— Furniture Today,
HIGH POINT — Prices of some Chinese leather furniture are likely to increase because


of a change in China’s value added tax refund rate for exports, according to industry sources.

Hoping to discourage “dirty” industries that pollute the environment and use excessive energy, China lowered the VAT export rebate from 13% to 8% on certain leather products, and from 13% to 11% on textiles, finished furniture (leather and fabric) and certain wood products.

Certain categories of finished leather products, like splits, had the rebate eliminated completely — probably because their production is particularly environmentally unfriendly, according to industry insiders.

U.S. furniture importers believe the change only applies to leather hides imported into China, not to products made using Chinese hides.

The changes are related to China’s standing in the World Trade Organization, which has demanded certain reforms of China’s economic system and environmental policies.

The CEO of a major furniture supplier that sources from China told Furniture/Today that “we have already been served notice by all our Chinese leather sources of immediate price increases of at least 5% to 10%” on leather hides, in response to the new reduction of VAT rebates.

According to Don Ohsman, president and chief editor of Hidenet.com, a global hide and leather reporting service, “Anyone who imports leather, and more likely leather furniture, can be affected by this.

“The bottom line is that if someone wants to import leather sofas or cut-and-sewn leather kits from China, sooner or later — and likely sooner — they are going to have to give their supplier more money or that supplier won’t be around any longer,” Ohsman said.

China’s Ministry of Finance and other agencies issued a notice on the tax rebate adjustment on Sept. 14. It was effective Sept. 15, although some previously signed export contracts could be “grandfathered” at the previous rate if certain criteria were documented by Sept. 30 and the contracts completed by Dec. 14.

According to the China Council for the Promotion of International Trade, the VAT rebates for exports were established in 1985 to make Chinese exports more competitive in the global market.

As U.S. textile and furniture industries can attest, it worked well. It also contributed to a trade surplus for all goods that Chinese officials say will exceed $100 billion this year.

Officials hope the rebate adjustments will help shift China’s exports to goods with higher added value like high-tech products, for which the VAT export rebates were actually increased. In addition, officials have suggested the changes could help eliminate China’s constant struggles with antidumping suits on products ranging from bedroom furniture to shoes.

Chinese silk producers are also saw their export rebate reduced to 11% from 13%, a move that compounds pricing presssures created by a drought in silk-raising areas.