WASHINGTON, DC — A decision by U.S. trade officials to impose stiff antidumping trading penalties on Chinese imports of wooden cabinets and vanities is exposing major fault lines in the domestic cabinet market, sparking sharply conflicting reactions from two distinct groups of cabinet suppliers.
Reactions by both sides in the trade dispute were vocalized last month, after the U.S. Commerce Dept. issued an affirmative preliminary determination in a months-long investigation, finding that Chinese exporters of wooden cabinets and vanities have “dumped” products in the U.S. at margins ranging from 4.49% to 262.18%. As a result of the decision, U.S. Customs and Border Protection agents were instructed to collect cash deposits from Chinese cabinet importers based on the preliminary duty rates. Those duties are in addition to countervailing duties in effect since August.
Applauding the Commerce Dept. decision was the American Kitchen Cabinet Alliance (AKCA), a coalition of major U.S. cabinet suppliers with ties to the Kitchen Cabinet Manufacturers Association. The 50-member AKCA, organized to combat Chinese trade practices, filed an unfair-trade petition in March with the Commerce Dept. and the U.S. International Trade Commission (ITC), charging that unfairly traded Chinese imports of wooden cabinets – valued at an estimated $4.4 billion in 2018, and allegedly subsidized by the Chinese government – pose an existential threat to the $9.5-billion U.S. cabinet trade. Since then, both agencies have been conducting separate, parallel investigations into the matter.
U.S. trade laws provide domestic companies with a mechanism to seek relief from the impact of unfair pricing of imports into the U.S. Foreign companies that price their products in the U.S. market below the cost of production, or below prices in their home markets, are subject to antidumping duties. Companies that receive unfair subsidies from their governments – such as grants, loans, tax breaks or production inputs – are subject to countervailing duties aimed at countering those subsidies.
Last month’s Commerce Dept. decision, according to the AKCA, was “an important continuation of the work to address unfairly traded Chinese imports of wooden cabinets and vanities.”
The decision, said Mark Trexler, president and CEO of AKCA member Master WoodCraft, “allows the American kitchen cabinet industry to keep fighting against the unfairness of China’s trade practices. The Commerce Dept. clearly understands the importance of this issue and the need to keep working to create an even playing field.”
“This is a good next step in the process of leveling the playing field for American manufacturers, and we look forward to the final determinations,” added Perry Miller, president of Kountry Wood Products. “The Commerce Dept. determination makes it possible to move forward and continue to fight for our workers and for American jobs.”
But the AKCA’s unfair-trade petition continued to draw harsh criticism from the American Coalition of Cabinet Distributors (ACCD), a coalition of small and mid-sized companies that import, distribute and install ready-to-assemble (RTA) cabinets. ACCD officials pushed back hard on what the coalition said is a “cynical” and “devastating” trade petition that reflects an effort by “traditional made-to-order” cabinet companies “to capitalize on anti-China trade fever,” induce the government to impose trade duties against imported RTA product from China and “wipe out” America’s RTA segment.
“This trade case was initiated despite the fact that RTA product accounts for less than 10% of the healthy and still growing U.S. cabinet market, and several of the companies behind the petition have themselves imported cabinet product from China and elsewhere overseas,” said the ACCD, adding that the AKCA petition “threatens to damage companies and the jobs of tens of thousands of American workers employed in the RTA industry.”
“This petition is simply an attempt to use current political sentiment against China to eradicate a small but important market segment traditionally supplied by China, to favor the petitioners’ new foreign suppliers in other countries and to otherwise limit consumer choice in deference to the aging business model of domestic manufacturers,” said Randy Goldstein, CEO of Raleigh, NC-based Kitchen Cabinet Distributors.
“There are cabinet companies in the U.S. that are struggling because they face a complex set of issues, some of which are self-inflicted and some of which are driven by direct competition from…more cost-efficient manufacturers,” Goldstein said. “While it may feel good to point a finger at imports and hide behind a patriotic veneer, the facts are much more complicated.”
According to Matthew Nicely of Hughes Hubbard & Reed, the Washington, DC law firm representing the ACCD, U.S. fair-trade laws “were simply not meant to be used to impose trade restrictions on imports that are growing their own market in the U.S. based on distinct, qualitative product characteristics that are unavailable from domestically sourced merchandise. For domestic producers to suggest otherwise – while themselves importing the product – compounds scapegoating with sheer hypocrisy.”
RTA cabinets, according to the ACCD, fill a specific consumer need, providing a limited selection of options that are available in a matter of days, a dramatically faster turnaround time than made-to-order cabinet companies offer.
“The made-to-order cabinet industry does not offer this niche product, and there is no justification for trying to penalize a segment of the market that their U.S. production does not serve,” the ACCD said, adding that the RTA cabinet market accounts for less than 10% of all U.S. cabinet sales, and RTA imports are “already saddled” with 25% duties due to the ongoing U.S. trade war with China, making additional antidumping/countervailing duties “nothing more than punitive.”
According to ACCD, it is important to understand that (the latest Commerce Dept. decision) “does not in any way suggest that imports of RTA cabinets and vanities from China are causing injury to the made-to-order cabinet industry behind this petition.
“Regardless of the Commerce Dept.’s ultimate determination, no duties will be collected if the ITC finds no material injury caused by these imports, and we fully expect the ITC to reach such a conclusion.”
The AKCA said it “looks forward” to the Commerce Dept. continuing its efforts “to push back on unfairly traded Chinese imports and ensure a level playing field for American workers.”
The ACCD said it will “continue to vigorously oppose this cynical trade petition.”
The Commerce Department is expected to issue a final determination in the investigation on or about Feb. 17, 2020. If Commerce’s final determination is affirmative, the ITC will be scheduled to make a final injury determination on or about March 30, 2020.
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