The home furnishings industry faces significant challenges rooted in the global trade landscape. As American retailers and importers honor stringent tariff requirements and compliance standards, some foreign competitors exploit loopholes, leaving responsible businesses at a disadvantage. This evolving problem centers on tariff evasion, fraudulent import practices, and inconsistent enforcement, all of which threaten the integrity of the market and the viability of domestic retailers.
Peter Theran, HFA CEO, spoke with Keith Koenig, Chairman of CITY HOME, Steve Fodor, Founder and CEO of Customs Services & Solutions, Chris Andresen, Senior Vice President of Dutko Government Relations, and HFA’s lobbyist to understand these challenges and what the future holds for furniture retailers.
The Growing Problem of Tariff Evasion
At the core of the issue lies the gap between compliance and exploitation. While responsible businesses operate as importers of record—disclosing accurate product values and classifications and paying appropriate tariffs—a subset of foreign importers and manufacturers manipulate declarations and exploit regulatory loopholes.
The problem became apparent with the introduction of more aggressive tariff policies. When the United States raised tariffs on imported goods, especially from China, data show that overall container volumes from China dropped by an average of 40%. In the home furnishings sector, however, the decline coincided with a rise in suspiciously low-priced products dominating online marketplaces like Amazon. The pricing of these goods could not be explained by standard cost differences alone, prompting deeper scrutiny from industry insiders.
Understating Product Value
A prevalent method of circumvention is undervaluing product invoices. In a typical supply chain, a retailer might import an office chair for $18–$20 wholesale. With a 50% tariff, adding that cost would make it impossible for retailers to offer the chair at retail prices of $38.95 or $38.99, which is the cost observed for some brands selling thousands of units each month on marketplaces like Amazon. The only way to achieve such retail pricing is by declaring the value at unreasonably low levels—sometimes as low as $2—resulting in a negligible tariff payment and a dramatic, though fraudulent, cost advantage.
Misclassification of Goods
A second technique used to evade tariffs and duties is misclassifying goods. For example, some importers misstate the product code to avoid anti-dumping duties, a serious issue for articles such as sleeper mattresses or wood bedroom furniture from China. These goods bear significant additional duties—sometimes nearing 200%—but by incorrectly labeling them under alternate categories, unscrupulous importers avoid these crucial payments.
Ignoring Product Safety Standards
A third danger is the import and sale of products that do not meet established safety standards, such as those outlined in the STURDY Act, which governs anti-tip-over requirements for furniture. Many goods sold online that are imported through these fraudulent methods fail to comply with these standards, posing real safety hazards for consumers.
How the Scheme Operates
Central to these schemes is the “non-resident importer” status, a legal designation that allows foreign entities to operate as importers to the U.S. market without being physically present. Factories, particularly in China, ship goods to their U.S.-based distribution operations, setting artificially low declared values. Because the same company controls both ends of the transaction—the foreign manufacturer and the U.S. distributor—it books the “sale” to itself at a nominal price, books the margin on the eventual U.S. sale, and, in the process, drastically reduces its tariff responsibilities.
This vertically integrated approach gives these foreign-owned importers a substantial edge. While a U.S. retailer pays all applicable duties and complies with safety standards—and bears liability for non-compliant products—these importers can undercut on price, bypass essential safety rules, and offload potential risks. At the same time, platforms like Amazon take their fees but accept little to no responsibility.
The Impact on the U.S. Market
The repercussions are immediate and severe for American retailers. Responsible businesses find themselves unable to match online competitors’ prices, not because of greater efficiency or innovation, but due to unscrupulous behavior that the current system inadequately addresses. This dynamic siphons sales volume away from local retailers to online platforms and overseas-controlled sellers, who grow market share at the expense of compliance and consumer safety.
Jobs are also at stake. Many consumers buying inexpensive, non-compliant furniture online might otherwise shop at local stores. Each sale diverted through fraudulent import practices represents a loss in jobs, wages, and tax revenues for communities across the United States.
Customs Enforcement: Where Vulnerabilities Persist
The customs entry process, while robust in its digital documentation, is fundamentally a “garbage in, garbage out” system. Customs brokers rely on information provided by the importer or supplier, including invoices, tariff classifications, and origins. Without overt red flags, there is little basis to question declared values or product codes—brokers are not typically in a position to know the actual product costs or intended classifications. Those importers of record are also very hesitant to share pricing information outside of their companies. Only in extreme cases, where declared values are obviously fraudulent (such as a $2 chair known to cost $18 wholesale), do brokers halt proceedings and investigate.
The sophistication and volume of global trade complicates efforts to police these practices. Customs authorities, while alert to the signs of fraud—such as the sharp drop in average container values—must process a massive flow of shipments, making granular enforcement difficult.
Policy Efforts: Closing Loopholes and Strengthening Oversight
Recognizing the severity of the problem, U.S. Customs and Border Protection (CBP) and policymakers are taking steps to bolster enforcement and close loopholes. Executive orders have been issued to target illegal practices by foreign-based importers, including undervaluation and misclassification. New regulations, along with enhanced data inspection and increased accountability for marketplace operators, are expected in the upcoming months.
However, as enforcement tightens, those engaged in fraudulent practices continuously seek new ways to exploit evolving regulations. For instance, offers from foreign distributors to deliver “duty paid” imports at implausibly low rates have ensnared unsuspecting U.S. retailers, only for CBP to detect later the undervaluation and subject these retailers to scrutiny, penalties, and additional duties.
The Role of Legal Practices: Tariff Engineering and First Sale
Not all strategies to reduce tariff burdens are fraudulent. There are legitimate legal tools available, such as tariff engineering and the “first sale” doctrine.
Tariff Engineering
Tariff engineering involves legally modifying products or their sourcing to fit lower tariff categories. For example, changing the fiber blend in a textile product might halve the duty rate. In furniture, disassembling certain components for separate import or altering the materials used can qualify goods for lower tariffs. Importers should consult customs brokers and international trade attorneys for guidance on these highly technical matters, as crossing the line into misrepresentation carries risks of penalties.
First Sale Doctrine
The first sale principle allows importers to base the declared customs value on the price paid in the first sale to a middleman (excluding certain fees), rather than the price paid by the final buyer in the U.S. While this can legitimately reduce tariff liability by about 10–15%, it has been part of U.S. statute long before recent tariff surges. It is a lawful, established practice and does not fall under the umbrella of abuse currently under scrutiny.
Building Awareness and Driving Policy Change
Industry education and advocacy remain crucial. Lawmakers, for the most part, are only beginning to grasp the nuances and harm of these unfair import practices. Policy responses are in development, with some legislators working to reform the non-resident importer system and enhance scrutiny of marketplace operators. Still, progress takes time—as shown by the years-long overhaul of de minimis exemption policies.
Home Furnishings Association will continue to collect evidence, educate policymakers, and press for reforms that protect local jobs, ensure consumer safety, and create a level competitive field.
What Can Retailers and Importers Do?
Retailers must stay informed and vigilant. Key recommended actions include:
- Monitoring new regulations and industry guidance—The regulatory landscape is shifting quickly, and staying informed is essential.
- Reviewing supply chain documentation in detail—Ensure that invoices, bills of lading, and tariff classifications are accurate and supportable.
Vet suppliers and avoid offers that seem “too good to be true”—Beware of arrangements where the distributor promises delivery, duty paid, at below-market rates.
Communicate with policymakers
In the coming weeks, HFA will send talking points to guide your conversations with legislators. Be sure to pair those with your own stories: share concrete examples of how current rules affect your business and customers to build support for the reforms needed.
Conclusion
Fair competition is fundamental to the health of the home furnishings industry. As global supply chains grow ever more complex, loopholes and inconsistent enforcement create real risks not only to U.S. retailers but also to consumer safety and the overall economy. With regulatory reforms in process, American businesses must remain alert, proactive, and coordinated to ensure that the intent of tariff policies—to support domestic enterprise and uphold standards—is realized.
A level playing field is achievable, but only through continued vigilance, education, and a shared commitment to integrity across the industry.
