Date: Thursday, May 20, 2021
Source: Furniture Today
HIGH POINT — Retailers in Canada and vendors serving the market there are grappling with the sudden imposition early this month of heavy duties on upholstery made in China and Vietnam.
On May 5, the Canada Border Services Agency subjected importers to initial country-wide duties of 295.5% for Chinese-made upholstery and 101.5% on such goods from Vietnam after the Canadian International Trade Tribunal made a preliminary ruling those goods were harming domestic manufacturers in Canada. Twenty-eight Chinese manufacturers received separate rates ranging from 20.65% to 226.45%, while seven manufacturers in Vietnam received separate duty rates ranging from 17.44% to 89.77%.
Jim Fee is president of Toronto-area retailer Stoney Creek Furniture and a former president of the Home Furnishings Assn. Stoney Creek operates an 85,000-square-foot main store in Stoney Creek, Ontario, and an 18,000-square-foot location in Vaughan.
Beyond the short-term issue of paying duties for goods already on the water, Fee believes that if those duties stand at their current level, it will mean less choice for consumers as well as limit retailers’ ability to obtain sufficient levels of goods to meet demand.
His major issue at the moment is the lack of notice for the duties, which were effective May 5, the same day CBSA sent out notification of the duties to importers.
“Right now, we’ve been sorting out what we can cancel,” Fee said of goods in route, noting that vendors might be able to divert Canada-bound upholstery shipments to customers in other countries. “We were able to cancel most, but I had one container that shipped May 1. You’re now getting penalized for product that may have been ordered in October. If there’s a container on the water, I’m stuck with it unless (the vendor) can re-route it.
He added that while Stoney Creek should be able to satisfy most customers who’ve made purchases due to good inventory levels, imported upholstery offers looks and values the retailer can’t find domestically. And he believes manufacturers not subject to duties, especially in Canada, won’t have the capacity to meet ongoing demand.
“Even if the complainants increase their capacity, say 10% to 20%, they still won’t be able to make up the difference,” Fee said, adding that shoppers “will have less choice, less variety, and they’re going to pay more.”
Not enough time?
According to the ashleyhomestore.ca website, Ashley Furniture Inds.’ retail network in Canada includes 51 stores. Ashley had largely avoided U.S.-imposed tariffs on Chinese goods by relocating offshore sourcing and manufacturing elsewhere to complement the majority of its goods made stateside.
Vietnam in particular saw major investment on Ashley’s part, but the company now faces duties on upholstery from that country in Canada. With the investigation ongoing, the company didn’t want to say a lot, but it doesn’t believe any duties are warranted.
“While we do not believe any duties are justified nor do they reflect the substantial amount of information already presented to the CBSA, at this point it is premature to comment on the current procedure pending the CBSA’s determination of final rates,” a company statement read. “We continue to work closely with the CBSA to provide all the requested information about our exports to Canada pursuant to CBSA procedures and timelines.”
After CBSA announced the anti-dumping inquiry in December, motion and stationary major Manwah retained a Canadian legal team specializing in customs issues in order to state its case to investigators. Manwah has factories in both countries totaling millions of square feet. Getting proactive on the proceeding didn’t help Manwah avoid the countrywide preliminary duties.
In a letter to customers dated May 6, the day after duties became effective, Manwah USA CEO Guy Ray said the company had cooperated with CBSA and answered the agency’s “discrepancies in a timely and professional manner.”
“Our completed answers were in fact received by the CBSA on April 12 and April 20, giving them plenty of time to properly review,” Ray told customers. “While our answers were complex, they were straightforward and direct,” and he was surprised when Manwah received countrywide duty rates.
“When pressed on this matter,” he continued, “the response our representatives received from the CBSA (was) that they were ‘overwhelmed and understaffed’ and lacked the necessary resources to properly analyze our responses in time. This is very disappointing, and it harms us all.”
CBSA Spokesman Mark Stuart told Furniture Today in an e-mail that the agency reviewed all submissions that were received by the deadline.
“Where the responses were complete and contained sufficient information to estimate normal values, export prices and amounts of subsidy, exporters were issued company specific provisional duty rates,” he said, adding that more information concerning the preliminary results for individual exporters will be included in a Statement of Reasons, which will be available on the CBSA’s website by May 20.
Ray remains confident that Manwah will receive a “workable percentage” upon review of duties in August and with the investigation’s final determination in September. In that case, CBSA could issue refunds for differences between the assigned temporary countrywide rate and the final rate assigned to Manwah.
Level field or unfair advantage?
Fee at Stoney Creek understands that the complainants in the anti-dumping action want a level playing field, and he believes there could be instances of offshore sources not playing fair, but the prohibitive countrywide rates have cast a wide net that he believes includes too many legitimate operators.
“If you look at some of the separate rates — 21%, 40% — those could be managed,” he said. “But a 295% tariff actually gives an unfair advantage to the domestic guys.”
The big losers will be smaller independent retailers, added Fee, a former president of the Home Furnishings Assn. retail trade group.
“Even if the bigger players are forced to source domestically, they could chew up all the production and live the little guys out in the cold,” he said. “We deal with Canadian manufacturers the best we can — probably 60% of our floor — but there are only so many styles, so much capacity you can get.”
Fee added duties will “decimate” retail floors, especially in light of already long lead times. He even believes it’s possible that Canadian shoppers living close to the United States — such as those in the Toronto area — might look elsewhere.
“If I were a customer who wanted a chair or sectional, I might run across the border to Raymour & Flanigan,” Fee said. “If you get caught, you’ll pay, but how often are they going to check someone moving furniture?”
The CBSA’s investigations are continuing and final decisions concerning the dumping and subsidizing will be made by August 3.
If the CBSA issues a final determination of dumping or subsidizing, then the Canadian International Trade Tribunal will conduct an inquiry into the question of injury to the Canadian producers of like goods. Stuart said it is important to note that the CITT process is completely separate from the CBSA’s investigation. More information on the CITT’s process is available on the CITT website.