New 10% on Chinese Fabrics May Affect U.S. Upholstery Fabric Industry

The U.S. recently announced proposed additional import tariffs, at the rate of 10%, on thousands of classifications of goods of Chinese origin, including upholstery fabrics.

The Office of the U.S. Trade Representative is accepting public comments on the proposal. Specifically USTR wants to hear from you regarding the specific tariff subheadings to be subject to increased duties whether:

• they should be removed from the list;
• they should stay on the list at 10%; or
• they should stay on the list but at a lower or higher rate.

A strong case can be made that upholstery fabrics should stay on the list, and at a higher than 10% rate. The reason for this is the legal basis for the tariffs. Here I need to give a mini civics lesson. The Constitution is clear in Article 1 Section 8 that it is Congress, not the President, which has the power to impose import duties, so how is it possible that the President, in this case appears to be acting unilaterally? The answer is that Congress has delegated to the President limited authority to adjust import duties. One such delegation is Section 301 of the Trade Act of 1974 which authorizes the President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. In this case the justification for "Section 301" tariffs is China's intellectual property rights violations. For U.S. upholstery fabrics manufacturers intellectual property -- copyrighted designs and proprietary finishes -- is an important part of how they successfully compete and is, also, reported to be frequently illegally "knocked off" in China. Therefore, there is direct, and compelling connection between harm done to U.S. upholstery fabric manufacturers and the legal basis for the Section 301 tariffs.

Comments are due by August 17th and must address specific 8-digit tariff subheadings. Agathon Associates can assist U.S. companies in drafting and filing comments. While the case for upholstery on the list is compelling, the story will take some effort to tell due to the fact that the tariff schedule does not differentiate upholstery fabric from other fabrics. However, using such factors as weight, construction, and the presence of back-coating, we can construct an approximation. Due to the complexity of matching the specific tariff subheadings with the products of interest to individual companies submitting comments I strongly urge interested companies to begin the process as soon as possible. I have already been approached by individual upholstery manufacturers to assist in drafting and filing comments. The more companies that join in this effort the strong the response to the U.S. government will be and the cost can be spread over more individual companies.