Chinese furniture firms move to Vietnam to avoid US tariffs

By August 24, 2016 | 07:49 pm PT

Local firms are worried that the tax spotlight could be turned on them.

Official statistics show a third of foreign-invested companies in Vietnam’s furniture industry are from China.

Since 2015, the U.S. has imposed import tariffs on Chinese furniture including beds, nightstands and other wooden wares in an attempt to protect its domestic manufacturers from Chinese “dumping”, or the export of goods at an unfairly low price.

As a result, many Chinese furniture companies have moved their manufacturing facilities to neighboring Vietnam to get around U.S. anti-dumping duties.

In addition, labor costs are about 20 percent less in Vietnam than in China, according to the Ho Chi Minh City-based business advisory firm Infocus Consultants, which makes the Southeast Asian country an attractive manufacturing hub for foreign furniture companies, especially China.

U.S. furniture imports from China total roughly $12 billion annually, according to data from the U.S. Customs Service. Vietnam is second to China with more than $2 billion in exports to the U.S. as the country evolves into one of the world’s largest wooden furniture producers.

The fact that a large number of Chinese companies are exporting to the U.S. from Vietnam has led to growing concerns that Vietnamese manufacturers will soon come under the radar of American anti-dumping investigators, said Nguyen Ton Quyen, chairman of the Professional Association of Timber and Wood Products (Vifores).

He also added Chinese companies are planning to take advantage of tariff incentives Vietnam is expected to enjoy from new-generation free trade agreements such as the Trans-Pacific Partnership (TPP) and the pact with the European Union (EVFTA).

For instance, the TPP will either cut or eliminate tariffs for various Vietnamese exports to other member countries.

Chinese companies have recently stepped up their efforts by acquiring majority stakes in local producers, said Huynh Van Hanh, deputy chairman of the Handicraft and Wood Industry Association in Ho Chi Minh City.

“A sudden surge in export volume, no matter what the export industry is, could lead to Vietnamese companies being accused of dumping,” Hanh said.

“Moreover, as Vietnam has not been fully recognized as a market-based economy, domestic companies could face double tariffs with anti-dumping and anti-subsidy duties,” Hanh continued.

Vietnam exported $3.8 billion worth of wood products during the first seven months of this year, slightly up from the same period last year.

Vietnam’s furniture exports have experienced average annual growth of 7 - 8 percent in recent years, said the Vifores chairman.

However, the industry may miss its export target of $7.6 billion in 2016, he added.

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