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How Much Damage Will Samsung and LG Suffer from US ITC’s Judgment
Korean Washing Machines
How Much Damage Will Samsung and LG Suffer from US ITC’s Judgment
  • By Michael Herh
  • October 9, 2017, 04:45
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Samsung Electronics and LG Electronics are expected to emphasize that if the safeguard is sparked off, consumers will have limited choice and that product prices will rise.
Samsung Electronics and LG Electronics are expected to emphasize that if the safeguard is sparked off, consumers will have limited choice and that product prices will rise.

 

There is growing interest in how much damage will be done to Samsung Electronics and LG Electronics by the US International Trade Commission (ITC)'s judgment that Korean washing machines were causing damage to the US washing machine industry.

First, the ITC ruling will not prompt a safeguard and Donald Trump will decide the final measure at the beginning of next year after a public hearing among others.

According to the electronics industry on October 6, the ITC’s decision will lead to a public hearing on relief steps and ITC votes to determine the level and method of concrete relief measures on October 19. In December, the ITC will recommend a specific trade relief measure to President Trump and President Trump will make the final decision within 60 days.

It is expected that President Trump will make the final decision between January and February of next year. Remedial measures are made when a country judges that its domestic industry is suffering serious damage. The measures are expected to be new and increased tariffs and the restriction of imports and the allocation of tariff rate quotas (TRQs) among other things. The level of tariff hikes and the extent of import restriction must be substantiated to calculate actual damage.

It is estimated that Samsung Electronics and LG Electronics sell more than two million units (about one billion US dollars) of washing machines annually in the US market. Samsung Electronics manufactures and exports most of its washing machines in Thailand and Vietnam, while LG Electronics exports 80% in Southeast Asia and the remaining 20% ​​in Changwon Factory in Korea.

As the ITC decided to exclude Korean washing machines from safeguard measures, most of Samsung Electronics’s exports and all of LG Electronics exports from Southeast Asia will be subject to the safeguard. However, both Samsung Electronics and LG Electronics are in the process of constructing their own factories in the US, so even if safeguard measures are triggered, they will be able to absorb much of impacts from the safeguard.

In particular, the home appliance factory that Samsung Electronics is building in South Carolina is expected to start operating in January of next year. LG Electronics plans to produce a large portion of its US exports by operating a home appliance factory in Tennessee in the first half of 2019.

However, even if their US factories go into operation, it will take some time until their production stabilizes, and volume being currently produced in Thailand and Vietnam will be inevitably negatively affected as such volume needs pruning or has to find new export markets. There is also concern that the safeguard measure will hurt Samsung Electronics’ and LG Electronics' distribution networks in the US.

The two companies intend to do everything that they can do to respond to the ITC hearing that will be held on October 19. The ITC is scheduled to hold the public hearing ahead of next month's report on remedial measures. Samsung, LG and Korean government officials have decided to explain their positions. Samsung and LG are expected to emphasize that if the safeguard is sparked off, consumers will have limited choice and that product prices will rise. "A bigger problem is that in the future, similar issues may be raised at any time not only about washing machines but about other items," an electronics industry official said. The official meant that other products, such as refrigerators and TVs, may fall victim in addition to washing machines.