Multinational businesses and local government officials joined together Jan. 3 to caution the Trump administration against imposing significant safeguards on large residential washer imports as Samsung and LG embark upon new U.S. production plants, but domestic industry representatives claimed those arguments attempted to relitigate an October governmental determination of import injury.
During an interagency Trade Policy Staff Committee (TPSC) meeting in Washington Jan. 3, representatives of local governments, multinational washer producers Samsung and LG, and retail giant Sears, were among the parties making a case against a three-year tariff-rate quota (TRQ) recommended by the International Trade Commission (ITC) to President Donald Trump in November.
The ITC made the recommendation after finding in October that large residential washer imports are hurting domestic producers.
The ITC unanimously recommended a TRQ for large residential washers imported above an annual threshold of 1.2 million units subject to a 50 percent duty rate in year one, a 45 percent duty in year two, and 40 percent in year three. But the four commissioners were split on whether in-quota washer imports should also be subject to duties.
In Section 201 cases, the president can impose trade restrictions if the ITC determines that imports of a subject product, regardless of origin, are injuring U.S. industry.
Separate Recommendation. The TPSC will soon send a separate recommendation on potential remedies to Trump, and the administration is expected to announce its final decision in February regarding what, if any, import restrictions it will impose on large residential washer imports.
The Section 201 cases on imports of large residential washers and solar cells and modules – which saw the ITC provide safeguard recommendations to Trump in November – are the only such safeguard cases since a 2001 case on steel. These three cases are the only 201 reviews the commission has ever conducted, according the ITC website.
As such, precedent in this case is “fairly limited” in terms of determining the degree to which any TPSC remedy recommendation would align with ITC safeguard guidance, Center for Strategic and International Studies School Chair in International Business Bill Reinsch said in an email.
But TPSC advice can be “very different” from ITC recommendations, depending on the “relative strength” of the Office of the U.S. Trade Representative (USTR), which leads the TPSC, the perceived priorities of the president, and current domestic politics and geopolitics, said Tom Sneeringer, president of the Committee to Support U.S. Trade Laws.
Section 201 reviews start with applications of case facts to statutory criteria, much like antidumping and countervailing duty cases, but have a “political element” at the end, including presidential discretion to impose whatever trade remedies he sees fit after an ITC affirmative injury determination, Sneeringer said in an email.
The interagency review process for Section 201 and other non-antidumping and countervailing (AD/CV) duty cases, such as Section 232 “national security” import investigations, has yielded the death and/or dilution of strong ITC remedy recommendations in the past, as the policy objective of fair trade “bumps up” against other national objectives involving economics, foreign relations, national security, etc., Sneeringer said.
“In an AD/CVD case, the agencies cannot weigh the consequences of sticking a finger in China’s eye vs asking for their help with North Korea, for example, but when a 201 gets to the president, he can,” Sneeringer said. “The agencies that care about that are heavily represented on the TPSC and USTR has the job of trying to come up with a consensus.”
The TPSC is a “formalization” of a regular interagency process that reviews ITC recommendations and forwards them to the president, usually along with an interagency recommendation of consensus, “or differing views if that’s the way it came out,” Reinsch said.
The TPSC is the “lowest rung” on the interagency trade ladder, beneath the Trade Policy Review Group on the assistant secretary level, two stages below a deputies committee, and three stages below the cabinet.
“Not every decision goes through every stage, however,” Reinsch said.
Community Economic Considerations. During the TPSC hearing, Rep. Ralph Norman, R-S.C., urged the Trump administration to resist the ITC recommendations at a time when Samsung is working to establish a manufacturing plant in Newberry, S.C. The company expects to begin production at the new facility in early 2018.
Large residential washer imports will fall after the facility starts operations, Norman said. Washer imports into the U.S. have recently increased amid the 201 investigation, as companies have rushed product into the country to get ahead of any remedial decision made by Trump, according to a Jan. 3 Wall Street Journal report.
In addition to Samsung’s South Carolina facility, LG anticipates opening a Clarksville, Tenn. washer production plant in early 2019.
Complementing several Samsung and LG executives and lawyers, Tennessee Department of Economic and Community Development Commissioner Bob Rolfe, Montgomery County, Tenn. Mayor Jim Durrett, and Clarksville Mayor Kim McMillan cautioned against implementation of the ITC’s recommended TRQ.
“Fierce competition” between Samsung, LG, and other U.S.-located washer companies will increase efficiency of future Clarksville employees, and help washer production to transition to a more domestically dominant operation, Durrett said. A TRQ could impede that competition, Durrett suggested.
“A safeguard case like this is not about unfair trade,” he said. “Rather, this case is just about volume of imports. Looking to the near future, most large residential washers sold in the U.S. will be made in Tennessee, South Carolina, Ohio, and Kentucky, not any countries outside the United States. The state and federal governments should embrace that opportunity as exactly the kind of healthy domestic manufacturing we want, just as our community has agreed.”
Section 201 doesn’t require the finding of an unfair trade practice like antidumping and countervailing laws, but the requirement for proving domestic industry injury to the ITC is considered more difficult than other types of trade cases, according to the commission.
Push For Remedy. Parties arguing to the TPSC in support of the ITC’s TRQ recommendation included representatives of Whirlpool, the original petitioner in the case, as well as other U.S. companies and trade consultants.
Representing the petitioners, Cassidy Levy Kent attorney Jack Levy said the defendants were trying to relitigate the previous ITC proceedings through their arguments. The question is not whether to impose remedies, Levy said. The question is, rather, what remedies to assess, given that the ITC has found that large residential washer imports are harming U.S. industry.
The statutory purpose of Section 201 investigations is to remove injury to domestic industry and restore competitive conditions, and remedies should be commensurate with the injury found by the ITC, he said. Large residential washer prices are “anything but healthy” right now, as recent AD investigations have found several foreign washers to have been illegally dumped, Levy added.
Levy also reiterated that Samsung and LG representatives during the hearing voiced a commitment to follow through with construction of the South Carolina and Tennessee production facilities regardless of the outcome of the safeguard review.
“So let’s take them at face value,” he said. “I would ask you to be very discerning and to discriminate between the interests of Samsung and LG as foreign producers and importers, on the one hand, and their interests as future domestic producers,” on the other hand.
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