Final ruling fails to surprise
By Dai Yan (China Daily)
Updated: 2004-04-20 10:01

Although it was expected, the final ruling by the US Department of Commerce on anti-dumping charges related to Chinese colour TV sets still disappointed Chinese TV manufacturers.

"We have prepared for such a decision as we know one in our favour is almost impossible given the current climate in the United States. But it is still very hard to accept the unfair ruling," said Liu Haizhong, spokesman for Changhong, a major domestic TV maker.

With the US presidential election looming, President Bush has been on the defensive because of the loss of some 1.8 million manufacturing jobs since he took office, and Chinese products, analysts say, are easy to blame.

But all the TV makers said they will spare no efforts in obtaining a fair result eventually and will not withdraw from the US market.

Although these final rates have decreased sharply from the department's preliminary dumping margins, the Chinese industry said that is because the preliminary margins were calculated based on inacurate inforamtion.

The department calculated the preliminary dumping rate on the figures provided by a website, which are groundless and unauthoritative.

Fu Donghui, a lawyer from the AllBright Law Office, who co-operated with US law firm Willkie Farr & Gallagher, successfully negotiated the duty rate on Xiamen Overseas Chinese Electronic Co (Xoceco), a major TV maker, from 31.7 per cent to 4.35 per cent by highlighting many faults in the department's calculation.

"A ridiculous example is that the department calculated transportation costs from Xoceco to the shipping port using air freight costs while the two are just 2 kilometres apart," Fu said.

These kinds of miscalculations are not uncommon in the department's anti-dumping cases.

Most of the troubles result from a Chinese concession for entering the World Trade Organization (WTO), which allows other countries to treat China as a non-market economy for 15 years after its entry.

By defining China as a non-market economy, the department uses the cost of production in a surrogate country, where material and labour costs are much higher than in China, to calculate the normal value of Chinese exports.

This time, the United States chose India as the surrogate country despite the fact that China's TV industry is highly competitive.

In fact, Changhong, Konka, TCL, Xoceco, Haier, Philips, and Skyworth have asked the department to recognize the Chinese TV industry as a market-oriented industry (MOI).

But the departmetn has refused the request, saying the Chinese TV industry, which may be the TV manufacturing industry experiencing the most fierce competition in the world, failed to meet its MOI test.

The department MOI test requires the following: There should be virtually no government involvement in production or pricing; the industry should have private or collective ownership that behaves in a manner consistent with market considerations; and producers should pay market-determined prices for all major inputs, and for all but an insignificant proportion of minor inputs.

The department said the data provided by the respondents strongly suggest that the Chinese TV industry does not satisfy the second prong of the MOI test.

Fu said no Chinese industry, even with a high degree of private ownership, has been regarded as a MOI by the department.

Now domestic TV makers are placing their hope on a fair decision by the US International Trade Commission (ITC), though they know their chances of a favourable decision may be slim.

The duties will not be finalized until the US commission rules on whether the US television industry has been hurt by the imports. Its final decision is expected on May 27.

Xoceco, which already receives the lowest duties, is one of the companies pinning its hopes on the commission.

Li Yong, general manager of the Xoceco's Overseas Trading Co, is not satisfied, even getting the lowest dumping rate in the ruling, because he says the way is unfair.

"Though the rate will not have a large impact on our business, we will continue to seek a final ruling we deserve," Li said.

"What we hoped for was that the figure would be zero, since actually the US market is very profitable for us."

The United States' two largest television retailers also urged the commission to kill anti-dumping duties on Chinese-made colour TVs.

Kevin O'Connor, vice-president in charge of home entertainment products for Wal-Mart, said Chinese televisions serve a low-end segment of the US market that domestic producers are not interested in supplying.

"We believe that these TVs do not compete with domestically produced colour televisions and have not had any adverse effect on the domestic colour TV producers," O'Connor told the commission.

He said Wal-Mart purchased a large volume of Chinese TVs in 2003 primarily for its "Thanksgiving Blitz" a one-day promotion where it offered low-end TVs at rock-bottom prices to bring customers into its stores at the start of the holiday season.

Bill Cody, vice-president of Best Buy Co, the second-largest television retailer after Wal-Mart, said his company stocks Chinese-made TVs year-round under the brand name Apex.

The Chinese sets do not steal sales from domestic producers, who are "focusing on higher-tech, value-added products that are the future of the TV industry and not the bottom end of the market," Cody said.

Some TV makers are looking ahead and say they will file a court case with the US Court of International Trade if the commission fails to give what they consider a fair ruling.

Since there have been precedents of positive outcomes for Chinese manufacturers in other sectors, TV makers are still hopeful.

Nine apple juice from concentrate makers from China won a case against the department for its anti-dumping ruling in February.

The US Court of International Trade ruled that the tariff rate for four of the nine companies will be zero, and those for another five companies will be less than 4 per cent.

In the original department ruling, these makers had to pay anti-dumping duties as high as 51.74 per cent.

In fact, the move to slap tariffs on Chinese TVs could end up hitting US consumer wallets while lending a hand to Japan's Sony and Toshiba, whose establishments in the US are now the main producers of TV, which pushed US brands such as Zenith and RCA into obscurity.

Labour unions at Sanyo Manufacturing in Arkansas, Sharp Electronics in Tennessee and Toshiba America in New Jersey all Japanese firms played a role in the case against Chinese TV makers.

Their moves led to a wide-spread suspicion among the China industry that Japanese companies were behind the case led by Five Rivers Electronic Innovations, two labour unions, the International Brotherhood of Electrical Workers (IBEW) and the International Union of Electrical, Electronic, Furniture and Salaried Workers (IUE-CWA).

Five Rivers is an electronics assembly factory but has no TV brands.

Whatever the outcome of the cases against Chinese TV makers, Li from Xoceco said they will honour existing contracts with American customers and will also further expand into the US market because of its great potential.

Han Facai, an official from Konka's Brand Management Centre, said Konka has achieved export increases of 235 per cent year-on-year and 198 per cent year-on-year in January and February this year, despite the anti-dumping investigation.

"We will continue with plans to increase market share in the US," Han said.

Yu Haitao, the director of Hisense's Information Department, said Hisense has adjusted its company strategy in response to the anti-dumping charges.

"First, we have gradually switched from colour TVs to LCD (liquid crystal display), PDP (plasma display panel), and Digital TV products to avoid the margins. Second, we will further our co-operation with overseas enterprises, such as our strategic co-operation with US Digital Television Channel to export digital TVs to the US market." Yu said.

He estimates that Hisense will ship a total of 400,000 digital TVs under this strategic co-operation, of which 11,500 units have already been delivered in the first quarter and another 10,000 units will be shipped this month.

"Third, Hisense will establish manufacturing facilities overseas, such as within North American Free Trade Agreement (NAFTA) members as well as in Europe and Iran" Yu said.

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