On August 29, 2013, an antidumping case involving South Korea began at the World Trade Organization over U.S. tariffs imposed on imported washing machines. South Korea exports around U.S.$800 million–1 billion worth of washing machines to the United States per year. The machines are made in Mexico and South Korea. South Korea was notified by the WTO for consultations with the United States on anti-dumping and countervailing measures on South Korean "residential washers" by the US Department of Commerce. The case was brought by Whirlpool Corporation, one of the world's biggest appliance makers.
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Whirlpool produces large residential washers in the United States under the Whirlpool, Maytag, Roper, Estate, Admiral, Amana, and Crosley brands.
The antidumping investigation came in response to a petition filed in December 2011 by Whirlpool Corporation, claiming washing machines imported from South Korea and Mexico were being sold at prices below fair market value. Whirlpool filed several complaints against imports from South Korea and Mexico.
History of Chaebols
South Korean companies are known as chaebols, multinational corporations owning numerous international firms. These conglomerates play a role in South Korean politics. During the 1960s, Park Chung-hee's government initiated a series of five-year plans under which the chaebols were required to fulfill a series of objectives. These plans were initiated to promote growth and development within South Korea. Chung-hee's goal was to increase industrialization by promoting large businesses through the First Five Year Economic Plan. The chaebols' growth was directly related to foreign loans and special favors, as well as access to newer technology. Tremendous growth began in the early 1960s with the expansion of South Korean exports and continued to expand into export markets in the 1980s, when the chaebols became financially independent.
Daewoo
Daewoo was established in 1967 by Kim Woo-jung. The company didn't become a major asset until Park's second five-year plan. Daewoo benefited from cheap loans given by the South Korean government. The company concentrated on labor-intensive clothing and textile industries that boosted profit margins due to South Korea's inexpensive workforce. In 1998, Daewoo ran into financial trouble because of the 1997 Asian financial crisis. The crisis forced many of the chaebols to cut back, but Daewoo added 14 new firms in the same year the group lost 550 billion won, when sales were about 62 trillion won. While many of the chaebols cut back due to the crisis, Daewoo took a larger portion of the debt. By 1999, Daewoo went bankrupt with debts exceeding 80 trillion won. The company dismantled in 1999 yet some divisions that were a part of Daewoo survive today as independent companies, including Daewoo Electronics, which produces washing machines.
LG
LG (Lucky-Goldstar) Corporation, currently headquartered in the LG Twin Towers building in Yeouido-dong, in the Yeongdeungpo-gu district of Seoul, was established as Lak-Hui Chemical Industrial Corp in 1947 and became the first South Korean company to enter the plastic industry. It also established Goldstar Co, whose focus was electronics. The two companies merged to form Lucky Goldstar. The corporation is known for manufacturing many home appliances such as radios and TV's. LG Electronics has expanded into new products such as mobile devices and digital TVs.
Samsung
Samsung was founded by Lee Byung-chul in 1938 as a trading company. The company expanded into areas such as food processing, textiles, insurance, securities and retail. It entered the electronics industry in the 1960s and shipbuilding in the 70's. Samsung became to expand as an international corporation in the 1990s. By 1992, it became the largest producer of memory chips. After the financial crisis, Samsung was relatively unharmed, only suffering significant loss after selling Samsung Motor to Renault.
Dispute and results
The U.S International Trade Commission ruled 6-0 in favor of Whirlpool, finding that the U.S washing machine industry was threatened by imports of residential washers from South Korea. Also, the commission stated South Korean producers, Daewoo, LG, and Samsung were dumping washing machines far below their market value. Investigation into the matter led to the finding that LG and Samsung's market sales in the United States were found significantly different and the differences were not taken into account using the average-to-average method. A countervailing duty of over 72 percent was set for Daewoo, while the two other South Korean companies were given much smaller duties of below two percent. LG Electronics Inc. faced a dumping margin of 13.02, while Samsung Electronics Co. Ltd. received a 9.29 percent dumping duty rate. Both LG and Samsung have since challenged Commerce's findings in the U.S. Court of International Trade, using the argument that the ITC improperly used the zeroing method to calculate dumping margins.
Consultations between South Korea and the United States were requested concerning the anti-dumping and countervailing issues on August 29, 2013. LG and Samsung objected to the analysis, Whirlpool's dumping allegations in the preliminary determination of the case, the Nails test, and also the use of weighting-average net prices in conducting the targeted dumping analysis. LG and Samsung also objected to the gap test used to detect the weighted-average sales in a target and non-target group. The WTO said South Korea has taken issue with the U.S. Department of Commerce's use of zeroing, a controversial method for calculating anti-dumping duties that has been the subject of other WTO cases against the U.S. Zeroing is a way of calculating anti-dumping duties that does not provide offsets for instances of "negative dumping" — that is, when an imported product is sold in the U.S. at prices equal to or higher than in its home country — in determining a dumping margin.
South Korea claims that the measures identified in its request for consultations are inconsistent with:
In September 2013, China and Japan requested to join the consultations. In December 2013 South Korea requested the creation of a panel – this was deferred by the Dispute Settlement Body until January 22, 2014, when a panel that consisted of Brazil, Canada, China, the European Union, India, Japan, Norway, Thailand, and Turkey was formed.
On 10 June 2014, South Korea requested the Director-General to compose the panel. He composed the panel on 20 June 2014.
On 15 December 2014, the Chair of the panel informed the Dispute Settlement Body (DSB) that the beginning of the panel's work was delayed due to a lack of available experienced lawyers in the Secretariat. The panel expects to issue its final report to the parties by the end of 2015.