retail watch | Apr 30, 2020 |
When tariffs and the coronavirus cross paths in the mattress business, the feathers fly

Nothing has quite perplexed and created more havoc for the furniture industry than tariffs—nothing, that is, until the coronavirus pandemic and the resulting economic collapse. And when these two calamities cross, things can only get worse.

That’s the situation the mattress business finds itself in now, as battle lines are being drawn on the possible tariff penalties sought by a group of domestic producers against companies bringing in product from Asia. Meanwhile, the importers claim these products are critical for donations for the current national health crisis—and further charge that opponents are using this time (and the lack of in-person hearings) to win their case.

On April 22, the U.S. Department of Commerce agreed to start investigating the charges—the first step in a complex process that could result in large tariffs, potentially steep enough to make these mattresses uncompetitive in the American marketplace. After the investigation concludes, the U.S. International Trade Commission is expected to issue a ruling by May 15.

Yohai Baisburd, the counsel for the domestic mattress petitioners, said the commerce department’s decision to investigate is “a critical step” in understanding how mattress imports from eight countries impact the domestic mattress industry.

The opposing group of importers have coalesced around a newly formed organization, the American Mattress Alliance, which charges that tariffs would restrict its members’ ability to donate mattresses for the coronavirus relief movement. “We were slapped in the face with this petition that is working against us as we race to get beds in hospitals,” said Sam Malouf, alliance member and CEO of the Logan, Utah–based bedding company Malouf. “We don’t need to be pulled from the front lines.”

In addition to Malouf, AMA members include retail behemoth Ashley Furniture; home goods brand Maven, also from Logan; and Knoxville, Tennessee–based bedding company Mlily USA. The organization’s members import from Vietnam, Thailand, Malaysia, Indonesia, Cambodia, Turkey and Serbia. They say a ruling against them would impose “insurmountable tariffs up to 1,008 percent.”

While imported mattresses remain a minority of the overall sales in the category, these seven countries are believed to represent more than 80 percent of all imports.

The domestic producers, some of whom also import product, claim that the imports are not fairly priced, creating a disadvantage in the marketplace for American-made products. They also say they have more than enough capacity to supply hospital and medical facilities with mattresses during this crisis. The petitioning group members include Carthage, Missouri–based furniture brand Leggett & Platt; Phoenix, Arizona–based Brooklyn Bedding; Newnan, Georgia–based Elite Comfort Solutions; and the recently merged FXI Inc. and Innocor in Radnor, Pennsylvania.

“The filing of this petition has no negative impact on America’s COVID-19 response,” the group said in a statement. They added that whatever the outcome of the investigation, no duties would be imposed “for at least four months.” Separately, Leggett & Platt denied exploiting the system by bringing the case at a time when public hearings and meetings are limited.

The furniture industry famously fought a multiyear battle over tariffs on imported bedroom furniture during the first decade of the 2000s, with some domestic producers charging that Chinese producers were purposely underpricing their goods in order to gain an advantage in the American marketplace. The domestic producers prevailed, and under the terms of the law as it stood then, they were able to get the proceeds from the duty fines directly.

The laws have since changed, but tariff battles—exacerbated by the recent Trump moves on Chinese goods—have continued to break out in the furniture business; this latest skirmish over mattresses is unlikely to be the last. The pandemic may eventually recede, but the tariff wars are likely to go on for as long as most of the industry’s products come from overseas … which is to say, pretty much forever.

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For big-box lifestyle retailers, the store is the brand—until it’s notWarren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. He was also a guest on the BOH podcast, and his Retail Watch columns offer deep industry insights on major markets and product categories.

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