TVs Would Bear Especially Heavy Burden in USTR's Proposed Chinese Tariff List

TVs imported from China could bear an especially heavy burden under the Office of the U.S. Trade Representative’s list of products targeted for 25 percent tariffs under the Trump administration's Section 301 investigation (see 1804040019). “This is a big impact on TV,” Bob O’Brien, president of Display Supply Chain Consultants, said in an interview. All products classified in Harmonized Tariff Schedule subheading 8528.72.64 would be prone to tariffs, “which is basically all TVs” imported from China, he said. He estimates 18.8 million TVs with a value of $3.9 billion were imported from China in 2017 under that classification. “This would have a huge impact on the TV supply chain.”

The subheading specifically mentions any color TV “reception apparatus” with a flat-panel screen, video display diagonal larger than 34.29 cm (13.5 inches), “incorporating a VCR or player,” O’Brien said. Though TV makers stopped building VCRs into their sets decades ago, CBP has ruled that if a TV under the 8528.72.64 subheading has a port for accepting something like a Google Chrome stick, “that constitutes a device that incorporates a video recording apparatus,” or video player, and currently qualifies for a lower import duty than sets that don't, he said. Virtually all TVs imported from China have those ports, he said.

Companies facing stiffer challenges would include Best Buy, which sources virtually all its private-label Insignia-brand TVs from China, O’Brien said. “Those companies would need to scramble to get some sort of production in a new place.” Best Buy hails the Trump administration’s “desire to ensure that our trade partners are using fair practices,” emailed spokesman Jeffrey Shelman. “We look forward to the opportunity to share our thoughts on the proposed list of products and on how to make sure these measures do not inadvertently hurt millions of American families, students, small businesses, and schools by causing them to pay substantially more for the consumer electronics they rely on every day.”

O’Brien’s sense is that there’s “a pretty wide range of preparedness” among TV makers if the proposed tariffs go through, he said. “Any company that hasn’t been thinking about this at all is just criminally negligent, because this has been out in the news and it was such an important part of Trump’s campaign,” he said. “If this is a total surprise to you, then you don’t belong in this business.” The “bigger” players in the TV business, “they’ve probably got several options on the table, and probably have a systematic approach to what they’re going to do if certain things happen,” including the possibility of expanding production in Mexico, O’Brien said. So far, he sees no evidence of an uptick in TV assembly production in Mexico, he said.

Meanwhile, the Consumer Technology Association continues to be alarmed by the tariff threats, CTA CEO Gary Shapiro said in a blog post after President Donald Trump said the USTR should consider even more tariffs on products from China (see 1804060033). "We are hurtling toward cutting economic ties with China altogether," he said. "We need to come to the table with China -- quickly -- and agree to a trade deal that works for them and for us. At this rate, the U.S. is only hurting itself."