Anti-Dumping: A Topic Every Practitioner and Consultant Should Know About

Over the past few days on Spend Matters and Spend Matters affiliate blog, Metal Miner, we've gone into significant detail (and even a bit of humor) about one particular anti-dumping case which impacts the mattress and bedding industry. You can read these posts here:

No Sleep for the Weary: USITC Will Hear Leggett & Platt Anti-Dumping Petition
No Sleep for the Weary: USITC Will Hear Leggett & Platt Anti-Dumping Petition (Part 2)
Leggett and Platt -- Increasing Prices While Filing Anti-Dumping Complaints
"Anti-Dumping" Should be Called "Save the Fat Cats" at Everyone Else's Expense ...
Inner Spring "Anti-Dumping" Humor...

Why do I care so much about this topic? I believe that this single case is indicative of a much broader trend that all procurement and supply chain practitioner should be aware of. And that's the willingness of the US government to step in and prop up what essentially would be failing industries if it were not for artificial protections that they're willing to grant them. But these protections bring a higher tax on the rest of the market. Indeed, the victims of these interventions are everyone else who is forced to pay higher prices because they are denied the opportunity to go to global sources for items which US producers are no longer capable of producing competitively -- from both a quality and price standpoint.

In this one case, the so called "victim" is a supplier, Leggett & Platt, that I know about from firsthand experience in the metals innerspring sourcing world. I say this because a couple of years back, my wife's consulting firm, Aptium Global, was involved in a mattress innerspring global sourcing project (I even joined her on a trip to China as part of it). It turned out the new Chinese supplier, in the domestic buying organization's words, produced parts of a better quality than their incumbent suppliers (the folks who would later file the anti-dumping complaint). And they were able to purchase these springs at a double digit discount relative to what they paid L&P and others in the past.

But now that this company and others can no longer purchase globally sourced springs because importers have pulled out of the market and export producers selling direct are gun shy, Leggett and Platt and others have raised prices significantly. The irony of this is that in their court filing, L&P is claiming they were "wronged" by the market and those who dumped springs on the US.

While I can believe they were wronged -- by crappy global sourcing and supply chain management, not the market, but more on that in a minute -- I find it impossible to believe that three countries systematically sold goods under cost into the US market (as the anti-dumping complaint claims). That's ridiculous. In a growing country like China, for example, domestic demand for inner springs would negate any opportunity for a manufacturer to sell at a loss (not to mention the cost of energy and raw materials). Simply put, if there’s not profit involved, they’re not producing.

So what really happened here? Bad sourcing and bad management, that's what. On the part of L&P. In my view, the failure of companies like Leggett and Platt to create new, global options for their customers -- either from buying up or building capacity abroad -- represents a sourcing and business failure that their shareholders should be forced to pay for (not to mention the executives who should not be wasting time on Aberdeen's advisory board when they should be figuring out how to actually compete in the market, rather than crying to the courts). Instead of bringing in the "A" -- or even the "B" -- Spend Management team, Leggett and Platt hired a few lawyers and lobbyists, took out the tin cup and cried to a sympathetic "fair trade" Federal ear. And as a result, they're forcing all of their customers to pay higher prices because of their own inability to deploy effective global sourcing and Spend Management practices that keep them competitive with the world price for a given category.

As I mentioned at the beginning of this post, I believe this anti-dumping case matters for all companies engaged in any type of global sourcing activity. For if Leggett and Platt can play the part of the victim successfully -- convincing others that they're not incompetent from a global sourcing perspective themselves, but rather the victim of globalization itself -- then other companies will whine successfully to Uncle Sam too. And that will mean if you're sourcing globally today and domestic alternatives exist to what you're buying, you could very well find yourself losing your offshore options. In other words, think of the anti-dumping statutes as a type of discretionary reverse tariff that can be invoked at anytime.

- Jason Busch

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