The Commerce Department ruled yesterday that Chinese bedroom furniture is being "dumped" in the U.S. market. But the department imposed relatively modest duties on the furniture, a rare departure from a long tradition of slapping stiff penalties on imports in such cases.
The decision involves the biggest anti-dumping case ever brought against China, and it comes at a time when U.S. job losses to foreigners has become an issue in the presidential election. The furniture industry, which is heavily concentrated in southeastern states, has been hit particularly hard by competition from abroad and blames a surge of Chinese imports for plant closings and workforce reductions that have led to 35,000 layoffs.
Commerce Department officials agreed with U.S. furniture makers and unions who complained that their Chinese competitors have been selling at unfairly low prices. But the department indicated that it couldn't find evidence of severe dumping.
The case covers about $1.2 billion in wooden beds, armoires, dressers and other pieces that are often sold at chains such as Crate & Barrel, Rooms to Go, J.C. Penney and Bombay Company.
In a preliminary decision, the department set "dumping margins" ranging between 5 and 24 percent for the approximately 90 Chinese firms that account for the vast majority of imported bedroom furniture from that country, with an 11 percent margin set for most of the firms. That means preliminary duties of those amounts will be imposed on most Chinese furniture imports, and the duties may be permanently set after department officials pursue further investigations of the dumping allegations, which will take a number of months.
U.S. manufacturers were seeking duties upwards of 400 percent, so the department's findings came as a pleasant surprise to free-trade advocates. Cases involving "non-market" economies like China and Vietnam are easier than others for American manufacturers to make the argument that foreigners are selling below the cost of production, because department officials have considerable leeway in assessing costs. In a high-profile case brought by U.S. catfish farmers against Vietnam, duties were set last year at 37 to 64 percent.
"I'm elated by this news," said Dan Ikenson, a trade specialist at the Cato Institute, a libertarian-oriented think tank that has long criticized U.S. dumping laws and Commerce's administration of them. Ikenson voiced hope that the ruling was indicative of a new mindset at Commerce, but he noted, "China's the number one target of anti-dumping cases. New cases have been initiated at a rate of one per month since January 2003."
A paper Ikenson wrote said the furniture case gave a clear example of why the dumping laws need reform. Although U.S. furniture manufacturers were angered that retailers were importing items direct from China, many of the 31 manufacturers that brought the case were themselves importing furniture from countries like the Philippines, Brazil, Indonesia and Vietnam.
But the preliminary duties on Chinese furniture are low enough that they are unlikely to have a major impact on prices and sales, according to industry experts. "I imagine they'll be a little bit higher" in the final decision, Ikenson said.
The duties "could have been a lot worse," said Mike Veitenheimer, general counsel of the Bombay Company and a spokesman for the Furniture Retailers of America, a group that fought the manufacturers. Still, he said, "this is only the preliminary decision," and he said his group would continue arguing for zero duties. Furthermore, one group of Chinese companies, which didn't respond to Commerce's requests for information, was socked with duties of 198 percent. Those firms, which account for about one-fifth of Chinese imports of bedroom furniture, will presumably be priced out of the market, Veitenheimer said.
Joseph W. Dorn, an attorney for the 31 manufacturers and five unions that brought the complaint, said he was "very pleased" that Commerce had found the Chinese were dumping, adding that he expects the department to impose "much higher" duties once it fully investigates the charges.
Asked about the likely impact on prices, James J. Jochum, the assistant commerce secretary for import administration, said previous cases show "there's not always a direct relation between the duty being levied and the price increase. What we often see is that trade flows change," as imports start from countries that aren't hit with duties.