Best Buy Purchasing and Best Buy Health “have been adversely affected” by the Section 301 List 3 tariffs on Chinese imports, argued the subsidiaries Monday in a complaint (in Pacer) at the U.S. Court of International Trade. It was among the roughly 3,300 suits filed at the CIT since Thursday to vacate the Lists 3 and 4A tariffs, including 700 on Monday, the last filing day for importers to qualify for refunds if the actions are successful. There was some debate Tuesday whether the Monday deadline could be open to interpretation.
The U.S. Court of International Trade should “set aside” the List 3 and 4A Section 301 tariffs on Chinese imports as “ultra vires” (“beyond the powers”) of the Office of the U.S. Trade Representative and order the duties refunded to U.S. importers, said tech companies Dana Innovations, Foster Electric, GN Audio, Scosche Industries and Sharp Electronics in five virtually identical complaints (in Pacer). They were among hundreds filed Thursday and Friday accusing USTR of overstepping Trade Act authority and violating the Administrative Procedure Act. The suits attempt to seize on a potential tariff refund opportunity, if floor-tiling plaintiffs prevail in their case (see 2009110041). The complaints are “timely,” said the dozens of them we studied, under CIT’s residual jurisdiction provision, coming before Monday’s two-year anniversary of USTR’s List 3 Federal Register notice. Though the HMTX case “may be a long-shot, you can never say never,” blogged trade expert Ted Murphy with Sidley Austin. “If you want to preserve your right to a refund, in case the flooring companies’ action is successful, you need to put a case on file at the CIT.” Scosche suffered “an actual, imminent injury that is fairly traceable to the implementation, administration, and enforcement of List 3 and/or List 4,” said the car audio supplier. The harms “can be redressed by a declaratory judgment and permanent injunction” ruling USTR’s actions unlawful under the Trade Act and “arbitrary and capricious” under the APA, said Scosche. Akin Gump filed the original suit for HMTX using as a template the complaint it drafted for CTA two years ago. Other lawyers modeled their actions after that. USTR didn't comment.
The Office of the U.S. Trade Representative notified Sonos it got extension through Dec. 31 of the exclusion from the List 4A Section 301 tariffs on speaker imports from China, said the company in a Thursday SEC filing. The exclusion extension eliminates the 7.5% tariffs until year-end. Sonos sources the speakers under the Harmonized Tariff Schedule's 8517.62.0090 subheading for a wide swath of Bluetooth goods, one of 87 categories granted USTR extensions Aug. 31 (see 2008310033). Sonos, whose exclusion was granted in March (see 2005110034), has begun the process of seeking refunds for the $30 million in tariffs paid through July, said Chief Financial Officer Brittany last month (see 2008060030). The company is continuing plans to diversify its supply chain into Malaysia, Bagley said on the August call. Sonos turned to Malaysia to reduce exposure to the tariffs on Chinese-sourced wireless mesh networking audio components. The company planned to have “significant” U.S.-bound production from Malaysia ramped up by Dec. 31, but due to COVID-19-related government restrictions on manufacturing in Malaysia, reaching scale will take until mid-2021, Bagley said.
The Office of the U.S. Trade Representative extended List 4 Section 301 tariff exclusions to Dec. 31 on 87 Harmonized Tariff Schedule categories of Chinese imports, including LCD TV main board assemblies (HTS 8529.90.1300) and modules (HTS 9013.80.9000) that Element Electronics sources to assemble finished sets in South Carolina for sale through Walmart and other big-box retailers (see 2006090056). The exclusions were to expire Tuesday. Also extended were exclusions on smartwatches, fitness trackers and Bluetooth tracking devices (HTS 8517.62.0090), plus wireless audio receivers for smart speakers (HTS 8518.22.0000). USTR will let expire more than half the 200 exclusions it granted.
U.S. and Chinese trade officials reemphasized their commitment to the phase one trade agreement (see 2001160022) during a Monday call, said the Office of the U.S. Trade Representative. Treasury Secretary Steven Mnuchin, USTR Robert Lighthizer and Vice Premier Liu He participated on the call, which was scheduled for earlier this month before President Donald Trump postponed it (see 2008190030). The call included a discussion on what China has done about intellectual property rights, forced technology transfer and the removal of “impediments to American companies” in the financial services and agricultural sectors, said USTR. The sides also discussed China’s “significant increases in purchases” of U.S. goods and more actions China needs to take to fulfill its phase one commitments. “Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,” said USTR. China’s Commerce Ministry called the call a “constructive dialogue," in an unofficial translation. “Both sides agreed to create conditions and atmosphere to continue to promote the implementation" of the phase one deal, it said.
More substance and detail are needed in guidelines the Interagency Labor Committee intends to follow for enforcing the U.S.-Mexico-Canada Agreement's free-trade labor rules, commented retail, manufacturing and business groups as posted Monday in docket USTR-2020-0028. The treaty took effect July 1, giving Mexican workers collective bargaining rights for the first time, plus protecting them against retaliation for joining unions or refusing to join.
The Office of the U.S. Trade Representative seeks comment by Aug. 20 whether to extend for another year new List 4A Section 301 tariff exclusions on Chinese imports that are set to expire Sept. 1. Each exclusion will be evaluated independently, said the agency Monday. The focus will be whether, despite the first imposition of the additional duties, the particular product remains available only from China.
A “key thing” about the Trade Act Section 301 tariff exclusions on Chinese goods that have been granted or extended is that most end Dec. 31, Nicole Bivens Collinson, Sandler Travis president-international trade and government relations, told a Sports & Fitness Industry Association webinar Thursday. If President Donald Trump is reelected, she believes his administration “will view that as a mandate” for eradicating tariff exclusions permanently. As an importer, “I would be looking at January as having tariffs in place without any exclusions,” she said. If U.S.-China relations further deteriorate, Collinson fears the 7.5% List 4A tariffs will increase to 25%, she said. “We also have a List 4B that has no tariffs on them right now. That could change as well." The Office of the U.S. Trade Representative didn’t comment.
The top Republican on the House Ways and Means Committee supports extending Trade Act Section 301 tariff exclusions on Chinese imports automatically instead of through burdensome notice and comment proceedings, he told reporters Wednesday. The Trump administration should alleviate “the energy and effort that businesses have to undertake to extend these exclusions right now when they frankly have bigger fish to fry,” said Rep. Kevin Brady, R-Texas. He said he expressed his views to U.S. Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross. Brady supports bipartisan legislation sponsored by fellow Ways and Means member Rep. Jackie Walorski, R-Ind., and House Agriculture Committee Chairman Collin Peterson, D-Minn., that would direct USTR to extend expiring exclusions for at least a year, but would give the agency some discretion when it disagrees (see 2007170050). U.S. businesses should be “focused on surviving” the COVID-19 pandemic and keeping people employed instead of scrambling to find non-Chinese sourcing or arguing for an exclusion extension, Brady said. USTR and Commerce didn’t comment Thursday.
The $38 million in Trade Act Section 301 tariff costs iRobot incurred in 2019 inflicted a hit of 3 percentage points on its gross margin for the year, said CEO Colin Angle. IRobot assumes the List 3 tariff exclusion that landed last month on the robotic vacuum cleaners it sources from China will expire at the end of 2020, he said. U.S. Trade Representative Robert Lighthizer “made it quite explicit” in congressional testimony last month that any granted List 3 exemptions “would expire at the end of the year,” said Angle Wednesday after quarterly results. The company’s “cash position” improved when it recently started receiving “cash payments associated with our tariff refunds” from the Trump administration, said Chief Financial Officer Julie Zeiler. “We anticipate receiving the $57 million in tariff-related refunds owed to us over the next 12 months.” IRobot is “continuing to push with all energy to drive the diversification of our manufacturing base,” said Angle. Delay in shifting production to Malaysia and bringing it to scale “has been one of the impacts of COVID-19,” he said. “There’s travel bans in place” that inhibit “sending people into Malaysia, which has created a delay,” he said. The company is trying to get that work “back on track,” he said. “We do believe that by the end of 2021, we’ll be in a situation where we are effectively geographically diversified and U.S.-China trade policy does not substantially affect our business anymore.” Europe is the region most reliant on brick-and-mortar, and stores were shuttered for much of the quarter, he said. Europe’s e-commerce infrastructure also is less “mature” and the system buckled under the weight of demand for essential products during the pandemic, he said. E-commerce revenue grew about 50% in Q2 from the year-ago quarter and was more than 70% of total quarterly revenue, said Angle. IRobot stock closed $79.35, down 7.49%.