Tuesday, February 8, 2011

New group opposes tariffs in engineered flooring "anti-dumping" investigation

This is an update to my last post about the anti –dumping allegations surrounding engineered hardwood flooring “Anti-dumping allegations will profoundly affect engineered flooring market regardless of investigation outcome.”

A group of distributors, retailers and importers has formed a third party in the ant-idumping and investigation of engineered wood flooring from China.  They are the Alliance for Free Choice and Jobs in Flooring and directly oppose the mission of the Coalition for American Hardwood Parity (CAHP) which is leading the cause against China.  The leaders of the recently formed group, AFCFJ, state its function is to educate themselves and the industry about real world conditions which will point to the fact that duties on imported products should not be increased.

So now here are the players in the bid for the engineered wood flooring market in America:

•    The action against China comes from the CAHP, lead by giants Mannington and Shaw. They claim that Chinese manufacturers have an unfair advantage (low prices) and are injuring the entire domestic hardwood flooring industry. They allege the unfair advantage is derived from Chinese government subsidies and manipulation of the Chinese yuan to the detriment of the US industry.
•    The AFCFJ group, which was formed at Surfaces, believes that the petition against China is a threat to independent distribution and is an attempt to eliminate private label programs in America’s flooring industry; effectively “driving the independents out of the market by cutting them off from their source of supply.”
•    A loose coalition of Chinese manufacturers and their US partners who strenuously deny the allegations and blame US manufacturers for losing market share as a result of their inefficient manufacturing methods and lack of innovation.  It remains to be seen whether this group will join with the AFCFJ.
•    The ITC (International Trade Commission) which is conducting the investigation -  has stated there is sufficient evidence to launch an investigation by the US Department of Commerce with a final determination expected around the end of July 2011.
More background: Read my previous post for more background. “Anti-dumping allegations will profoundly affect engineered flooring market regardless of investigation outcome.”
The AFCFJ has just published a FAQ with their full position. In the last 24 hours some of the flooring industry media outlets have published on this topic. Read Floor Daily: Group to Fight Wood Dumping Charge  and Hardwood Floors Blog: AFCFJ Formed to Oppose Tariffs on China.

AFCJF was formed by a collection of American distributors importers and retailers, the majority of whom purchase engineered hardwood flooring products from Chinese manufacturers which are then sold under private label brands. These products thus compete directly with products manufactured and sold by US manufacturers. The claims of the new alliance include:
•    The petition brought by US manufacturers is in reality a blatant attempt to eliminate American independent distribution private label programs.
•    Independent American distributors and retailers are delivering what consumers want in their particular marketplaces.
•    The real reason American manufacturers have lost market share is because of lack of innovation in product assortment including species.
•    Some US manufacturers manufacture their products in prison facilities whereas US law prohibits the import of products made using prison labor.
•    If US manufacturers are successful in their petition the number of American jobs lost across the US flooring industry will be far greater than those lost in manufacturing plants if the petition is unsuccessful. Furthermore selling prices will increase as a result of any increase in duty which may drive consumers to different less expensive flooring such as laminate or vinyl (much of which is produced off shore).

So that’s the update and as I said earlier the action is starting to heat up and confirms once again my often stated belief that the relationship between manufacturers and distributors remains highly adversarial. My thoughts at this stage are:
•    Interestingly, there has been no comment from or mention of either Mohawk or Armstrong -  the two largest US manufacturers both of whom have strategic relationships with Chinese manufacturers.
•    The issue obviously continues to take up valuable management time when all parties need to be focused on other aspects of the market.  By the way, engineered flooring imports last year amounted to about $120 million.
•    There vast majority of domestic product is peeled face and all imports from China are sliced face.  This may be a small distinction but it's a fact that most imports in question are different from the domestically produced product.
Finally I do not want to be seen to take sides in this issue but the following thoughts keep coming back to me:

Certainly for at least the last decade US companies have been saying they compete in a global economy which is a huge opportunity for them and one they must use all their efforts to exploit. Consequently I think it is shortsighted and unwise to want to add the proviso “provided it does not hurt our current domestic business.” We suddenly have three coalitions which may well lead to increased confusion and misunderstanding as well as continuing to feed the legal practitioners. Where will it go from here?  One thing is for certain – it will mean higher prices to the US consumer.

This is the perfect venue for you to weigh in and voice your thoughts…what do you think?

As always, thanks for reading.

David

David Wootton is President of The Wootton Group, an independent flooring consultancy, and a member of the Floor Covering Institute. He is past CEO of both Columbia Flooring and Harris-Tarkett.

2 comments:

  1. Actually, I read Mohawk's last quarterly statement and they have come out in support of the petition.

    There are many elements in this article which are factually incorrect - for example, from my understanding, much of the laminate and vinyl flooring sold in the U.S. today is produced by U.S. manufacturers. LVT would be the sole vinyl category which is not produced here.

    You also state that all imports from China are sliced face - this is absolutely untrue. The vast majority of hand scraped floors imported to the U.S. have rotary peeled faces.

    I suggest you check your resources and research a little more.

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  2. It is ridiculous to believe that Mohawk would support this initiative. They have a HUGE strategic partnership with a specific laminate producer in China. I import from the same manufacturer.

    This is an attempt for Mannington and Shaw to force the consumer's into a domestic brand, pure and simple. Sales by legislation is an age old trick for those who cannot compete on a global front.

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