Recent tariffs imposed by the federal government have created a ‘devastating situation’ for furniture retailers in Canada.
A coalition of small to midsize furniture retailers said the tax of up to 295 per cent on specific categories of upholstered furniture from China and Vietnam, imposed by Canada Border Services Agency on May 5, is a “financial bombshell, adding to the one present throughout the past few months, affecting retailers and the entire retail furniture supply chain.”
“To better illustrate the impact: sofas sold – including those already ordered, those in the ports, or en route in the supply chain – are subject to an increase of up to 295 per cent, without any notice. For example, some upholstered sofas that used to cost $1,500 now cost $5,925. The imposition of the tax affects retailers and customers alike. At this cost, these products will not be able to be offered to consumers,” says the coalition.
Diane J. Brisebois, President & CEO of the Retail Council of Canada, called it a “devastating situation” for furniture retailers across the country.
The situation began in 2020 when several Canadian furniture manufacturers launched a complaint alleging that furniture from China and Vietnam was being dumped in the Canadian market at below market prices and hurting Canadian businesses. That led to the tariffs. The Canadian International Trade Tribunal will investigate the matter this Fall.
“This tax creates an unprecedented economic and operational challenge in a pandemic context, where rising raw material and labor costs, international transportation issues, in addition to staff shortages, cast a shadow on overall economic health of the furniture retail sector,” said Johannes Kau, President of Mobilia.
Brisebois said the Retail Council of Canada disagrees with the tariffs and it has indicated it will be intervening in the case to represent furniture retailers across Canada.
“The Tribunal will hopefully make its final decision around September, early to mid September, and at that point in time we will know if one, they believe that there’s no justification for any duties, two, if they believe there has been anti-dumping in some cases and may create a duty rate of a certain level that will be way below what the CBSA has put in place as a provisional duty or three, they could agree with the provisional duties that have been put in place by the CBSA in the interim period before the final finding,” said Brisebois.
“Our case will be that we don’t believe there’s been anti-dumping and most importantly we believe that the provisional duties that the CBSA has put in place are absolutely outrageous and are creating an enormous amount of damage within the sector and also not only furniture retailers but their customers. The problem is that by making it effective May 5 those retailers who had shipments coming in had to in fact pay those duties to accept those shipments. In many cases, it’s had a very serious impact on their bottom line and secondly I think what has really aggravated the situation is that because of the pandemic and the challenges in supply chain . . . even those retailers who have been putting orders in through Canadian manufacturers have to wait three, six to nine months if not more to get some of the orders.
“At the end of the day, we are asking the Minister of Finance to intervene in this special case and to consider putting a freeze on the provisional duties until such time as the Tribunal has made its final decision or reduce the duties to the level at which even the complainants are suggesting which is around 35 per cent duty.”
Brisebois said many of the retailers have written letters to their MPs asking for this consideration because of the injurious nature of these provisional duties on the entire sector and ultimately on customers who are not able to afford expensive luxury furniture – the everyday Canadian in other words, she said.
In a letter to MP Rob Morrison, Canyon Street Furniture in Creston BC, which has operated since 2015, said that despite the many challenges posed by COVID-19 and repeated shut-downs and capacity restrictions, it has managed to weather the current public health crisis.
“The biggest threat to our business arises from a recent federal government decision under the Special Import Measures Act (SIMA). SIMA, which is the joint responsibility of the Canada Border Services Agency (CBSA) and the Department of Finance, is intended to provide anti-dumping remedies. Dumping occurs when a foreign company exports goods to Canada at a price that is lower than in the exporting company’s domestic market,” said the company.
The letter said duties recently imposed “at these levels are highly unusual and are potentially crippling to Canadian furniture retailers like ourselves, as they can double the cost of Vietnamese imports and quadruple the cost of Chinese imports,” it added.
“At present, we have $30,000 of goods on order that we simply cannot afford to bring into Canada. Even if we could find the financing to pay the provisional duties, it is unlikely that we could sell much of it at the far higher consumer prices that would result from these increases in the cost-of-goods. To add to our frustration and challenges, there is no way for us to obtain alternative products from domestic manufacturers, who have next to no current capacity,” explained the company.
Thanks for sharing such an interesting post. Yes, it’s the reality that we the small to medium sized furniture retailers are living now in a devastating situation. This new federal laws is forcing us to incur a huge costing while selling upholstery furniture due to paying huge amount of taxes.