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Sanyo can’t sell its Chinese-built cameras to Uncle Sam

Because Japan-based Sanyo Electric Co. has decided to cut its costs by manufacturing many of its security cameras in a new factory in China, it will no longer be allowed to sell those cameras to the U.S. federal government.

"We’ve more or less said we are not a viable entity in the government marketplace," said Frank Abrams, vice president and general manager of Sanyo’s security products division.

The Trade Agreement Act of 1979 prohibits the General Services Administration (GSA) or other federal government departments and agencies from buying products built in countries other than the United States and a group of specially designated "favored" nations. China is not included among that group of eligible countries.

As a result, said Abrams, Sanyo cannot sell its federal government customers such innovative products as its latest "pan-focus camera" or its "high definition security camera," both of which he described as unique in the world.

"This is bad for the U.S. Government," said Abrams, "because it will have no access to pan-focus technology."

Sanyo opened its camera plant, which is located near Shanghai, on April 1, said Abrams. The company’s GSA Schedule contract for cameras, which was administered out of GSA’s Philadelphia, PA, office, expired last September, said Abrams, and Sanyo has decided not to try to renew it. "We can’t be listed on a GSA Schedule," he declared.

Sanyo chose to relocate its camera manufacturing capability from Japan to China in order to lower its production costs, Abrams explained, while recognizing that it would have to give up its current business with the U.S. Government, which he estimated at less than $5 million annually.

The ability of Sanyo -- or other companies that are manufacturing their security equipment exclusively in China -- to sell their products to Uncle Sam may be eliminated, but many of these companies are more focused on commercial customers as well as governments located outside the U.S.

For example, China Security & Surveillance Technology, Inc., (CSST), which claims it is the largest vertically integrated security company based in China, is almost entirely concentrated on China’s own burgeoning domestic market.

"We have only 10 percent of our business outside China," explained Terence Yap, vice chairman and CFO of CSST. Yap conjectured that Sanyo, like many other high-tech suppliers, may have shifted their attention to the expanding Chinese marketplace.

The Trade Agreement Act makes it illegal for a company to falsely declare that a product it sells to the U.S. Government is eligible for purchase, when in fact it is not.

Joel Hesch, an attorney and law professor at Liberty University in Lynchburg, VA, says he is currently representing a "whistleblower" who is an executive with a U.S. company that believes one of its corporate competitors is fraudulently misrepresenting the country of origin of the high-tech products it is selling to the U.S. Government. Hesch said the products allegedly are being manufactured in China, but he declined to provide specifics of this case.

Hesch believes that the Trade Agreement Act is basically a good idea because it helps levels the competitive playing field, while still allowing a U.S. company to seek an exception to some of the law’s more restrictive provisions.

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