Tech Interests Oppose Section 301 Duties on Tariff Line They Say Would Damage 'Internet of Things'

As critics continue ratcheting up their opposition to the Trump administration’s proposed third round of Section 301 tariffs on $200 billion in Chinese imports, it remains to be seen how the Office of the U.S. Trade Representative will accommodate all who have requested to testify in five-minute slots during four days of public hearings scheduled to begin Aug. 20. Well more than 300 people in various industries filed requests in docket USTR-2018-0026 by the July 27 deadline to appear at the hearings, virtually all of them to say they'll testify against the tariffs.

Tech interests are increasingly focusing their opposition to inclusion of the one Harmonized Tariff Schedule line item they say would disrupt the Internet of Things (IoT) supply chain if 10 percent duties are imposed. HTS 8517.62.00 includes servers, gateways and modems critical to the IoT “ecosystem,” as well as ubiquitous consumer products such as Bluetooth headsets, speakers, fitness trackers and smartwatches, the Consumer Technology Association said (see 1807310016). Federal Communications Commission Commissioner Jessica Rosenworcel tweeted July 31: “In 8517.62.00, @USTR proposes tariffs on ‘machines for the reception, transmission, conversion & transmission or regeneration of voice, images, or other data.’ This is the #InternetofThings & the damage these tariffs could do to innovation here is real.” The Trump administration is now considering increasing the tariff rate on the next tranche of Chinese imports to 25 percent, rather than 10 percent (see 1808010070).

JLab Audio, which supplies Bluetooth earbuds and headphones to Best Buy, Target and other big-box retailers, warned it may need to trim payroll to absorb the higher costs of tariffs on goods it imports from China under HTS 8517.62.00. Fitbit agreed and said subheading 8517.62.00 “covers a wide variety of wireless products, including fitness trackers and smartwatches, which comprise nearly all of Fitbit' s products,” in July 27 comments. Tariffs on those goods “will negatively affect not only Fitbit, but American retailers and consumers generally,” it said.

Fitbit wants the USTR to remove goods under HTS 8517.62.00 from the tariffs list, it said. “At the very least, wrist-wearable products classifiable in this subheading should be removed,” it said. Tariffs on subheading 8517.62.00 “would place U.S. companies like Fitbit at a competitive disadvantage in the U.S. market,” and could “compromise” U.S. market-share leadership in wearables, it said.

The Chinese wearables brands Xiaomi and Huawei “are already among the top four suppliers of wearables in the world, and are aggressively targeting additional U.S. market share,” Fitbit said. “Unlike U.S. companies, such as Fitbit, that maintain major, U.S.-based research efforts, Chinese companies can survive on razor-thin margins and easily absorb this tariff, potentially with state-backed support. This would ultimately work to the advantage of Chinese competitors seeking to gain U.S. market share and access to U.S. consumers' health and fitness data.”

Dell Technologies opposes tariffs on four USTR line items, including on the network switches it imports from China under subheading 8517.62.00, the company said. Dell manufactures “advanced technology products” at its plants in Franklin, Massachusetts, and Apex, North Carolina, it said. “Tariffs will increase the costs of vital parts and components for our U.S. services and manufacturing operations. Driving up the costs of manufacturing key Dell products in the United States will inevitably undermine U.S. technology leadership, as well as put good-paying U.S. jobs at risk.” American consumers also will “suffer” if the Trump administration “raises the cost of key technologies, diminishing access and increasing the digital divide,” Dell said.

Smart home startup Brilliant Home Technology fears that tariffs on goods it imports from China under two HTS classifications, not including 8517.62.00, will stop the company in its tracks before it even launches its first smart product, it said. The Brilliant Control is a new type of smart-home device “that has never existed before, and the intellectual property, which includes electronics, mechanical design, and software, is created entirely by Brilliant in the United States,” it said. Though the Brilliant Control is not yet commercially available, “engineering work is complete, production samples have been provided to partners, and the product is in the manufacturing process,” it said. The device is scheduled to launch in the first week of September, it said.

Brilliant sources the “main device” from China under HTS 8537.10.91, and also a “faceplate unit that is believed to fall” under HTS 3925.90.00. Both classifications, which are on the tariffs list, “are based on our best current understanding, with the proviso that the Brilliant Control is a new type of product that may not fit cleanly into existing classifications, and these classifications therefore may be subject to revision,” it said.