IMPORT DUTIES ON TVs FROM CHINA MEET WITH RETAIL OPPOSITION

Despite the rise in imports from China, the domestic CRT industry has managed to post an increase in operating income by value to $128.7 million, from $119.1 million during the same period, ITC Comr. Steve Koplan said during a final hearing into a complaint filed last May by Five Rivers Electronic Manufacturing and union representing workers at Toshiba and Sanyo factories. The complaint is asking the ITC impose duties on CRT-based TVs imported from China, which are being blamed for a slump in the U.S. market that has resulted in factory closures and layoffs.

The increase in operating income was largely a result of tube makers shifting production to increasingly larger sizes as Chinese manufacturer rose to dominate sizes up to 27”, industry officials testified. For example, Toshiba recently halted production of 27” at its Lebanon, Tenn., factory to focus on 32” and up, said Troy Johnson, an official at the International Brotherhood of Electrical Workers (IBEW) that represents workers at the plant.

The fear, industry officials testified, is that Chinese manufacturers will continue to push into larger sizes. Indeed, Apex already has 32”. “There’s been a modest increase in profit, but it’s not enough to sustain an industry,” said Patrick McGrath, managing dir. at Georgetown Economic Services. With tube makers nearing the “technical limit” in producing 40” CRTs, “the U.S. industry is running out places to hide.”

The testimony Thurs. followed the ITC’s decision to drop the investigation into CRTs imported from Malaysia -- largely by Funai -- after Commerce found the amount involved to have little impact on the U.S. market. Commerce late last year assigned a 0.4% dumping duty on those CRTs. Commerce also has softened the proposed duties on TVs imported from China to a range of 4.35- 24.38%, down from the 40-70% proposed late last year.

The duties on sets from Sichuan Changhong, Xiamen Overseas and Shenzhen Konka and TCL were proposed to be set at 24.38%, 4.35%, 11.36% and 22.36%, respectively. The ITC is expected to vote on whether the imports from China have “injured” the U.S. industry in May.

Despite Commerce’s decision to lower the proposed duties, a Chinese govt. spokesman maintained that “these hefty anti-dumping duties measures are unjust treatment of Chinese enterprises.” TCL, which is in the process of acquiring Thomson’s TV assets, argued that its prices in the U.S. were “reasonable” and based on “consolidated costs.”

The entrance of Chinese brands in the U.S. market has posed “little competition” for higher profile brands and entry-level models “haven’t affected the prices in the high end tiers,” said William Cody, vp for TVs and home entertainment products at Best Buy. “Opening price point products enlarge the market and don’t affect well-known brands sold in other tiers.” Best Buy sources its sets from a range of suppliers. This year, it replaced Apex in the entry-level 27” and 32” screen sizes with Funai and Orion’s Sansui brands that are imported from Malaysia and Thailand, respectively, Cody said.

U.S. CRT-based TV assemblers said they've suffered “massive reductions” in sales as result of the imports from China. The imports also have resulted in factory closing and workforce reductions, CRT manufacturing executives testified. At Five Rivers Electronic Innovations, which assembles TVs at a factory in Greenville, Tenn., the number of assembly lines has been cut to 3 and 550 workers, from 9 lines and 2,000 employees in 2001, CEO Thomas Hopson testified. While the Five Rivers plant is willing to make the transition to assembling LCD, plasma and DLP- based TVs, it’s faced with a financial crunch because of the imports, he said, Hopson said. Five Rivers is on “the “brink of bankruptcy” and could close by year-end unless duties are imposed, Hopson said. “We can compete with anybody on a fair- trade basis,” he said.

“Our jobs are now at stake not because of a more efficient workforce, but by dumped imports” from China, said A.J. Davis, vp of Local 1106 of the International Union of Electrical Workers representing employees at Sanyo’s Forrest City, Ark., plant that produces 20” and up sizes. During the past 2 years, Sanyo has cut the number of production lines to 2 from 6 and work force to 391 from 624, Davis said. While there have been hints that the Forrest City plant might start assembling HD-ready sets, no plans have been finalized, Davis said. Alan Price, an attorney representing the Chinese manufacturers, countered that the restructuring sweeping the TV tube market in the U.S. is the result of a shift toward new technologies.

Domestic manufacturers also took aim at Wal-Mart’s vaunted Black Fri. promotions that occur the day after Thanksgiving and are synonymous with industry-low prices. While Wal-Mart has described the sale as an annual event, the prices established on Black Fri. frequently serve as a low-end benchmark for the following year, said David Hartquist, attorney for the CRT manufacturers.

Wal-Mart Home Entertainment Div. Mdse. Mgr. Kevin O'Connor has testified that the chain has a separate buying staff for the Black Fri. sale and that there’s little overlap between brands that are imported from China and those produced in the U.S. O'Connor maintained that CRTs at the heart of the ITC investigation have little impact on Wal-Mart’s day-to-day operations. Wal-Mart conducts an open bidding process for the Black Fri. sale and chooses participating vendors based on a proven track record of production and an ability to offer a “family of electronic products,” O'Connor said. Wal-Mart sold low-end TVs from China for the Black Fri. for the first time last year, he said. Wal-Mart’s imports of China haven’t had an adverse impact on the domestic color TV market,” O'Connor said.

If duties are imposed on TVs imported from China, retailers and manufacturers will likely transfer production to countries not covered by the order including Malaysia, Mexico and Thailand, said James Ninesling, mktg. vp for mainstream TV at Philips. For example, Philips shifted production of a Magnavox 27” TV that was built by TCL in China 2003 to its LG.Philips Displays joint venture in Mexico this year. The LG.Philips Displays factory lacked the capacity for the 27” last year, but has since expanded production, he said.