Apple Can’t Find Sourcing Outside China, It Says in Each of Its 11 List 4A Tariff Exclusion Requests

Apple and SVS Sound were among the first tech companies to seek product exclusions from the 15 percent Section 301 List 4A tariffs when the Office of the U.S. Trade Representative began accepting exemption requests at noon on Oct. 31. Apple filed 11 requests, while Specialty Technologies, which does business as SVS, filed two applications, one each for the finished speakers and subwoofers it sources from China.

Many of Apple's exclusion requests were for parts, components and accessories, but also for “final” products sourced as finished goods from China, including the Apple Watch, iMac desktop, HomePod smart speaker and AirPods wireless earbuds, said the public 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,” the company said, using the same sentence in each application.

Apple marked as “business confidential” in all the filings the summaries USTR asked for explaining the company's efforts to find sourcing in the U.S. or third countries. Apple also shielded from public view summaries of its arguments why it deserves the List 4A exemptions. The product is “not strategically important” to Made in China 2025 “or other Chinese industrial programs,” Apple said in each application. Apple didn’t comment Friday.

SVS once built speakers in the U.S. when it had only seven employees and generated annual sales of $2.5 million, it told USTR. Since "transitioning" to Chinese production eight years ago, SVS has grown to more than 35 employees and sales exceed $27 million, it said. "Through our partnership with our China based OEM, we were able to leverage all of their resources," including product development "specific to our line of products," it said. "These factors in total allow us to provide a much better finished product to the end consumer at a better retail price."

Attempts SVS made to again source in the U.S. or from third countries "were not successful," the company said. "We have not been able to identify a manufacturer in the states or third countries that have the same ability to produce the product at the volumes needed while maintaining the level of quality we demand." Its Chinese OEM "has proprietary amplifier, driver and software technology that we are only able to provide to the consumer because of the manufacturer that we work with," it said. SVS CEO Gary Yacoubian previously said his company was studying the viability of shifting production to Thailand or the Czech Republic (see 1906180005).

The public has two weeks to comment on an exclusion request once it's posted, and the requester would have seven days to respond, USTR said. Importers can file List 4A exclusion requests 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 List 4A took effect.