NakiRadio wants an exclusion from the List 4A Section 301 tariffs for the “kosher Wi-Fi device” it imports from China, it posted Sunday in the Office of the U.S. Trade Representative public docket 2019-0017. The device streams only “pre-approved” Jewish content and is imported under the same 8517.62.00.90 subheading covering a broad swatch of other tech goods, including smart speakers, Bluetooth headphones, fitness trackers and smartwatches. The device has a 2.1-channel stereo speaker/subwoofer with a three-inch screen “used to navigate an electronic interface,” said the application. NakiRadio tried sourcing the product in the U.S., “but has been unable to find a manufacturer” capable of producing the firmware that “limits the accessible channels,” it said. Finding alternative sourcing would incur “punitive capital investment and serious disruption to its supply chain" because the product is of “a highly specific construction and functionality,” it said. “Kosher Wi-Fi devices with limited channels geared for the Orthodox community are not strategically important” to the Made in China 2025 industrial program, it said. NakiRadio pays 15 percent List 4A duties on the imports. The Trump administration announced plans Friday to roll back List 4A to 7.5 percent in the phase one trade deal with China (see 1912130042).
Tech hailed a “Phase One” U.S.-China trade deal averting 15 percent List 4B tariffs from taking effect Sunday and halving 15 percent List 4A duties in place since Sept. 1. Several expressed frustration 25 percent tariffs remain on the first three tranches worth $250 billion. There's anxiety a comprehensive Phase Two trade agreement may be months away. "We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election," tweeted President Donald Trump. "This is an amazing deal for all." Phase One is “an historic and enforceable agreement” that “requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer,” among others, said the Office of the U.S. Trade Representative. Formal “signing” of Phase One awaits “legal review, translations, authentication and other necessary procedures,” Vice Commerce Minister Wang Shouwen told a Beijing news conference Friday. The U.S. and China held in-depth discussions on boosting IP safeguards, said ministry officials. Phase One addresses the protection of trade secrets and combating pirated and counterfeit goods over e-commerce platforms, they said. It also features measures for enhancing IP enforcement, they said. It's “welcome news,” said CTA CEO Gary Shapiro. It addresses “critical tech priorities,” such as IP protections and forced technology transfer, he said. Postponing the List 4B tariffs on smartphones, laptops and tablets “may temporarily protect American consumers from price increases,” he said. The Information Technology Industry Council is “pleased” Phase One “begins to roll back harmful tariffs, increases IP and tech transfer protections for American companies, further opens China’s financial market, and stabilizes this critical trade relationship,” said CEO Jason Oxman. “We encourage both countries to use this positive momentum to finalize a broader agreement.” It's "needed relief for the semiconductor industry by reducing uncertainty, easing some harmful tariffs, and not adding more,” said Semiconductor Industry Association CEO John Neuffer. “We urge both sides to avoid further escalations that could undo this progress.” The U.S. and China should use Phase One as “a springboard to a more comprehensive deal that more effectively protects intellectual property,” he said. The Telecommunications Industry Association thinks Phase One is “a first step toward addressing systematic issues,” said CEO David Stehlin. "TIA hopes that faithful implementation of this Phase One agreement will build trust and encourage China to address the unfair trading practices that limit market access for global technology firms operating in China.”
Senate Republicans are eager to pass the U.S.-Mexico-Canada Agreement, despite reservations about including language shielding the tech industry from content liability. House Speaker Nancy Pelosi, D-Calif., announced an agreement with the White House on USMCA Tuesday (see 1912100012). Senate Majority Leader Mitch McConnell, R-Ky., said that chamber will consider the trade pact in 2020 (see 1912100015).
Tech and business groups hailed the pact announced Tuesday between House Democrats and U.S. Trade Representative Robert Lighthizer on legislative terms to ratify the U.S.-Mexico-Canada Agreement on free trade. There’s “no question” USMCA is “much better” than the North American Free Trade Agreement, said House Speaker Nancy Pelosi, D-Calif. “In terms of our work here, it is infinitely better than what was initially proposed by the administration.”
The Office of the U.S. Trade Representative rightly concludes in its Trade Act Section 301 investigative report Monday (see 191202006) that France’s digital services tax (DST), enacted in July, discriminates against U.S. companies, said tech and business trade associations. USTR seeks comment by Jan. 6 in docket USTR-2019-0009 at regulations.gov on its proposal to slap up to 100 percent retaliatory tariffs on 63 subheadings of French imports worth about $2.4 billion in 2018 customs value, mainly cheese, beauty products, handbags and kitchenware. The French government didn’t comment Tuesday.
U.S. importers sourcing smart speakers, Bluetooth devices, smartwatches and fitness trackers from China filed the most List 4A U.S. tariff exclusion requests of any consumer tech category since the Office of U.S. Trade Representative began accepting requests Oct. 31, the docket shows. The goods had the widest tariff exposure of any consumer tech product on List 4A, found our review of International Trade Commission data. Importers of such goods from China likely paid about $221 million in the duties in the first month after the 15 percent duties took effect Sept. 1. Of six exemptions sought, three were from Apple and one each from Bose, Fitbit and Tile.
The U.S. Trade Representative Monday evening listed 63 Harmonized Tariff Schedule subheadings that may face tariffs of up to 100 percent when imported from France. It's in retaliation for that country’s digital services tax.
The Office of the U.S. Trade Representative will issue its Section 301 investigation report and “any proposed action in the investigation” Monday on France’s digital service tax (DST), said the agency Wednesday. Tech firms and trade associations blasted the DST during the summer as a radical departure from international norm that discriminates against U.S. companies and undermines efforts to reach global, multilateral consensus on the digital economy (see 1908190043). France’s DST “invites other trading partners to similarly disregard their international commitments and move forward with their own proposed taxes,” said the Computer & Communications Industry Association Wednesday. “A timely, proportionate and impactful response is needed by the U.S. to send a message that our trading partners may not single out American enterprises for discriminatory treatment.”
Apple, Fitbit and SVS Sound were the first tech companies to seek product exclusions from the 15 percent fourth-tranche tariffs after the Office of the U.S. Trade Representative began accepting exemption requests Thursday. Apple filed 11 requests, and Specialty Technologies, which does business as SVS, filed two. There's one each for the finished speakers and subwoofers it sources from China. Many of Apple's exclusion requests were for parts, components and accessories. Some were for “final” products sourced as finished goods from China, including the Apple Watch, iMac desktop, HomePod smart speaker and AirPods wireless earbuds, said the docket. “Apple has not identified a source outside of China that is able to meet U.S. demand for this product in the coming year,” said each application. The product is “not strategically important” to Made in China 2025 “or other Chinese industrial programs,” said each application. The company didn’t comment Friday. Fitbit "began to adjust its operations" almost immediately after the Trump administration proposed tariffs on smartwatches and fitness trackers sourced from China, said the company. It "anticipates being able to make substantial additional changes to its supply chain in the foreseeable future." The company will shift production to "outside China" starting in January for “effectively all of its trackers and smartwatches” (see 1910090025). It announced Friday an agreement to be bought by Google for $2.1 billion (see separate report, this issue). The public has two weeks to comment, and requesters have seven days to respond. Importers can file through Jan. 31 at USTR’s online portal. The docket posted about 80 requests from various industries that were filed the first day. Any exclusions granted would be good for a year and would be retroactive to Sept. 1 when 4A tranche took effect.
IRobot U.S. sales declined 7 percent in Q3 because growth “remained subdued as the direct and indirect impacts” of the 25 percent List 3 U.S. tariffs on China “weighed heavily on consumers, retailers and suppliers,” said CEO Colin Angle on a Wednesday call. Tariffs forced iRobot to hike prices July 22 that resulted in “suboptimal sell-through” in August and September, he said. Sales recovered after the vendor "rolled back" pricing to “pre-tariff levels” in October, he said. The company regards these duties as “a short-term phenomenon that has temporarily stunted top-line growth and eroded profitability,” said Angle. “We plan to continue to limit our China exposure by moving production to Malaysia.” IRobot will have one Malaysian production line “operating at scale” for entry-level products by Jan. 1, said Angle. It will continue seeking “ways to move higher-complexity products outside of China, depending on what we’re seeing relative to the tariff situation,” he said. “Malaysia is playing a growing part of our strategy. We’re not holding our breath and waiting for tariffs to end or to be exempted.” The vendor filed for a tariff exclusion July 1 on the "retail-packaged robotic vacuum cleaners" it imports from China. It remains locked in a “Stage 2 -- Initial Substantive Review" hold at the Office of the U.S. Trade Representative. "With over 30,000 applications now awaiting review, it could take several more quarters before we learn whether our request for an exemption will be granted." USTR didn't comment. Shares closed at $49.06, down 9 percent.