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Daewoo Told to Pay 71 Per cent US Duty on Washing Machines

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Source: Bloomberg

The US Commerce Department told Daewoo Electronics Corp to pay a 71 per cent import duty on large, residential washing machines made in South Korea, after the company did not respond to a probe of government subsidies.

The agency announced a preliminary finding Wednesday after Whirlpool Corp of Benton Harbor, Michigan, said in a December 30 complaint that Seoul-based Daewoo, LG Electronics Inc and Samsung Electronics Co of Suwon, South Korea, sell washers in the US for less than production costs.

The finding comes after Daewoo in March said it was ‘on track” to diversify distribution channels by supplying Wal-Mart Stores Inc as it targeted doubling North America home appliance sales to US$150 million this year. Samsung was ordered to pay a 1.2 per cent duty, and LG Electronics 0.22 per cent on the washing machines imported to the US from South Korea, according to the agency. All other companies would pay 1.2 per cent.

Daewoo will discuss the matter with its US unit and decide how to respond before the final finding is announced, Gwon Dae Hoon, a spokesman for the company, said Thursday by phone.

The higher duty set for Daewoo reflects the company’s refusal to respond to an investigation of South Korean subsidies for the makers, which sell about US$569 million worth of the machines a year in the US, the agency said.

“I don’t think it’s going to be a big issue for Samsung and LG as the duties don’t seem to be high, and the portion of North America washing machine sales out of their total sales is small,” Kang Yoon Hum, a Seoul-based analyst at NH Investment & Securities Co said.

Samsung is “confident that once the full investigation is concluded, the US Department of Commerce will confirm that Samsung is in compliance,” the company said by e-mail.

“Samsung respects the trade rules in the US market.”

LG will fully cooperate until the final decision is made, the company said in an e-mailed response to a Bloomberg News query.

Samsung fell 2.6 per cent to KRW1.194 million in Seoul trading at 12:47 pm local time, while LG Electronics dropped 3.6 per cent. The benchmark Kospi index retreated 1.4 per cent. Daewoo was delisted from the Korean stock exchange in 2002.

Whirlpool is pleased “given the proven record that South Korean appliance producers have benefitted from their government’s subsidies that violate trade law,” Kristine Vernier, a spokeswoman, said in a statement.

Whirlpool closed up 30 cents to US$63.13 in New York Stock Exchange trading, and touched US$65.45 after the announcement.

The agency’s decision sets countervailing duties, which are imposed to offset government subsidies. The Commerce Department has not issued results of its investigation into Whirlpool’s anti-dumping complaint against imports from Korea and Mexico. That decision is scheduled next month, according to a statement.

The Commerce Department and the US International Trade Commission, an independent agency, are scheduled to make their final determinations on the trade disputes later this year.