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CDF CHIEF: Tariff will cost jobs in local furniture industry

The leader for economic development in Tupelo and Lee County describes a proposed U.S. tariff on upholstery fabric from China as potentially catastrophic for local furniture manufacturers.

Posted: Aug 25, 2018 10:12 AM
Updated: Aug 25, 2018 11:28 AM

TUPELO, Miss. (WTVA) - The leader for economic development in Tupelo and Lee County says there will be significant job losses in the area if local furniture manufacturers are not given an exemption to a proposed tariff on upholstery fabric from China.

"This cost disadvantage could be catastrophic to the lives of our 14,000 men and women working in Northeast Mississippi’s furniture industry," wrote Community Development Foundation President and CEO David Rumbarger.

Rumbarger's comment was part of oral testimony Friday in Washington before President Trump's U.S. trade representative.  The CDF chief provided a copy of that testimony in advance of his appearance.

The economic developer is hoping the testimony will help convince the Trump administration to exempt furniture makers from the tariff on those fabrics.  He says upwards of 80 percent of those fabrics used in furniture production is from China.

This year, the Trump administration started imposing tariffs on Chinese imports with the intention of helping U.S. businesses.  China imposed tariffs on U.S. imports in response, and the trade war was on.

Both countries concluded two days of talks Thursday without any resolution in the trade dispute and another round of tariffs taking effect.

As for the proposed fabric tariff, Rumbarger contends that local furniture manufacturers would have to cut jobs to deal with the extra expense and stay competitive with companies in Southeast Asia and Central America who can ship upholstered furniture to the U.S. without tariffs.

Below is the oral testimony prepared by Community Development Foundation President and CEO David Rumbarger:

Good afternoon. My name is David Rumbarger, President and CEO of the Community Development Foundation in Lee County, Mississippi. We are located in the northeast part of our state. In the 1900 census, our county ranked as the poorest county in Mississippi. Through our organization’s efforts, we have worked very hard to recruit and retain employment for our region. For the last 50 years, we have developed and then fought to maintain our place in the upholstered furniture sector. We acquired Foreign-trade zone status as a part of that effort.

The Annex to your Notice of July 17th includes a number of input items which are used in the production of American-made finished products such as upholstered furniture, electric recliners, lift chairs, and hospital beds. On behalf of the furniture manufacturing industry in northeast Mississippi, CDF respectfully requests the removal of these inputs from the list of products to be covered by USTR’s Final Action.

The upholstered furniture manufacturing industry in northeast Mississippi employs more than 14 thousand people with total annual wages of over $500 million – the highest concentration of furniture manufacturing production in America. In some northeast Mississippi counties, one out of every two persons are employed in the furniture industry.

From 2011 to the present, the annual output of American-made upholstered furniture grew from nearly $8 billion to $17 billion. During this same time, imports of finished upholstered furniture have risen from approximately $1 billion to $2 billion per year. The doubling of imports of finished upholstered furniture – which carries a zero duty rate – has certainly been felt by American furniture manufacturers.

Section 301 tariffs on items used as inputs for furniture production will result in significant job losses in northeast Mississippi. This will be brought about by readily identifiable countermeasures that will be employed to avoid those tariffs. The industry does not object to the inclusion of finished upholstered furniture in the final Section 301 Action; however, it urges the removal of upholstery fabrics and other inputs used in the production of American-made upholstered furniture products.

Vietnam and other Southeast Asian countries have greatly increased their capacity to produce and export finished upholstered furniture to the United States. For example, Man Wah Holdings of China has recently expanded its footprint in Vietnam to over 3 million square-feet that will produce, sew, stuff, motorize and manufacture then export 36 thousand containers of finished upholstered furniture to the United States annually. These finished products will enter into the U.S. market with zero tariffs.

The proposed Section 301 tariffs on upholstery fabric and prefabricated upholstered cover sets will place our American-made upholstered furniture manufacturers at a significant cost disadvantage versus many producers of finished goods and prefabricated upholstered cover sets from Southeast Asia, as well as from Central America.

This cost disadvantage could be catastrophic to the lives of our 14 thousand men and women working in northeast Mississippi’s furniture industry.

In addition to Man Wah’s shift in manufacturing production of finished goods from China to Vietnam, I want to make you aware of another important shift that will most certainly take place should Section 301 tariffs be assessed on upholstery fabrics and prefabricated upholstery covering sets or kits.

Instead of certain upholstery fabrics being manufactured in China and shipped to the United States where they are cut-and-sewn by Americans prior to installation on American-made furniture frames, these same fabrics will continue to be manufactured in China and sent to third countries – such as Vietnam, Mexico and Nicaragua – and be transformed into prefabricated upholstery covering sets or kits; then shipped into the United States duty-free.

This will undo the work that CDF has done for over the past decade to repatriate outsourced cut-and-sew jobs to northeast Mississippi, and it will undo our work at little or no cost to Chinese upholstery fabric mills.

I want you to carefully examine not only CDF’s more extensive written comments, but also those submitted by members of our region’s furniture industry. These comments describe in detail how the proposed Section 301 tariffs on fabrics and other inputs for the production of upholstered furniture will be sidestepped at the expense of jobs which are, at present, held by our fellow citizens in northeast Mississippi.

For the moment, I am happy to provide you with a few supporting documents, including a one-page chart of HTS classifications of fabrics and inputs used in upholstered furniture production in northeast Mississippi – items we request that you remove from the Annex of USTR’s Final Action – and answer any questions you may have.

In conclusion, we support tariffs that help level the playing field for American manufactured furniture, but applying it to the inputs used in American manufacturing these tariffs cripple American companies manufacturing furniture for domestic and international markets.

Thank you.

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