industry insider | May 21, 2021 |
A new set of tariffs is rocking the Canadian design industry

In October 2020, the Canadian Border Services Agency quietly agreed to investigate a complaint filed by 14 furniture manufacturers, including the country’s five biggest: Palliser, EQ3, Elran, Jaymar and Fornirama. The brands alleged that upholstery producers based in Vietnam and China were illegally dumping (exporting and selling at below-market prices) their goods onto the Canadian market, damaging native companies’ sales. That complaint and the resulting legislation have thrown the Canadian furniture industry—and by extension, the interior design industry—into turmoil in recent weeks, as a tax of up to 295.5 percent has been placed on Chinese-made leather upholstery, along with a tax of up to 101.5 percent on those same goods from Vietnam.

The tariffs went into effect on May 5, taking designers and manufacturers by surprise. “There was almost no warning for this,” says Toronto-based interior designer Meredith Heron. “It’s not something that was on anyone’s radar, and then all of a sudden it was in effect. With a policy like this, you would think the government would have given us a six-month lead time. Instead, designers and showroom owners are having to cancel orders—because, honestly, who is going to pay $1,500 for a chair that was made in China?”

In the complaint filed to the CBSA, lawyers for the brands said the “unfair practices of dumping and subsidization by the governments of China and Vietnam [have deprived] domestic manufacturers of the opportunity to earn a profit on a level playing field.” The statement continues: “As a result, Canadian producers have lost sales and seen their prices depressed in the domestic market. … [The practices] have caused injury, and are threatening to cause further injury, to the Canadian industry.”

While the original complaint specifically targeted leather- and fabric-covered home theater, motion and reclining furniture (including sofa beds), the new tariffs are being applied broadly, impacting items like swivel chairs and gliders. In a more detailed report about the new policy released on May 20, CBSA clarified that the tariffs apply to a broader range of upholstered motion seating than initially thought, including all reclining, swivel or rocking chairs with leather upholstery.

“It feels miles away from the initial idea, which was essentially about La-Z-Boy–type recliners and big, reclining sectionals,” says Andrew Metrick, the managing director of Toronto-based furniture brand Elte, which manufactures in Asia. “Now, our products are getting swept up in this and we’re having to cancel and even discontinue many of our leather upholstery options or motion furniture pieces.” Metrick says that he had been working on developing Elte’s leather product category, which the brand has now decided to scrap.

Though the tariffs came as a shock to many designers and retailers, there had been some discussion of an import duty in recent months. In late April, the Retail Council of Canada announced plans to fight the new tariffs (which at the time were estimated to be around 50 percent, a fraction of what the actual tax ended up being), claiming that it will be “building a coalition to represent the interests of our furniture retailers/importers.” The brands that brought the complaint forth have not commented publicly since the tariffs went into effect, nor have they commented on the RCC’s efforts to overturn them.

Another issue that the tariffs present to interior designers is that, in many cases, there aren’t Canadian-manufactured equivalents to the pieces they were sourcing. “Canada doesn’t have a massive furniture industry—we don’t have our own version of High Point,” says Calgary, Alberta–based interior designer Heather Draper. “If you’re limited to buying furniture made here, you don’t have a lot of options, and oftentimes the quality is low but the price is still high.”

One perception of the new tariffs is that they will be good news for Canadian furniture manufacturing, but apart from the companies that instigated the tariffs, brands that were importing from China and Vietnam are unlikely to bring those operations back to North America. “People will just take their operations to another country in Southeast Asia—whether that’s Thailand or India or somewhere else,” says Jonathan Wilner, the president of Montreal-based home decor brand Renwil. “The idea that this would suddenly make more companies start manufacturing in Canada—that’s nonsense.”

Metrick points out that the new tariffs are coming at a time when the global furniture industry is already facing supply chain issues and massive delays. “We have many customers that have been waiting on delayed orders which are now going to be canceled entirely because it doesn’t make sense, financially, to bring them into the country,” he says.

There’s also the issue of importers now having to pay astronomical tariffs on orders that were already in the process of being shipped when the new policy went into effect. “There are going to be businesses that won’t exist anymore because of these tariffs because they can’t finance their way out of this problem,” says Metrick. “The impact will be real for smaller businesses who don’t have teams of lawyers that can fight on their behalf. That’s a very real situation.”

Heron, who says she has been in contact with her member of Parliament to oppose the tariffs, feels that the new taxes are also having an incidentally sexist effect. “The majority of small furniture stores in Canada are owned by women, while the big companies that perpetuated and are profiting from this change are all run by older white men,” she says. “It’s women that will bear the brunt of this policy—and during a pandemic that has already made it so difficult to operate a small business, no less.”

Draper, too, feels that small businesses are being forsaken by new tariffs. “There are thousands of interior designers in this country, and we need to be supported just like these giant manufacturers,” she says. “It’s insane to think that the Canadian government has decided to impact thousands of small businesses for the sake of a few corporations. But I guess that’s our new reality.”

Homepage photo: © Vergani Fotografia | Adobe Stock

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