LG's bid to expand washer tariffs to belt-drive models snubbed by US ITC in mid-year review

15 August 2019 10:19am

12 August 2019, by Kat Lucero

LG's effort to have the US impose tariffs on belt-drive washers isn't getting much sympathy from the US International Trade Commission.

Even in a political climate favoring scrutiny of imports from China and Mexico — two major producers of the washers — the ITC refrained from including LG’s tariff recommendation in the agency's 161-page mid-year report sent last week to the White House and Congress.

The US enacted so-called 'safeguard' tariffs on large residential washer imports in February 2018 — but didn't include belt-drive washers imported by GE and others. The safeguard tariffs, under Section 201 of the Trade Act of 1974, involved a three-year exemption from additional tariffs for the first 1.2 million large residential washers imported.

Imports above that quota were hit with an additional tariff rate of 50 percent in the first year, decreasing by 5 percent each subsequent year.

Korea's LG and Samsung were hard-hit by the tariffs, which were enacted at the request of Whirlpool, which argued that Samsung and LG had circumvented country-specific antidumping duties by moving factories to other countries not subject to the duties.

LG contends that belt-drive washers from China and Mexico are undercutting the safeguard measure, and should also be assessed the safeguard tariffs. Those imports are similar in design to the front-load models made by Whirlpool, Samsung and LG in the US — and therefore compete with the domestic industry.

The ITC report, which was written to inform administration decisions on the safeguard tariffs going forward, makes no recommendations on belt-drive washers, but its general tone undercuts LG's recommendation that the scope of the safeguard tariffs be extended to belt-drive washers.

Instead of adopting LG's recommendation, the ITC discussed new US manufacturing operations that followed the tariffs, including multi-million dollar LG operations in Tennessee and a multi-million dollar Samsung factory in South Carolina. The safeguard tariffs have led to a decline in imports, generally increased prices, increased employment and resulted in financial improvements for existing US-based producers, the ITC said.

“The report confirms that the safeguard is working,” Whirlpool said in a statement.

Major producers of belt-drive machines include Electrolux — a Swedish company with operations in Mexico — and a former unit of GE that was purchased by Chinese manufacturer Haier in 2016.

“The decision to exclude certain belt-drive washers [from the tariffs] has allowed imports from China and Mexico to undercut the effectiveness of the trade restraints,” Charles Anderson of Capital Trade said on June 25, representing LG at the review hearing that preceded the mid-year report.

Imports of Chinese belt-drive washers have skyrocketed since the US imposed the safeguard, while Mexican imports have remained at “commercially significant levels,” Anderson said. And now that Haier owns the GE unit, the Chinese manufacturer can use its “newly-acquired US distribution network to maximize sales of their Chinese non-scope imports,” Anderson said.

Whirlpool agreed with LG at the hearing that the belt-drive imports compete with the front-load models and should have been included in the scope of the safeguard tariffs.

GE, however, protested. “To call it circumvention, as LG does, is way beyond the pale,” John Magnus, attorney for Haier US Appliance Solutions, said.

Whirlpool has argued that the ITC has no mandate to recommend a change in scope, absent a specific request from the president, under Section 204 of the Trade Act of 1974. LG has argued that the ITC has discretion to make such a recommendation.

The ITC itself hasn't directly weighed in on the matter, but its mid-year report seems to reflect Whirlpool's wishes, rather than LG's objections.