Proposed LCD Panel Tariffs Forced Element to Curtail SC TV Assembly, It Tells USTR
The Trump administration’s July 10 proposal to impose 10 percent Trade Act Section 301 tariffs on Chinese imports of LCD panels and motherboards (see 1807110034) “has already resulted in reduced workforce and production” at the Winnsboro, South Carolina, plant where Element Electronics assembles LCD TVs, the company told the Office of the U.S. Trade Representative in comments filed and posted Friday in docket USTR-2018-0026. At "peak," Winnsboro numbered more than 325 workers, but "today, with the threat of a 10 percent duty, employment has been reduced to 136 workers and is quickly declining," said David Baer, Element's general counsel.
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"Simply the announcement” of the proposed 10 percent tariffs on LCD panels “triggered the need” for immediate factory cutbacks because of the likely impact the duties would have on the supply chain, said Baer. “When Element places an order for LCD panels or motherboards from China, the delivery time is between 90 and 120 days,” he said. “So, a panel ordered on July 10th, the date on which the Administration announced this list of products that could be subject to a 10 percent duty, would not arrive in the US and clear customs until mid-October or later.”
Imposition of a 10 percent duty on LCD panels “would result in each and every TV produced using those parts being sold at a material loss,” said Baer. Therefore, on July 10, “Element was forced to redirect its supply chain to assemble TVs in China to avert a catastrophic problem in October or November,” he said. The South Carolina facility continues to operate using available inventory and inventory already in the supply chain, he said. “However, without an immediate and comprehensive solution, employment levels will continue to decline as production at the facility drops.” Element’s long-term solution will be to import finished TVs from China and Mexico, he said.
Unless the 9013.80.90 and 8529.90.13 subheadings in the Harmonized Tariff Schedule are “immediately excluded from consideration,” Winnsboro will close “and imports will be the sole source of LCD TVs in the US,” said Baer. In testimony at the USTR’s May 15, Baer argued for keeping finished TVs from China on the tariffs list and keeping Chinese-sourced LCD panels off it (see 1805150069), he said. He also argued there against what he called the unfairness of U.S. tariff policy that lets companies like Best Buy and TCL import finished TVs from China at lower rates of duty than Element pays to source Chinese LCD panels.
In his comments Friday, Baer spared few punches in again blasting the trade policies that he said endanger the Winnsboro plant's survival. "No company can successfully compete when they face a 15 percent cost disadvantage to all of their competition," said Baer, computing the sum of the duties it would need to pay on Chinese-sourced panels if the proposed tariffs go through, compared with the finished TVs that are imported to the U.S. duty-free under the North American Free Trade Agreement. "It is particularly galling that this entire cost disadvantage is due to a tariff policy imposed upon Element and its workers by the US government," he said.
“Finished TVs have subsequently been excluded from the list of products subject or proposed to be subject to duties under the 301 while LCD panels and motherboards have been added,” said Baer. “This switch represents the final straw for Element’s US TV production.” On July 10, when the USTR’s office released its latest tariffs list with two classifications of LCD panels included, “the US government effectively shut down the sole remaining US producer of LCD televisions and put hundreds of people in Winnsboro, South Carolina out of work,” said Baer.
The components Element needs to assemble LCD TVs in Winnsboro “are essentially only available from China, most importantly LCD panels and motherboards used to produce the TVs,” said Baer. “There is no viable alternative source of supply." Though Foxconn has announced the construction of an LCD display fab in Wisconsin, "public statements make clear that LCD panels will not be available from that facility for at least five years,” said Baer. Display Supply Chain Consultants analysts peg Foxconn's Wisconsin fab's startup at closer to three years. Nearer-term, they say, Foxconn plans to assemble LCD TVs in Wisconsin from panels sourced from China, but would need to find alternative panel sources if the 10 percent tariiffs on Chinese panels go through.
Friday is the deadline for requesting to appear at the public hearings on the proposed 10 percent tariffs planned for Aug. 20-23, though Baer didn’t say in his comments whether Element plans to testify, and he didn’t respond to emails Friday. Written comments on the proposed tariffs are due Aug. 17, and Aug. 30 is the deadline for filing post-hearing rebuttal comments, said the USTR’s July 10 notice.