September 1, 2004    Volume 11, No. 16

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U.S. Furniture Industry Fights A Battalion Of Lawyers Representing Chinese Interests

When 31 bedroom furniture manufacturers and five labor unions from 18 different states decided to take legal action against Chinese furniture producers and exporters, they hired a law firm to file the largest anti-dumping case of its kind with the Department of Commerce.

The Committee for Legal Trade, the entity representing the mostly small manufacturing companies involved, spent $75,000 investigating the trade laws to find out how companies could protect themselves from a flood of cheap imports. It then spent more than $1.5 million hiring the law firm of King & Spalding to file the case. It has since spent additional money -- "far, far, far beyond budget," said John Bassett, president and CEO of Vaughan-Bassett Furniture Co. and chairman of the Committee for Legal Trade.

The group expected opposition, and it got it. For the one law firm representing the U.S. companies, opponents have hired 21 different law firms to fight them.

"There is one on our side and there are 21 on their side," Bassett told the House Small Business Committee recently. "And let me tell you how we feel and all of the companies in the furniture industry feel. First, we know we have a fiduciary responsibility to our stockholders. Second, we know we have a legal responsibility to our country -- we don't intend to be an Enron or a Worldcom. We are going to be responsible corporate citizens, but we also have a moral responsibility to our employees. Why should our employees lose their jobs to illegal trade? This is why we have filed this petition. We are doing it on behalf of the people who work in our companies, and it is expensive."

The domestic wooden bedroom furniture industry has been "devastated by a flood of dumped imports from China," said Bassett. China's share of U.S. imports of bedroom furniture increased from 26 percent in 2001 to more than 50 percent in 2003. As a result, the U.S. furniture industry has closed dozens of factories and lost more than 35,000 wood furniture jobs, said Bassett.

The Commerce Department's International Trade Commission issued a preliminary ruling in June that found the Chinese used low prices to increase their share of the U.S. market, resulting in "substantial declines in production, capacity utilization, shipments, employment and capital expenditures," said Bassett. The industry's operating income fell 38 percent from 2000 to 2002 and by another 45 percent from the first half of 2002 to the first half of 2003.

The petitioners expect the Commerce Department to impose duties on Chinese imports in December. The preliminary ruling "is the first good news that our industry has had with respect to import competition since the Chinese started targeting our market roughly four years ago," Bassett said.

Bassett's alliance of companies learned some lessons during the course of organizing and filing its case with the U.S. government. When it started, the industry had no idea of the types of antidumping laws that existed in the country. "I've read that the government spent millions to promote the new 20-dollar bill," Bassett told the Small Business Committee. "I know how to use a 20-dollar bill, but I wish the government had done more to make me and other manufacturers aware of our rights under our trade laws. We did not learn about this potential remedy until it was almost too late."

The Commerce Department also has too few resources and personnel to investigate the tens of thousands of Chinese producers and hundreds of Chinese exporters of bedroom furniture, said Bassett. Commerce only investigated seven companies. "It did not even select a couple of the companies that we thought were the worst dumpers," said Bassett.

It also took too long for the Commerce Department to respond to its petition. After the agency issues its final ruling in December, it could still take until the summer of 2007 to finish its first administrative review. "Many American manufacturers -- particularly the smaller ones -- simply cannot wait that long for adequate remedies to be imposed against illegal dumping," said Bassett. "It shouldn't take almost four years to address the worst offenders."

For many industries, these types of cases are too expensive for them to pursue. The Commerce Department should proactively initiative anti-dumping investigations without having to wait for U.S. industries to disappear under Chinese export surges, Bassett told the committee.

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