Chinese Products Spark
A Fierce Furniture Battle

Nov. 19, 2003 -- At Pottery Barn, it's a stylish game table with an antique honey finish. Crate & Barrel's got a walnut bedroom set complete with night stand and armoire. And for sale at Seattle's hip Area 51 boutique is a red wool "Soho" sofa with movable arms and chrome legs. What do they have in common? They all come from China.

Coming soon to your home: the global trade wars. With a battle over Chinese imports heating up, it turns out some furniture sold at the biggest names in nesting could wind up in the thick of it. From chains like Crate & Barrel to boutiques like Stanton Designs in Decatur, Ga., chic retailers increasingly rely on China to manufacture parts or assemble entire pieces of furniture. Next year Domain plans to bring in 25% of its goods from China, up from 10% now, and other stores are following suit, saying the quality's gotten better and the imports help keep costs down for the consumer.

But prices could go up. With Chinese furniture imports soaring 24.5% last year, a group of American furniture manufacturers contends the China makers are unfairly selling low-price wares in the U.S., and they're pushing for duties that some retailers insist will mean higher prices at checkout. Last week the stakes got higher, when 28 U.S. manufacturers filed a formal petition with the government requesting import duties on wooden bedroom furniture. And while retailers had mostly stayed on the sidelines, this week they've started protesting the notion of duties.

At Bombay Co., which imports fully half of its bedroom furniture from China, executives say they're concerned the push for duties will spread beyond bedroom furniture. "We think this petition is just the tip of the iceberg," says General Counsel Michael Veitenheimer, who adds prices "would have to go up." Domain President Judy George estimates her prices could jump at least 30% if U.S. manufacturers prevail. "In order to compete, I must import from China," she says.

Beneath the Radar

A lot of this is taking place beneath the radar for furniture shoppers. Checking out night stands at a Crate & Barrel, Stephane De La Faverie and his wife, Cyriane, say they haven't heard anything about the trade dispute. And the Miami Beach couple certainly couldn't tell where the pieces they're looking at have been made (including a solid walnut Kingston model from China). "I guess it's American," says Mr. De La Faverie.

Indeed, it can be pretty tough to tell just where an item was manufactured, though customs regulations say consumers should be able to find out before buying. Some imports are marked with the country of origin -- say, on a shelf or in back of the dresser -- but it isn't always done. Catalogs and Web sites aren't much help, either. While Pottery Barn plays up the "Indonesian hardwood" of its $900 Sumatra bed, there's no mention that pieces like a hamper stool with wainscoting hail from China.

Until the early '90s, most American furniture was built in the U.S. But over the last decade, improved technology and a more open Chinese economy, along with workers who make a fraction of U.S. wages, have made imports more compelling. "This is a labor-intensive industry," says Bob Novick, a lawyer for Wilmer, Cutler & Pickering, a Washington firm representing Chinese factory owners. He says the Chinese aren't "dumping" because they make a profit on their work.

The coalition of American makers disagrees, and what's more, it says retailers are shortsighted to oppose the duties, because the Chinese could eventually skirt U.S. shops altogether. "Store owners shouldn't assume that the Chinese won't sell directly to consumers," says Doug Bassett, vice president of sales at Vaughan-Bassett Furniture Co. in Galax, Va., and a spokesman for the firms filing their complaint.

Made in Europe

And not all retailers are eager to embrace the China connection. Some continue to worry about quality -- or at least a perception that "made in China" will turn off upscale customers. Roche-Bobois makes all its furniture in Europe, even though shifting to China could lower costs by up to 70%. "The Chinese don't know how to do our craftsmanship," says Olivier Cardon, vice president of Roche-Bobois North America. Similarly, New York furniture store VW Home says it keeps all its production domestic. "It's like the Hermès Kelly bag," says owner Vicente Wolf. "The bag is about the fact that you've got the guy who sits there in France with the leather and a hammer and a clear sense of quality."

Of course, it's far from certain that the U.S. government will side with American manufacturers. An initial assessment is expected by year end, and any duties could be imposed within six months of that. Still, some trade experts think there's a possibility it could happen, including Gary Hufbauer, a fellow at the Institute for International Economics in Washington, D.C. "It's fairly easy to prove that there's been dumping," he says.

It's also unclear how much of a price increase would trickle down to the retail counter. Manufacturers want duties averaging two-and-a-half times the wholesale price, but winning doesn't guarantee they'll actually get that much. Also, most retailers draw on other lower-cost markets besides China -- including the Philippines, Indonesia and Vietnam. If retailers shift away from China, prices could jump in the short term but then drop again later.

But for Matthew Biagi, a 29-year-old advertising executive who's decorated his apartment with candles and furniture from Pottery Barn and other big stores, the main thing is to look good. Where it's made is "not something that's a factor in my decision," he says.

-- Paula Szuchman contributed to this article.

Email your comments to rjeditor@dowjones.com.