Vinyl flooring makers seek tariffs on Chinese imports

Washington — U.S. vinyl flooring and tile makers are pushing for tariffs on Chinese imports, arguing it will result in more domestic investment and jobs, and help them overcome a flood of imports.

But importers and others predict it will lead to higher prices on vinyl products — with luxury vinyl tile, or LVT among the fastest growing categories within flooring — and will be particularly harmful to budget conscious home buyers and remodelers.

Two U.S. vinyl flooring makers, Mohawk Industries Inc. and Congoleum Corp., testified in favor of 25 percent tariffs at an Aug. 21 Washington hearing.

The vinyl flooring duties are part of a huge new package of tariffs the Trump administration has proposed against $200 billion in Chinese imports, on top of the tariffs on $50 billion of imports that have been phased in since early July.

"I can state unequivocally that U.S. manufacturing and jobs would increase if Chinese imports would stop flooding the market," said Brian Carson, president of the North American flooring business for Calhoun, Ga.-based Mohawk, which calls itself the world's largest maker of flooring products, with 49 factories and 21,000 employees in the United States.

He told an interagency tariff review panel, led by the office of the U.S. Trade Representative, that in the vinyl flooring markets, imports from Asia, primarily China, occupy between 55 and 70 percent of the market. Last year, China exported $1.7 billion of vinyl flooring to the U.S., he said.

"Unlike many opponents [of tariffs] who do not manufacture flooring products in the United States, Mohawk has remained committed to U.S. manufacturing and technology innovations, despite tremendous pressure exerted by Chinese imports," Carson said. "The return on these investments have been and will continue to be adversely effected if China's unfair trade, intellectual property and industrial policies remain unrestrained."

In 2016, Mohawk announced it was investing $100 million in luxury vinyl tile production at its Dalton, Ga., plant.

But the claims from those U.S. producers met pushback from American importers, a Chinese vinyl flooring executive who traveled to D.C. to testify, and, in a sign of division within U.S. manufacturers, plastic flooring maker Shaw Industries Group Inc. in Dalton, Ga.

Slapping a 25 percent duty on imports of vinyl flooring and tile, they argued, would mean higher prices for consumers and do nothing to change the Chinese industrial policies like forced technology transfer and the Made in China 2025 program that the Trump administration targets.

"Tariffs on these tiles would raise housing prices disproportionately on lower to middle income Americans," said Rupesh Shah, president of flooring importer M.S. International Inc., which employs 1,800 in the U.S.

Chinese imports, he said, "tend to serve the lower end of the budget conscious market and enable builders to be able to offer more affordable housing solutions. ... USTR would be placing the most vulnerable Americans in its cross hairs, not China."

As has been common in the debates over the tariffs, the two sides faced off over questions of China's handling of intellectual property.

A key reason the USTR gives for the tariffs is to gain leverage to force improvements in IP and level the playing field for U.S. firms.

But a Chinese vinyl flooring maker, Jiangsu Beier Decoration Materials Co. Ltd., came to the hearing and took issue with that premise, at least in the flooring industry, arguing that vinyl flooring is not a high-tech industry targeted by Made in China 2025.

One of its executives noted that it pays royalties to U.S. flooring firms.

"It is particularly strange that we are in an IP case," said Xiao Zhiyuan, general manager of Beier's international trade department, noting that his company already pays "substantial" royalties to Mohawk subsidiary Unilin and a Swedish company for key tile locking technology.

Written testimony from Orion Group LLC, a small importer and distributor from Florida, argued that "Chinese manufacturers respect U.S. intellectual property rights by paying patent [royalty]... in the amount of 5-12 percent of sales price, significantly higher than what is paid by the U.S. and EU manufacturers."

Congoleum President and CEO Chris O'Connor said the tariffs will help U.S. industry maintain a focus on product development and better deal with rising Chinese imports.

The 400-person company has 500 patents and focuses on new product research, he said, making it the type of business the U.S. government should support with tariffs, which are being pursued under Section 301 of U.S. code.

"Congoleum is the type of high-tech goods company that the Section 301 tariffs are intended to protect," O'Connor said. "We are a proud U.S. company fighting hard to survive."

He testified that his company imports some vinyl flooring products from China, but still supports the tariffs, which could go into effect as soon as late September.

"As the U.S. vinyl flooring industry matured over the years, many of our competing companies moved toward sourcing more and more internationally," he said. "With about 40 percent of our competitors relying on Chinese imports, it was impossible for our industry trade association [the Resilient Floor Covering Institute] to reach a consensus to participate in the proceeding."

"This is a complex issue for the industry," he said.

Illustrating that complexity, another U.S. plastic flooring maker, Shaw Industries, submitted comments to the USTR opposing the tariffs on Chinese vinyl flooring.

Shaw, which has 90 factories and 21,000 employees in the United States, told the U.S. government that the tariffs on vinyl flooring could have the unintended consequence of increasing costs, slowing sales and hurting U.S. jobs and investment.

"Furthermore, they will not effectively eliminate China's unfair trade practices, including those that threaten U.S. technological leadership," Shaw said.