005, Vietnam's bedroom shipments to the United States have soared by 153% to $929.5 million last year, making it the largest offshore source in the category. Over the same period U.S. imports of Chinese bedroom were about cut in half, to around $700 million in 2010, according to Furniture/Today market research based on government trade statistics.

U.S. bedroom imports from

In millions. Includes shipments for bentwood bedroom furniture, wood bedroom furniture and wood beds. Source: U.S. Customs Service, U.S. Census Bureau, U.S. International Trade Commission
"The proof of lost jobs will be very, very difficult because (the U.S. government) has to look at the landscape today. It is a whole different world than when we had the other antidumping case." Richard Magnussen, Magnussen

     That growth in Vietnamese shipments could have a big impact in determining the validity of an antidumping case, said George W. Thompson, an attorney with Washington-based Neville Peterson who focuses on trade regulation.
     "You have increase in volume and an increase in the rate of imports and an increase in market share. That gives you at least the makings of a case," Thompson said.
     One big hurdle in any such case is proving that dumping is happening - calculating a country's cost of production and determining whether the pricing is unfairly low. Since Vietnam is a non-market economy, the U.S. International Trade Commission would have to determine what the costs of bedroom production would be in a comparable market economy, he said.
     Another factor in determining whether a case could proceed is legal costs. Industry analyst Jerry Epperson of Mann, Armistead & Epperson said the cost of pursuing the case against China was about $5 million.
     Today, since many of the biggest players in domestic bedroom have started importing and/or have shut down domestic facilities, raising that kind of money would be difficult, Epperson thinks.
     In addition, a key financial incentive that was available in the China case - the Continued Dumping and Subsidy Offset Act of 2000, commonly referred to as the Byrd Amendment - has been repealed. For several years, it has sent millions of dollars in duties collected on Chinese imports to the U.S. companies that had petitioned for the antidumping investigation - funds that helped pay their legal fees and bolster their bottom lines. With Byrd no longer in effect, any Vietnam-related duties would go straight to the U.S. Treasury.
     Also in the China case, U.S. petitioners have privately collected "settlement" payments from specific Chinese factories in exchange for not pursuing high duty rates for those factories. But in the latest round of duty rate reviews, lawyers representing the Chinese factories told Furniture/Today that the petitioners didn't accept settlement payments - which could suggest that such payments might not be workable in a future Vietnam case.
     Richard Magnussen, CEO of case goods importer Magnussen Home Furnishings, said he doesn't believe a case against Vietnam will be filed. So many domestic producers are sourcing from Asia that they would have a hard time convincing anyone that they are out to support U.S. jobs, he said.
     "The proof of lost jobs will be very, very difficult because (the U.S. government) has to look at the landscape today," he said. "It is a whole different world than when we had the other antidumping case."
     Magnussen also said he doubts there would be enough financial support among U.S. producers to file against Vietnam.
     But a case still seems possible. Thompson, the trade attorney, said there doesn't have to be much of a domestic industry remaining to file a case.
     "There is no minimum amount. You could have one company producing, as long as there's production of the domestic industry a case could go forward. And I'm sure there's plenty of companies around. The industry may have been decimated or even worse but there's still domestic producers," Thompson said.
     The domestic industry would have to show the negative effect imports are having on manufacturing jobs and evidence of unfair trade practices. And, he added, if a domestic industry is in a bad financial condition, even partly as a result of the slow economy, a dumping case would be helped because the damage is clear.
     Pinning the domestic industry's problems on Vietnam could be difficult, however. Epperson said shipments from Indonesia and Malaysia could just as likely be targets for a case.
     "The growth in Vietnam has been spectacular. But a lot of our companies now have factories in Vietnam; Stickley's got a plant over there, Ashley's got a plant over there. It's a different environment than what we had in 2004," he said.
     Epperson also said that in considering a Vietnam case, industry executives also are likely to remember the rancor and disruption that followed the China action.
     The biggest disruption was the rapid shift of bedroom production to Vietnam, Malaysia and Indonesia. Retailers faced delays in getting product initially and longer lead times. A number of them created organized opposition to the Chinese duties in a group called the Furniture Retailers of America.
     Greg Harden, CEO of Harden Furniture, one of the original U.S. petitioners in the China case, said his company hasn't been approached on a new case, and said he would expect to have heard if something were in the works. But he said that duties on Vietnam bedroom furniture could nonetheless help domestic producers.
     "It may not bring a lot of jobs back to the U.S., but it will give those of us who are domestic producers some more breathing room," he said. "It will give us a chance to grow a little bit and take some antidumping momentum off the table."
     But Jake Jabs, CEO of Englewood, Colo.-based retailer American Furniture Warehouse and a big seller of imported furniture, said that even with new duties, he doubts major production of wooden bedroom would return to the United States.
     "If it would create American jobs and open new factories I'd be all for it, but that's not going to happen," Jabs said. "If they (enact duties) with Vietnam, it'll just move somewhere else. The low cost producer is the one that's going to make bedroom. And we're not the low cost producer."

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Also by Heath E Combs and Thomas Russell

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