Hot Duel over Dumping

Charges of kickbacks and cover-ups in Japanese TV imports

"The Executive Branch has neither the will nor the means to enforce the antidumping laws."

-Zenith Chairman John Nevin

America's TV manufacturers have long been bitter about the flood of Japanese television sets into the U.S. For nearly ten years, they have insisted that these imports, which last year totaled 2.8 million sets and captured 40% of the market, have been illegally "dumped," sold at cheap prices way below those charged in Japan. But the last three Administrations have been strangely deaf to the industry's plaints. Investigations into the charges have been halted, and dumping duties that should have been collected have not been. Now, at the prodding of Congress, the Carter Administration's attitude is changing. Meanwhile, evidence is emerging of lax enforcement of the trade rules and possible malfeasance by past and present Administration officials.

Last week the Treasury Department made a long delayed move to collect some back dumping tariffs. It ordered 38 importers to pay more than $40 million in duties on color TV sets that were brought in to the country between six and eight years ago. The department was clearly acting under pressure. Ohio Democrat Charles Vanik, who heads a House subcommittee on trade, has called for hearings on the dumping issue. At the same time, federal grand juries in New York City, Norfolk, Va., and Los Angeles, as well as a Justice Department task force in Chicago, are hearing federal allegations that several large retailers, notably Sears, Montgomery Ward and J.C. Penney, have accepted illegal Japanese kickbacks.

These payments were supposedly designed to disguise the true extent of the dumping, which, according to U.S. Customs officials, was most intense during and after the mid-1970s recession. The kickbacks allegedly worked this way: manufacturers quoted a high official wholesale price but then made illicit payments to their U.S. importers that enabled them to undercut the retail price of American-made TVs by as much as $100. Customs officials and Government lawyers say that virtually all Japanese manufacturers except Sony are implicated.

The potential penalties are high. The U.S. importers -such as the large retailers and the U.S. subsidiaries of Matsushita, Sharp, Sanyo and Toshiba -could be required to pay dumping duties totaling $500 million owed on $2 billion worth of sets imported since 1971. In addition, the U.S.owned retailers could face civil fraud penalties totaling $1 billion and criminal fines of $5,000 for each shipment of TVs brought in under a false import declaration. But the prospect is for a less painful out-of-court settlement. Says one Treasury lawyer: "Nobody wants to see the Government take over Sears."

Criminal investigations are being aimed only at U.S. companies, apparently because their records are more accessible and reliable than data from Japanese-owned import firms in the U.S. Yet the Treasury is moving to collect the dumping penalties from importers of all nationalities. These tariffs were first imposed in March 1971, but in April 1972, after only $1 million was collected, the assessments were discontinued. No official reason was ever given, and subsequent attempts to collect the fines and even investigate TV dumping were blocked by the Treasury.

In 1976 the U.S. International Trade Commission started to look into complaints of dumping, Customs fraud and antitrust violations in imported TVs, but its effort collapsed when the Treasury refused to give investigators access to files. William Simon, then the Treasury Secretary, wrote the commission insisting that the investigation was not necessary because "dumping duties are being and will continue to be assessed."

Two years later, the Treasury again moved to block an antidumping action. Customs agents were preparing "Project Omega," an attempt to collect $400 million in back duties. But as Thomas Delaney, the top Customs attorney, told TIME Correspondent Jonathan Beaty, before the tariffs could even be claimed: "Treasury pulled the plug. Out of the blue, they disbanded us. When I protested, they told me I would be fired if I continued to protest." Delaney, who spent 13 years working on antidumping matters, was moved to a new job: processing Freedom of Information Act applications.

Treasury officials admit to bureaucratic inertia in collecting penalties, but they trace the failure to assess any since 1972 to a lack of manpower and the refusal of the Japanese TV makers to turn over reliable data. A number of Congressmen and leaders of the U.S. TV manufacturing industry figure that successive Administrations have been unwilling to confront the Japanese on the issue during the long multilateral trade negotiations that are now nearing completion in Geneva. Industry critics also note that some high-level Government officials involved in dumping decisions are now working for Washington law firms representing the Japanese manufacturers.

In addition, there is growing evidence that the Carter Administration may have made a secret deal in 1977 to scrub investigations and drop pending dumping penalties in exchange for a Japanese "voluntary" limit on TV exports. The Japanese cite a May 1977 letter signed by Robert Strauss, Carter's special trade envoy, and sent to Japan's government. The letter promises to curb investigations but Strauss denies he ever made a deal to drop dumping duties. "That's a lie," he told TIME'S Beaty last week. "I could not have made this promise. I didn't know what I was talking about then. I had only been on the job for 60 days."

Ohio's Vanik has vowed to use his power as head of the trade subcommittee to get the dumping laws enforced. He threatens to prevent easy approval of the multilateral trade pact being negotiated by Strauss in Geneva unless TV makers and other U.S. industries hurt by unfair Japanese competition are properly protected. His public hearings on the TV imports, which begin early next month and will include an appearance by Strauss, are sure to be lively. --

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