The U.S. International Trade Commission (ITC) on Tuesday issued guidance for the imposition of a tariff-rate quota on imported washing machines, a remedy following the court’s ruling that Samsung, LG and other international manufacturers were hurting domestic washing machine makers through unfair trade practices.
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The ITC suggested a 50% tariff on imported washing machines, which would take effect if imports exceeded 1.2 million units in the first 3 years. While Whirlpool (NYSE:WHR), which brought the initial complaint against its South Korean rivals, Samsung and LG, earlier this year, recommended a 50% tariff on all washing machine imports, the ITC was conflicted over whether tariffs should be implemented if imports did not reach the 1.2 million threshold.
Meanwhile, seven lawmakers expressed concern in a letter to the ITC chair earlier this month that a 50% tariff could have a negative impact on “American jobs and American consumers.”
At the heart of the issue for lawmakers is Samsung’s soon-to-open $380 million manufacturing facility in South Carolina, which is expected to produce washing machines for the U.S. market. Lawmakers, with vested interests in the project, believe, and Samsung executives said during congressional testimony last month, that import restrictions could “undermine competition in the marketplace” and “have a negative impact on our ramp-up and transition strategy for South Carolina.”
The plant is expected to begin making parts by January and to employ 1,000 Americans by the end of 2018.
“The Samsung appliance manufacturing facility … is precisely the type of investment that we as policymakers should encourage with our trade policies,” Congressman James Clyburn (D-S.C.) wrote in a separate letter. “The factory is expected to open soon, and I understand several of my constituents have already been hired. Thus, Samsung is already a part of our community in South Carolina … it is important that the Commission protect these workers as well as other interests.”
Samsung said in a statement on Tuesday that "any tariff would raise prices, provide fewer product choices and impair job creation at our South Carolina factory."
Additionally, LG Electronics is set to open a new 1 million-square-foot manufacturing facility in Tennessee, which is expected to be completed by the first quarter of 2019.
While acknowledging that the ITC's recommendation is non-binding, Whirlpool applauded the decision, saying it would ultimately end up ensuring more jobs are created domestically.
"Whirlpool is encouraged by the ITC’s recommendation to impose a 50% tariff and remains optimistic that the administration will implement a full and appropriate remedy to ensure that Samsung and LG cannot circumvent any element of the order," the company said in a statement.
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.
The ITC’s recommendations will be sent to President Donald Trump, who will have two months to make a final decision.