Kickbacks in Living Color

The flood of Japanese TV sets on the U.S. market has long been a sore point with American TV manufacturers and labor unions. By one estimate, 70,000 jobs have been lost to Japanese imports, which last year accounted for 2.9 million sets, or 38% of the domestic market. In May, the Carter Administration worked out a deal with Japanese makers to limit imports. But now the picture is darkening again; U.S. Government investigators are probing charges that Japanese manufacturers have been making illegal kickbacks to U.S. importers as a way of getting around federal "antidumping" regulations, and selling color TV sets in the U.S. at bargain-basement prices. Government sources told TIME that one executive of a U.S. importing company has admitted that his firm has received millions of dollars in such kickbacks. John Nevin, chairman of Zenith, the U.S. company whose complaint touched off the investigation about a year ago, calls the kickback probe "the largest customs fraud investigation I know of."

Illegal Rebates. The kickbacks supposedly work this way: if a Japanese manufacturer sells a TV set in the U.S. for a price lower than it charges for the same set in Japan, that constitutes "dumping" under international trade rules and subjects the manufacturer to a penalty tariff. So the Japanese manufacturer quotes the U.S. importer an official price equal to the Japanese price, then makes under-the-table payments --in effect, illegal rebates--that allow the U.S. company to offer the set at prices that undercut U.S.-made TVs by $100 or more. Sometimes the payments are disguised as rebates or "credits" for advertising or shipping.

Zenith Chairman Nevin claims that the practice has been going on for years and that several big Japanese makers are involved. As to the number of U.S. kickback recipients, Nevin says: "I don't believe any large American buyer did not have the opportunity to get involved." A senior official at the U.S. embassy in Tokyo told TIME last week that 86 U.S. importers--presumably distributors and retailers, including some well-known chain stores--are under investigation. Worried embassy officials concede that they are convinced a major scandal is about to break.

At this point, two separate investigations are under way. One is by the U.S. Customs Service, the Treasury and the Department of Justice. They are looking into allegations of false invoicing by Japanese makers to avoid paying dumping duties. This is the probe that has turned up the kickback charges. The second investigation is by the U.S. International Trade Commission. Its lawyers are checking the possibility of unfair trade practices by the Japanese (a noncriminal charge), and they have talked to officials of Hitachi, Sanyo, Sharp, Toshiba and Mitsubishi.

Investigators also suspect, though they cannot yet prove, that the Japanese may have pressured the Nixon White House--or sought its favor--into backing off from any firm action against dumping. The Japanese TV industry was found guilty of dumping by U.S. authorities in 1971, but no dumping penalties were ever assessed. In 1973 the Japanese did raise official prices of TV sets sold in the U.S. Right after that, the kickbacks supposedly began.

If the kickback allegations are ultimately proved to be true, Japanese manufacturers doubtless will face fines and perhaps even stiffer penalties at the hands of the Carter Administration, which, while in a flexible negotiating mood, seems determined to enforce the rules of trade. The elimination of any kickbacks would help preserve the U.S. TV manufacturing industry, but consumers would eventually pick up the tab in the form of higher prices for sets made in Japan.

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