Witnesses Argue Against Tariffs on Vietnamese Exports Over Timber Issues

Witnesses from the furniture and cabinet sector in both Vietnam and the U.S. argued that Vietnam has greatly improved its governance over illegal imports of tropical wood and, to whatever degree illegal imports still exist, that wood is not then exported to U.S. buyers.

A number of witnesses noted that the kinds of imports from Cambodia, the Congo and Cameroon cited in the Section 301 investigation are of exotic tropical woods, like rosewood, and that exported furniture and cabinets are made from plantation wood, such as rubber wood and acacia, or imported wood that is not endangered, such as Russian birch, American cherry, walnut, oak, pine and poplar, or Brazilian eucalyptus or teak (which is also plantation grown).

All the witnesses testified at a virtual hearing on Dec. 28 hosted by the Office of the U.S. Trade Representative, and featuring questions from USDA, the State Department, Treasury, Commerce and the Small Business Administration. All the Vietnamese manufacturers noted they don't import from the countries mentioned by USTR as sources of illegal timber harvest.

A representative from Hiep Long Fine Furniture Company, said the company uses Forest Stewardship Certification for part of its supply, and that certification requires the chain of custody be audited annually. “We find it unfair to indict businesses like us who put a lot of effort in making sure our materials always come from legal and certified services,” she said, and said that the U.S. trade representative should travel to Vietnam “to see the scale of the legitimacy of our operation.”

Mark Schumacher, CEO of the Home Furnishings Association, which represents furniture retailers, said that although furniture sales bounced back strongly after two-month lockdowns, importers are facing much higher costs for shipping, even quadruple normal levels, and across-the-board tariffs would only increase prices to consumers more. He said that if an investigation finds that Vietnamese manufacturers are exporting furniture made from illegally harvested wood, the HFA either wants the U.S. government to seek a negotiated settlement with Vietnam, or see that tariffs are “levied against the specified offenders and their products.”

A broad-based tariff “would needlessly punish companies complying with supply chain norms,” he said, including those that export furniture made with the American wood exported to Vietnam. Vietnam is the second largest market for timber exports, after China. “None of that timber is illegal,” he said.

Rachel Stewart, fourth-generation owner of a Michigan furniture store chain called Gardner-White, said the company does $300 million a year in sales, and Vietnamese imports are a significant portion -- they expect to import $50 million worth of furniture from Vietnam in 2021. If tariffs are imposed, the cost of a $900 sofa will go north of $1,200, she said, and that will mean diminished sales, and fewer hours or jobs at the 1,000-person firm.

The CEO of the trade group that represents American furniture manufacturing brands, the American Home Furnishings Alliance, complained that USTR didn't explain why furniture, as opposed to cabinets, flooring or any other wood product, is “in the cross-hairs” of this Section 301 investigation. Andy Counts said USTR “still has not revealed any of its so-called supporting documentation,” which leaves the industry unable to defend itself. He said that such a bias “violates guarantees under the Administrative Procedure Act,” and noted that even environmental nonprofits said in their submissions that tariffs are not the answer to illegal harvesting (see 2011160027).

He said the Lacey Act is an appropriate way to address illegal timber harvests, not tariffs, which he said are a cannon-shot approach, rather than the scalpel needed.

Blake Harden, vice president for international trade at the Retail Industry Leaders Association, said that if USTR chose to impose tariffs, then Vietnam would be sure to impose tariffs on U.S. wood exports to Vietnam, which reached $350 million in 2019. RILA, the National Retail Federation and the American Apparel and Footwear Association all said that it would be unfair to tax Vietnamese exports in sectors unrelated to timber.

She also said there's no good time for increased tariffs, but with the economic stress following the pandemic, “now is certainly not the time.”

Harden said the government should negotiate with Vietnam if the Lacey Act is not sufficient to achieve its aims, and said that a thorough and transparent investigation takes time. “This process must not be rushed,” she said, and if the agency were to decide to impose tariffs, the proposed list should also be released and there should be a public hearing on the choices before they are taxed.

The only witness arguing that Vietnamese timber practices damage American commerce was Gat Caperton, owner of Gat Creek Furniture in Berkeley Springs, West Virginia, a boutique furniture maker with 42 employees. Caperton called for “firm and aggressive steps to end unfair timber practices,” and said that “it’s been an open secret that Vietnamese producers of wooden furniture buy [illegally traded wood] to lower their cost.”

Caperton, who uses local wood, said that the cost of wood is about 35% of the cost of a bed that he sells (which costs about $1,600 to $3,600). When asked if he knows of evidence that Vietnamese furniture sent to America has illegally harvested wood in it, he said he didn't, just that the growth in imports from Vietnam in the category has been rapid, and that the growth in American wood exported to Vietnam had not been as fast.

U.S. Department of Agriculture representative Andrew Stephens asked Caperton how much of Vietnam's price advantage is labor vs. timber costs, and Caperton did not guess the labor aspect, but said that if you used illegal timber, you could sell the same bed for 20% less.