Plug-in devices that connect to Wi-Fi and allow users to operate other devices by controlling whether electrical current flows from the wall outlet differ from wearable smart devices for classification purposes, Customs and Border Protection said in a Jan. 21 ruling, released last week. SDI Technologies argued the “SmartPlugs” deserve a similar classification as Fitbit fitness trackers that connect to mobile phones through Bluetooth. The Fitbit trackers were classified in heading 8517 due to the data transmission functions, but the plugs provide for different functions. “To the extent that data is transmitted from the application to the SmartPlug, it is in service of the primary function of controlling the electrical current to the connected appliance,” the agency said. “The transmission of data is not a function of the SmartPlugs,” it said, concluding the devices “provide electric control of electrical devices connected to them and thus are properly classified under heading 8537.” The applicable subheading, 8537.10.9, includes a 2.7 percent duty rate, and is subject to Section 301 tariffs on China, the agency said.
Customs and Border Protection is expected to implement "a number of the recommendations” of a Department of Homeland Security report on preventing counterfeit imports through e-commerce shipments “as quickly as possible," said Brenda Smith, executive assistant commissioner of CBP Office of Trade. The Jan. 24 report includes some actions CBP could take immediately, while others might require a regulatory process, she told our affiliate, International Trade Today. “We are pretty comfortable that we've got a head start on many of those recommendations through” the ongoing Section 321 and Type 86 pilots that are focused on small value shipments, she said last week. DHS recommends “a statutory change to explicitly permit the government to seek injunctive relief against third-party marketplaces and other intermediaries dealing in counterfeit merchandise,” said the report.
The White House Friday issued an executive order for “ensuring safe and lawful e-commerce.” Officials cited the exploitation of smaller express-carrier or international mail packages “by traffickers to introduce contraband into the United States” and foreign exporters evading customs duties and fees.
Nearly 140 countries and “jurisdictions,” working through the Organisation for Economic Co-operation and Development, “reaffirmed” their commitment “to reach a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy,” said OECD Friday. Their goal is to reach an agreement by year's end, it said. Tech groups back obviating the need for France’s digital services tax and similar measures cropping up elsewhere, which they say can harm U.S. interests (see 2001020036). “We continue to support the OECD process as the best way to resolve this important issue and urge all nations to pursue the ongoing negotiations in a spirit of international cooperation,” said the Information Technology Industry Council.
Sonos can’t move production outside China “in any reasonable or efficient manner,” it said Thursday in a List 4A tariff-exclusion request for the wireless mesh network audio components it imports under the 8517.62.00.90 subheading. “Most elements of our supply chain” are in China, where sourcing for the global consumer tech industry is “concentrated,” said Sonos in the Office of the U.S. Trade Representative docket. “There is no other single market in the world where all of the components and expertise required to produce our wireless home audio systems can be obtained at the scale necessary to support consumer demand for our products.” Shifting production to a third country “would require us to recreate an entirely new supply chain,” but “we would still need to import many of our components from China,” it said. “Identifying substitute components or new sources of products is a complex process that takes time and a significant investment to ensure we find trustworthy suppliers who meet our standards.” It’s the second exclusion request for Sonos, which applied Dec. 18 for a List 4A exemption on the wireless mesh network speakers it sources from Chinese manufacturers (see 1912190035).
The U.S. effort to box out Huawei shows how complex and intertwined the issues are, said the Asia Society Policy Institute president and a former deputy secretary of state. ASPI President Kevin Rudd, a former prime minister of Australia, said many in the U.S. semiconductor industry told him their ability to reinvest at the scale they need to remain dominant in the latest advances “hangs in part on their ability to export to China.” He asked, if the government bans those exports, will it “then step in to supplement on the order of tens of billions each year?” Rudd and ex-U.S. Deputy Secretary of State John Negroponte discussed the U.S.-China relationship at an ASPI event Tuesday. Negroponte said it's revealing that the Pentagon is resisting Commerce Department moves to restrict exports to Huawei. “It’s the Department of Defense finally calling to our attention this issue is more complex than it may seem. This technological war is going to be complicated,” he said. The U.S. makes 45 percent of semiconductors; China, 5 percent. That same day, the U.K. announced it won't bar Huawei from its 5G networks but will ban it from the “core” of those networks (see 2001280074). “Sounds like a great British fudge to me,” said Rudd.
Tuesday was unusually heavy for List 4A tariff exclusion requests at the Office of the U.S. Trade Representative public docket, with only days remaining before the web portal for filing for exemptions closes at 11:59 p.m. Friday. We counted nearly 300 requests posted in the docket through 3 p.m. EST, well above the daily average of 40 since the portal opened for requests at noon Oct. 31. Bose filed four requests Tuesday, to go with the two it submitted Nov. 22 (see 1911220042). It’s now seeking List 4A tariff relief on the audio sunglasses (9004.10.00.00 subheading), sound bar bass modules (8518.21.00.00), TV sound systems (8518.22.00.00) and wireless in-ear Bluetooth headphones (8517.62.00.90) it imports from China. “Over the past 18 years, manufacturing of consumer electronics, including the extended supply chain (e.g., component suppliers), has coalesced in China,” said the exclusion request for the audio sunglasses, typifying the nearly identical wording in all the applications. “There is no other country that has the expertise and capacity to mass produce high-quality consumer electronics, such as the audio sunglasses covered by this request. While the Company is evaluating suppliers outside China, qualifying new suppliers to produce products to Bose’s rigorous quality and performance standards takes many months.” There exists no “mass-market production” of the digital light processing (DLP) projectors BenQ imports from China under the 8528.62.00.00 subheading, said the vendor’s request for an exclusion Tuesday from the List 4 Section 401 tariffs. “While we source certain other products from third countries, the only suppliers that have the expertise and equipment to produce this product are in China,” said BenQ. “We are exploring sourcing this product from third countries, but this requires significant time and capital investment.” BenQ sources the DLP “core imaging technology” in its projectors from Texas Instruments, it said. “This technology requires many specialized components that need to be customized for the technology. Developing alternative sources for these components is more difficult than developing alternative sources for components used in competitor products.”
Fossil Group filed for a List 4A tariff exclusion on the “hybrid” smartwatches it imports from China under the 8517.62.00.90 subheading, it said in a post Monday in the Office of the U.S. Trade Representative public docket. “Fossil continues to look for ways to diversify its sourcing,” said the vendor. It has invested “significant time and resources in building its current supply chain in China” during the four years in which it has been in the smartwatch business, it said. Moving a “significant portion” of its smartwatch manufacturing out of China “is not feasible at this time, especially in the very challenging market,” it said. Fossil didn’t respond to emails seeking comment on why its tariff exclusion request on smartwatches came seven weeks after it sought exemptions on nine categories of traditional watch and component imports. USTR is scheduled to close the List 4A exclusion-request portal at 11:59 p.m. EST Friday.
There’s little optimism among corporate economists that the “latest developments in international trade” will stimulate sales in their companies or industries, a National Association for Business Economics (NABE) survey found. The group canvassed members Dec. 23-Jan. 8 and found 63 percent expect no “significant impacts” from recent trade developments, it said Monday. Equal blocs of respondents of 15 percent expect either positive or negative outcomes, it said. NABE started its canvassing 10 days after the U.S. and China announced their phase one trade deal (see 1912130042) but ended it a week before the deal was signed and the terms were released (see 2001160022). NABE's board includes the chief economists of Amazon and Intel.
Clarity Products seeks exclusion from tariffs it pays on the amplified cordless phones imported from China under the 8517.11.00.00 subheading, posted the Tennessee vendor Thursday in the Office of the U.S. Trade Representative docket. The phones’ audio systems also have “frequency adjustment, noise suppression and multiband compression to help those with hearing loss,” said Clarity. Chinese manufacturers of “regular” cordless phones could do “small production runs” for Clarity at “economical prices,” it said. Clarity is “researching moving production to Malaysia and Vietnam, but this is unviable at this time given the company’s small volumes,” it said. It “explored” making amplified phones in a production facility it runs in Chattanooga, “but it is not economical,” it said. If Clarity lands the exemption, it would be entitled to refunds of the 15 percent tariffs retroactive to Sept. 1 when List 4A took effect. USTR is scheduled to roll back List 4A to 7.5 percent Feb. 14 (see 2001160022).