Whirlpool to Ask U.S. for Broad Barriers on Washer Imports

By William Mauldin and Andrew Tangel Features Dow Jones Newswires

Whirlpool Corp. plans Wednesday to ask the U.S. government to impose broad barriers on imports of household washing machines, part of the company's efforts to fight what it calls unfair trade practices by South Korea-based rivals spanning half a dozen countries, company executives said late Tuesday.

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The case would go to President Donald Trump's desk if an independent commission agrees with Whirlpool's claims. Mr. Trump and his advisers have repeatedly vowed to dust off rarely used U.S. trade law to block foreign imports and bolster American manufacturers.

The Benton Harbor, Mich.-based Whirlpool has been fighting since at least 2011 what it and U.S. officials have called the dumping of washing machines made by Samsung Electronics Co. and LG Electronics Inc. in several countries. Samsung and LG have previously denied violating trade rules. An LG spokesman declined to comment, saying the company hadn't seen Whirlpool's request to the government. A Samsung spokeswoman didn't immediately respond to a request for comment.

Whirlpool is asking the U.S. International Trade Commission to weigh in on what it says is a doubling of imports of large residential washing machines and the potential injury the American industry is facing. If the commission -- an independent body that includes Democratic and Republican appointees -- finds an increase in washer imports that may be a substantial cause of serious injury, the Trump administration could respond this year by imposing broad tariffs or other measures on washer imports via a process known as "safeguard" or "Section 201" of trade law.

"We believe in free trade, but it doesn't work if people don't obey the rules and follow the laws," said Aaron Spira, chief legal officer for North America at Whirlpool Corp. "We have to look for other options that will solve the issue."

Whirlpool's long-term battle against Samsung and LG has already caught the attention of the Trump administration, which has warned of using rare presidential powers and U.S. legal provisions to punish trading partners, even at the risk of retaliation. The case could also provide a window into how far the administration will go in bigger cases involving steel, aluminum or other industries.

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At a gathering of economists earlier this year, Peter Navarro, head of the White House Office of Trade and Manufacturing Policy, said the washer fight shows "precisely the kind of trade cheating that must be stopped."

"This heartland of America icon is grappling with a practice called country hopping, in which two of its South Korean competitors, LG and Samsung, simply move their production to another country each time Whirlpool wins an anti-dumping case against them," said Mr. Navarro, one of Mr. Trump's most hawkish advisers on trade.

"Safeguard" actions such as Whirlpool's current case don't require the company to show dumping by foreign competitors, and they are much rarer than the run-of-the-mill trade cases that impose tariffs on dumped or subsidized goods from a particular country -- and often a particular producer.

Earlier this year, a solar-cell producer petitioned the U.S. commission for tariffs against imported solar cells. Former President George W. Bush imposed broad steel tariffs using a safeguard provision in a case that drew widespread criticism from the European Union and other major trading partners, highlighting the risks of such broad actions.

Whirlpool's expected request signals a tougher tack for the manufacturer in a yearslong battle with Samsung and LG as it has lost market share.

Whirlpool's brands accounted for 35% of U.S. washing-machine sales at the end of last year, down from 40% in 2012, according to TraQline data compiled by the research firm Stevenson Co. Samsung and LG's combined market share jumped to 35% from 22% four years ago.

To combat what it has charged is unfair competition, Whirlpool has sought and won rounds of tariffs from U.S. regulators in recent years.

But each time, Samsung and LG have been able to avoid the tariffs by moving production -- first from Mexico and South Korea to China. Faced with the most recent U.S. tariffs last year, Samsung and LG moved washer production to Vietnam and Thailand, rendering American trade actions moot.

Whirlpool estimates that U.S. imports from South Korea, China, Thailand, Mexico and Vietnam have doubled to about 3.2 million units in 2016, compared with 2012 levels.

Samsung and LG have denied they are underselling Whirlpool and insist they obey U.S. trade rules. They have said they are winning over American customers with greater reliability, better bells and whistles and sleeker designs.

"We don't have the same innovation they do," a Samsung attorney told U.S. trade regulators in December, referring to Whirlpool. "We don't have the same price strategy they do. We don't appeal in all the same segment of the markets."

The practice of "country hopping" to avoid duties has long occurred in other industries, such as steel and aluminum. U.S. companies allege that tariff-eligible metals from countries like China are shipped to Vietnam, where they are undergo final processing and are then imported into the U.S. duty free.

But the Whirlpool dispute is unique because involves foreign rivals that have shifted the entire production of complex consumer products -- not just commodities -- to other countries. Some experts predict trade disputes like these will increasingly become a challenge for Mr. Trump, who has vowed to protect American manufacturers and factory workers.

Samsung and LG are already planning their next move -- both plan to start producing in the U.S.

Write to William Mauldin at william.mauldin@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

May 31, 2017 00:15 ET (04:15 GMT)