The U.S. International Trade Commission (ITC) heard testimony from Whirlpool (NYSE:WHR) and its foreign competitors on Thursday, as the body considers remedies for perceived damages suffered by domestic producers due to unfair trade practices.
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On Oct. 5, the ITC voted unanimously in favor of Whirlpool, which brought a complaint forward accusing Samsung and LG Electronics, its South Korean competitors, of flooding U.S. markets with cheap washing machines and pricing out domestic manufacturers. While the ITC didn't say material harm was coming from South Korea in particular, Whirlpool alleged the country's manufacturers shifted production into other countries (Thailand and Vietnam) in order to avoid U.S. anti-dumping tariffs imposed in previous years.
“Samsung and LG have repeatedly demonstrated a commitment to spend hundreds of millions of dollars to avoid paying duties,” Whirlpool executives said Thursday. “It is therefore essential that the commission recommend a remedy that takes this past behavior into account and ensures that Samsung and LG cannot do another end run around U.S. trade measures.”
Whirlpool, along with GE appliances, has suggested the imposition of a 50% tariff on some imported washing machines, in addition to quotas for imported washer parts, as a resolution for the damage domestic producers have suffered.
However, U.S. economic development and job creation took center stage during the hearing as both Samsung and LG indicated punitive financial measures could put their pending U.S. factory plans in jeopardy.
“If this commission imposes import restrictions now, it could really cut us off at the knees, particularly the draconian tariff that Whirlpool is requesting,” Tony Fraley, plant manager for Samsung Electronics America’s South Carolina Home Appliance Facility, said in testimony before the ITC. “A tariff that cuts off Samsung’s imports will undermine our competitive position in the marketplace, and will have a negative impact on our ramp-up and transition strategy for South Carolina.”
In June, Samsung said it would open its first U.S. appliances plant in more than 30 years in South Carolina. That plant is expected to begin making parts by January and to employ 1,000 Americans by the end of 2018, Fraley said. With economic growth at risk, local lawmakers are also pushing back against Whirlpool’s complaint.
“This is purely a move to defeat competition,” Rep. Ralph Norman (R-S.C.) told FOX Business in a statement. “Government intervention would mean bad news for American workers and consumers. Samsung has already committed to being a domestic producer and harsh trade remedies will limit their abilities to expand operations in the U.S. and put Americans to work.”
Meanwhile, in August, LG Electronics announced plans to build a 1 million-square-foot manufacturing facility in Tennessee, scheduled for completion by the first quarter of 2019.
Rep. Marsha Blackburn (R-Tenn.) expressed concern in written testimony that government intervention in the washing machine industry could have damaging economic consequences in both her state and South Carolina.
“These facilities could, collectively, generate more than 1,600 new jobs and account for over $600 million in local economic development opportunities,” Blackburn wrote in a letter addressed to U.S. ITC chair Rhonda Schmidtlein on Oct. 3.
Whirlpool and GE Appliances on the other hand argue that “a robust remedy” will actually benefit investments at both companies’ U.S. plants because it encourages them to build all of their washing machines within the country.
The official ITC ruling will take place in November and then will be sent to President Donald Trump the following month, whereupon he will have two months to make a final decision.