Furniture Trade Groups, Environmental Watchdog Oppose Section 301 Vietnam Tariffs

A number of U.S. trade groups questioned the evidence behind the Office of the U.S. Trade Representative's assertions that Vietnam is importing illegal timber, and the assertion that those logs end up in exported products going to the U.S. The groups said in comments to the agency that the notice initiating the Section 301 investigation contained no citations for these claims. Both trade groups and companies asked for a virtual public hearing, and the right to rebut others' submissions.

Even the Environmental Investigation Agency, an international non-governmental organization that investigates timber smuggling and pushes for better forestry practices around the world, argued against broad tariffs to tackle the problem. EIA agreed that there are problems with Vietnam's timber trade, but it argued that a partnership approach, as the European Union has worked on, is most productive.

“EIA also believes the imports of illegal timber from Vietnam’s neighbors has fallen in the last few years. In Laos this is partly the result of improved enforcement, including the log export ban introduced in 2016, as well as Laos engaging with the EU on development of a Voluntary Partnership Agreement. The decline is also the result of action by Vietnamese authorities in border areas. Our continued monitoring of the illegal timber imports has found that the trade does still continue, though at much lower levels and using different methods, with emphasis on increasing concealment,” the group said in its comments. The group also suggested that if the U.S. government seeks an enforcement approach, it should listen to EIA, the World Wildlife Federation and Greenpeace, which have said that wood furniture should require a Lacey Act declaration form -- EIA noted that U.S. Department of Agriculture/Animal and Plant Health Inspection Service chose not to do so in the next phase-in.

Many groups and companies -- including the National Retail Federation -- said the Lacey Act would be a more appropriate avenue for remedy than Section 301. It also asked: “Is the investigation limited to the potential use of illegal timber by furniture manufacturers in Vietnam or is the investigation looking into any timber products or products containing timber?”

The Home Furnishings Association, which represents furniture retailers, said its member stores have had a hard time procuring product among factory closures and a surge in demand, with families working from home and schooling at home. “We are also seeing some price increases as a result of this shortage. Any negative impact on supply or pricing at this point would only add insult to injury to our retail industry and would harm the recovery from the Covid-19 shutdown,” the HFA said.

The International Wood Products Association, which represents manufacturers, importers, distributors and retailers, said the Convention on International Trade in Endangered Species (CITES) is the best approach, and says that the U.S. should address issues under its existing trade dialogue with Vietnam, with an eye to doing something similar to the Vietnam-EU Voluntary Partnership Agreement. “IWPA believes a bilateral agreement between the two governments should also include language moving the two countries to establish electronic document systems and provide for an exchange of relevant certifications, including e-Phyto and e-CITES processes and certificate exchanges,” the group said. It said that no discussion of CITES violations has ever been in the annual report on trade frictions with Vietnam.

Crate & Barrel told USTR that it audits each wooden item it sells twice a year, reviewing “the genus, species, country of harvest. Any products that are identified as potential 'High Risk' are flagged in the review and corrective actions put in place. By pulling this data, for example, we were able to confirm that our vendors in Vietnam are not using wood from Cambodia or other unauthorized locations.” It says none of the objects come from Congo, either.

“If there is furniture in our supply chain that does use illegal timber, we want to know about it. For this reason, we recommend that the United States increase efforts to identify bad actors in timber products supply chains and flag risks for importers to ensure compliance,” Crate & Barrel said. “We do not recommend, however, that the USTR impose tariffs on furniture goods imported from Vietnam. The increase in cost would likely lead our company and many others to simply move production, rather than review and improve compliance in our Vietnamese supply chains, the apparent the goal of this exercise. Indeed, Crate & Barrel would likely move some of our current production in Vietnam back to China as the result of tariffs on Vietnamese goods. This, evidently, would defeat the purpose of the original China Section 301 policy, which encouraged us to move production out of China in the first place.”

The Sustainable Furnishings Council, a trade group representing nearly 400 companies, said it is glad the USTR is investigating illegal timber in Vietnam, but wants a voluntary partnership agreement (VPA) or free trade agreement with Vietnam to address illegal lumber harvesting. The American Home Furnishings Alliance said groups and companies should have the opportunity to rebut the comments submitted last week, and then a hearing should be scheduled. “Although a remote hearing may result in additional time needed to conduct this investigation, such additional time is warranted here where any potential action by USTR will have far-reaching consequences on the entire U.S. economy beyond just the furniture industry,” the group said.

Legends Furniture said it manufactures 60% of its furniture in the U.S., and imports 40% from Vietnam. “Our Vietnam factories have very trusted sources who have certified that they procure their timber legally from outsourced countries such as Chile and the United States. If we discover that any of our vendors are supporting illegal timber processes, we will immediately terminate the relationship with them and find other sources for our import products,” the company said.

AmCham Vietnam argued that the CITES species that is reportedly coming from Cambodia, Congo and Cameroon is rosewood, which is in demand in Vietnam. “To the extent any illegal timber is imported or used in Vietnam, it is highly unlikely that such timber is exported to the United States,” AmCham said. “Furniture exports to the United States use other species, such as walnut, cherry, maple, or oak in higher-priced furniture; or pine, poplar, or veneers in lower-priced furniture.”

Lumber exporters also oppose the use of Section 301 tariffs to combat illegal timber practices in Vietnam. The Hardwood Federation, which represents 27 hardwood trade associations, said exports of hardwood lumber fell by almost a third from 2017 to 2019 because of the trade war with China, a drop of $1.1 billion. “Exports to Vietnam have been essential to supporting exporters of U.S. hardwoods during the past two years as markets in China have fallen dramatically. Vietnam is the 3rd largest export market for both US hardwood lumber and US hardwood logs after China and Canada,” the federation said. About 50% of hardwood lumber is exported, and a significant reduction of Vietnamese imports “would be devastating to the industry,” the federation said.

There were some supporters of the investigation that do think broad tariffs could be appropriate. The American Furniture Manufacturers Committee for Legal Trade offered more details on imports from Cambodia and Congo from nonprofits and news sources, and said there's domestic illegal harvesting, as well.

The Decorative Hardwoods Association, which represents the U.S. hardwood, plywood hardwood veneer, and engineered hardwood flooring sector, cited an EIA report that says plywood transshipment from China through Vietnam is a growing problem. “The trends for Chinese exports of hardwood plywood to the United States and U.S. imports of Vietnamese hardwood plywood are essentially mirror images,” the group said, after antidumping and countervailing duties cut Chinese exports to the U.S. -- with Vietnamese exports increasing nearly tenfold from 2011 to 2019. “Between 2017 and 2019 alone, wood imports more than tripled in value. This trend has continued into 2020, despite the COVID-19 pandemic. U.S. imports in January-August of this year are up 36% over the same time period in 2019.”

The Labor Advisory Committee to United Steelworkers said illegally harvested timber can act as a subsidy that makes it harder for domestic producers to compete. And Magnum Magnetics asked that flexible magnets from Vietnam face tariffs if the Section 301 investigation results in tariffs.