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Tariff goes, furniture jobs stay
(Northeast Mississippi Daily Journal (Tupelo, MS) Via Acquire Media NewsEdge) Jan. 1--BELDEN -- In a time when the slumping economy has taken its toll on the furniture industry in Northeast Mississippi, Tuesday brought welcome news.
Three furniture manufacturers -- Bauhaus USA, H.M. Richards and Lane Home Furnishings -- received Foreign-Trade Zone manufacturing authority, which enables each company to save more than $1 million each year primarily through the elimination of a tariff.
More importantly, nearly 1,000 jobs could be saved by the move.
The state's furniture industry has lost about 1,500 jobs this year alone.
"We're on the eve of a new year and this is much-welcome news for the furniture industry," said David Rumbarger, president and CEO of the Community Development Foundation, which helped push for FTZ status five years ago.
"This helps level the playing field," he said.
"The cost savings also extend beyond the elimination of the tariff," Rumbarger added. "There's also a big reduction in administrative costs, too. So we're talking about a lot of money."
The three companies were among more than 40 that were asked to participate in the application process that cost each company between $150,000-$200,000. The state helped pay for half the costs.
The FTZ manufacturing authority designation allows the companies to import micro-suede upholstery material in rolled form for free. Without the status, the companies had to pay a duty ranging from 7.2 percent to 17.2 percent.
Most furniture companies import pre-fabricated cut-and-sew kits made overseas that are shipped in duty-free. It's less costly than keeping cut-and-sew operations in-house.
Now, each company will save at least $1 million each year, helping to keep about 950 cut-and-sew workers employed.
"It was the right thing to do," said Al Wiygul, president of Bauhaus USA, which is located in Saltillo. "It was the right thing for the country, the right thing for the furniture industry, the right thing for north Mississippi, but most of all it was the right thing for the furniture employees whose jobs will come back to north Mississippi because of this.
"I firmly believe this will happen, and I plan to make sure it happens at Bauhaus."
Wiygul received applause from the several hundred Lane, Bauhaus and H.M. Richards employees who came to the announcement at Lane's Belden plant.
A good investment
The FTZ status is limited to micro-denier suede upholstery fabric since it is the fabric used most by the companies.
Wiygul estimated up to 50 percent of the covers used by Bauhaus are of the type, while Joey Tarrant, vice president of operations for H.M. Richards, said up to 65 percent of its fabric was micro-denier suede.
"Based on our volume, we're talking a savings of between $1 million to $1.5 million a year," Tarrant said.
H.M. Richards also has about 200 cut-and-sew employees at its Baldwyn facility, and having the FTZ designation is important for its future.
"We made the decision to keep as much of our cut-and-sew operations here," Tarrant said, "even though it was a cost disadvantage and a competitive disadvantage. But among the reasons why we did that was the quality of the workmanship, inventory control and our dedicated work force of cutters and sewers. Because of that, it was really a no-brainer to participate in this."
At a time when demand is slumping and furniture companies are having to cut back, every little move that cuts costs is critical.
For Lane President Skipper Holliman, the FTZ manufacturing authority designation is "a big deal for us."
The process began in 2003 when Lee County and Tupelo applied for initial Foreign Trade Zone status. The three companies filed their applications in June 2007 and had to go through a rigorous vetting process before getting approval last week.
"For it to take this long was tough," Holliman said. "There was a distinct possibility that it wasn't going to go through and we would have lost that money. But the three of us stood together. Others stood on the sidelines. But the investment was a good one, and it will help us keep jobs in Mississippi and hopefully create more jobs."
Rumbarger also said the companies will receive additional benefits.
Other furniture companies can also apply for the designation, and likely will not have to go through as long of a process as Lane, Bauhaus and H.M. Richards since they established a benchmark, Rumbarger said.
And he added that other companies who want to apply also are eligible to receive state help with the fee.
There are multiple reasons why more companies didn't participate in the application process.
"I think cost was one factor, because $100,000 is a lot of money, especially for the smaller operations," Rumbarger said. "Plus, the process is very lengthy and meticulous, and a lot of companies don't have the time or personnel to do it."
But Rumbarger said he hopes that the three companies have served as pioneers, paving the way for other companies -- and industries -- to follow their lead.
"It's very signficant that this is the first time the federal government has ever removed a tariff from an imported fabric," he said. "We've made history."
To see more of the Northeast Mississippi Daily Journal or to subscribe to the newspaper, go to http://www.djournal.com.
Copyright (c) 2009, Northeast Mississippi Daily Journal, Tupelo, Miss.
Distributed by McClatchy-Tribune Information Services.
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