Gov't Documents "difficult state of the industry" for Upholstery Fabrics

On March 4, 2008 the Consumer Product Safety Commission published (73 FR 11701) Standard for the Flammability of Residential Upholstered Furniture; Proposed Rule which included as part of the rule-making process a survey of Products and Industries Potentially Affected. According to CPSC (emphasis added):

• [i]n just the last few years the U.S. industry has been shaken by the decreased demand for domestically-produced fabric as a result of increased competition from imported upholstery fabric, the increased popularity of leather upholstery, and the dramatic increase in consumption of upholstered furniture imported from China.

• One of the largest marketers of upholstery fabrics in the U.S. reported that the trend to greater foreign competition and the entry of more converters of upholstery fabric (companies that purchase and resell fabrics) has resulted in greater fragmentation of the upholstery fabric industry in recent years, with lower barriers to entry, and an increase in competition based on price.

• In addition to declining sales for the leading U.S. upholstery fabric manufacturers, the difficult state of the industry is evidenced by recent bankruptcies of firms that were once industry leaders, such as Joan Fabrics (previously the number one upholstery manufacturer) and Quaker Fabric (previously the number three firm). Both of these firms ceased operations and their production facilities were liquidated in 2007.

• [I]t is likely that nearly all manufacturers of upholstery fabrics could be considered small businesses under SBA guidelines.

• The U.S. Census Bureau reported that U.S. upholstery fabric production in 2004 was 284 million square yards (which is the equivalent of 189 million linear yards).

• This production was 43 percent lower than 2002's reported production of 499 million square yards (332 million linear yards) of upholstery fabric.

• The number of looms in operation for the production of these fabrics totaled 2,610 at the end of 2004, down 20 percent from 3,098 looms at the end of 2002.

• Until recent years, relatively little upholstery fabric was imported. A report by Keyser Ciprus, Ltd., estimated that 8 million linear yards of residential upholstery fabric were imported in 1997. That accounted for approximately 2 percent of total consumption of upholstery fabric for residential furniture production in that year. However, as noted above, foreign upholstery fabric production facilities (located primarily in China) have expanded operations and imports of upholstery fabrics have grown substantially.

• Much of the foreign production is from facilities that are owned or operated in partnership with U.S. textile firms. For example, Culp, Inc., reported that almost 60 percent of their sales of upholstery fabrics in their fiscal year ended April 29, 2007, consisted of fabrics produced in plants outside the U.S., compared to 17 percent of sales just two years before. Culp owns and operates four upholstery plants in Shanghai, China, and markets other fabrics from third party sources which are also located in China. The firm only has one remaining upholstery fabric plant in the U.S., down from fourteen in 2000. Culp's experience in shifting production to foreign plants has also been reported by other U.S. upholstery fabric manufacturers. In January 2007 Richloom Fabrics Group shifted production of its Berkshire Weaving upholstery line from its South Carolina plant to a facility in Shanghai. Quaker Fabric Corporation also entered into business agreements in recent years with Asian firms to produce fabrics it designs.

• Quaker estimated that, industry-wide, about 42 percent of total domestic upholstery fabric sales (excluding automotive fabrics) were imported in 2004, versus only 11 percent in 2002. The company's management believed it was likely that the trend continued, and it estimated that about 60 percent of furniture upholstery fabric sales were imported by the end of 2006.

• Quaker Fabric, which had long been a major U.S. producer of upholstery fabric, could not successfully adjust its operations to meet the recent market shifts, and the firm liquidated its operations in 2007.

• At least until recent years, exports of upholstery fabric were significant for many U.S. manufacturers. In the late 1990s as much as 20 percent of the upholstery fabric production by U.S. manufacturers in recent years may have been exported. As noted above, more upholstery fabric is being imported from China and other foreign sources in more recent years, and some major U.S. fabric manufacturers have established production facilities in China, or have established business relationships with Chinese firms to produce fabrics to their specifications and designs. These market changes could be expected to reduce exports by domestic firms from previous levels.

• There is a growing practice, especially for leather, to purchase fully cut and sewn parts from areas outside of the United States including but not limited to: Argentina, Brazil, China, Italy, Thailand and Uruguay. This trend should continue given the lower labor costs in some of these areas and other existing economic conditions.

• La-Z-Boy reports that importing cut and sewn leather parts results in savings of 10 to 20 percent compared to domestic purchases and fabrication of these parts.

• Culp reports that it rapidly expanded its cut and sew operations in its Shanghai plants.