Sony's China Sourcing of Big-Screen TVs Squares With Import Data: DSCC

Sony didn’t respond to questions about the nature of the large-screen TVs it’s importing from China under the Harmonized Tariff Schedule’s 8528.72.64.60 subheading for sets with screen sizes exceeding 45 inches, one of the more standout disclosures in Sony’s Section 301 complaint Wednesday at the U.S. Court of International Trade (see 2103180054). The TVs have List 4A tariff exposure, and Sony joined the roughly 3,500 other complaints inundating the court for a finding that the List 3 and 4A tariffs are unlawful and for an order refunding the duties paid.

Sony hired sole practitioner David Newman of Nyack, New York, to handle the case rather than a big multinational law firm because Newman was a longtime member of the Sony Electronics law department in nearby Park Ridge, New Jersey, he emailed us Friday. Newman worked "in conjunction with a large D.C. firm with respect to two other cases" in the Section 301 litigation, he said. As for whether he will file additional Section 301 complaints for other clients on his own, "there isn’t another case yet in the pipeline," he said.

There's a certain irony to Sony jumping in with a Section 301 complaint now. Its filing comes under the watch of Mike Fasulo, who within days will retire as Sony Electronics president-chief operating officer. Fasulo chaired the CTA executive board in 2018 when th association hired Akin Gump to draft a complaint blocking the Section 301 tariffs as unlawful under the 1974 Trade Act and 1946 Administrative Procedure Act. CTA shopped the complaint around to other trade associations for political and monetary support, but ultimately never took the Trump administration to court. Akin Gump dusted off the complaint and filed it in September on behalf on HMTX Industrries and Jasco Products. It became the template for the massive number of complaints to follow.

As for Sony's rationale for sourcing big-screen TVs from China when most of the premium-TV supply chain has moved to Mexico is open to speculation, said Display Supply Chain Consultants President Bob O’Brien. “When the pandemic hit, the initial reaction of everyone in the supply chain was to pull back,” he emailed Thursday. “Then in April of last year, people started to realize that TV sales were surging and consumers were using their subsidy and tax return checks for TVs. The supply chain got cut short.”

The industry experienced “a big surge” of TV imports from China in Q2 last year, despite the List 4A tariffs in place, “because the supply chain through China is much faster than the supply chain through Mexico,” said O’Brien. “So I speculate that Sony had Foxconn make TVs in China and ship them direct during this time to get them to market quickly. I do not know for sure, but that explanation is consistent with the import data.”

Looking back at the share of TVs in the 8528.72.64.60 category originating from China, “it peaked at 41% in Q4 2018 and then declined during 2019 and was only 16% in Q1 2020,” said O’Brien. China’s share then jumped to 34% in Q2 2020 before retreating in the second half to 18% in Q4 2020, he said.

China generated 19.8% of HTS 8528.72.64.60 imports to the U.S. in 2020, down from 28.5% in 2019, said Census Bureau figures accessed through the International Trade Commission’ DataWeb tool. Mexico generated 74.5% of TV imports in January with the largest screens, to China’s 17.4%, said DataWeb (see 2103090027).