Two of the country’s largest home-furnishings manufacturers, including Ashley Furniture Industries Inc., have been dealt a pivotal blow in a 10-year legal battle that once threatened to spark a civil war in the domestic industry.
The U.S. Appeals Court for the Federal Circuit ruled Aug. 19 in a 2-1 vote that Ashley and Ethan Allen Operations Inc. are not entitled to receive duty payments from a successful anti-dumping case against a group of Chinese wooden-bedroom furniture manufacturers.
Ashley had indicated it opposed the petition, while Ethan Allen said it had no position. Ashley broke ground in April on an $80 million manufacturing and distribution expansion in Davie County, where it plans to have at least 550 employees at full capacity.
The case involves the since-repealed Byrd Amendment and the hundreds of millions of dollars in anti-dumping duties collected from the Chinese manufacturers.
Because there was a split vote among the appellate judges, it is possible Ashley and Ethan Allen could appeal the decision to the U.S. Supreme Court. However, in May 2010 the Supreme Court chose not to hear a case regarding anti-dumping duties and the Byrd Amendment pursued by SKF USA Inc., a maker of ball bearings.
Ashley officials and attorneys representing the company in the case could not be reached for immediate comment Wednesday. The website Law360.com reported that Dan Aiman, Ashley's general counsel, said the company is working with outside counsel to review the opinion and explore further options.
A group of 22 U.S. manufacturers began pursuing the anti-dumping duties in 2003, which became a hot issue at High Point Market trade shows at that time because several prominent U.S. furniture retailers sourced products from the Chinese manufacturers.
The petitioners were organized into the American Furniture Manufacturers Committee for Legal Trade and were led in the appeal process by T. Copeland and Sons Inc., Kincaid Furniture Co. Inc., Stickley Inc., Sandberg Furniture Manufacturing Co. Inc., Stanley Furniture Co. Inc. and Vaughan-Bassett Furniture Co. Inc.
The retailers, which formed the Furniture Retailers of America, had become dependent on lower-cost imported products and claimed the duties essentially were a hidden tax on consumers.
The U.S. Commerce Department ruled in November 2004 that those Chinese manufacturers had dumped products into the U.S. market at artificially low prices.
Another factor that made the issue so divisive is that a group of seven U.S. furniture manufacturers and marketers, including Ashley, Ethan Allen and Furniture Brands International Inc., filed a lawsuit claiming they should benefit from the duties even though they didn’t participate in the 2003 petition.
Those manufacturers said that under free speech laws, they did not have to support the petition to benefit from the duties if they were affected by the dumping. Also listed as defendants in the appeal were the U.S. International Trade Commission and U.S. Customs and Border Protection.
The appellate judges who voted against the appeal rejected the companies’ First Amendment challenges.
“We hold that appellants have not supported the petition under the plain meaning of the Byrd Amendment,” the judges wrote in their opinion.
“The conclusion that a producer who indicates that it ‘takes no position’ in a questionnaire is a supporter is also incongruous because such a producer has not ‘indicated support,’ ” the judges wrote.
The dissenting judge wrote in his opinion that “nothing in the Byrd Amendment requires a domestic producer to check a certain box in order to qualify for Byrd distributions.”
“The court’s endorsement of the ITC’s choice to use the support/oppose question as a shortcut for classifying domestic producers, thus mandating the expression of a point of view to distinguish between similarly situated producers, invites a serious First Amendment problem.”
As a result, the judge said he believed Ashley and Ethan Allen are entitled to anti-dumping duties if they can prove they were damaged by the Chinese products being sold in the U.S. at artificially low prices.
The anti-dumping duties have played a pivotal role in helping several recipients maintain their overall profitability amid a slowdown in business in recent years.
However, some petitioners have closed plants, gone out of business or filed for bankruptcy protection during the past 10 years.
The issues, and the bruises, go back to when Congress created the Continued Dumping and Subsidy Offset Act in 2000. The act requires that revenues from antidumping and countervailing duties on designated imports be distributed annually to domestic producers that were either petitioners or interested parties supporting the petition that resulted in duties being levied.
What galls some industry observers is Furniture Brands’ claim for $25 million even though it aggressively opposed the petition when the issue came to a head at the 2004 spring and fall High Point Markets. Furniture Brands joined the furniture retailers’ advocacy group.
At that time, Furniture Brands was accelerating the taking of its production offshore or shifting it to third-party vendors in Asia. That strategy led to the elimination of at least 8,860 jobs in North Carolina.
The dismal financial performance of Furniture Brands the past five years, punctuated by a $40 million loss in the second quarter of 2013, led an analyst to predict the company is headed for liquidation or bankruptcy.
Ralph Scozzafava, the company's chairman and chief executive, told analysts during a conference call earlier this month that “we've recently conducted a thorough review of our portfolio of assets with our board, and outside advisers are in the process of executing on specific initiatives that were the output of this review.”
“These include possible sales of non-core or underperforming assets.”
If a Chapter 11 bankruptcy filing is the outcome, one probable consequence could be Furniture Brands requesting that the federal Pension Benefit Guaranty Corp. take over more than $200 million in pension obligations for about 20,000 participants, many of whom live in the Triad and Hickory area.