Customs Duty

FCC Chairman Ajit Pai could face dissents on parts of the C-band order set for a vote Friday. Commissioner Jessica Rosenworcel is considered the most likely to dissent, but Commissioner Geoffrey Starks also has concerns, industry and FCC officials said. Pai could push the most contentious parts of the order, including aggregation limits, to another order, to get a 5-0 vote on the key parts of the proposal. Approval is less of a question, with Commissioners Mike O’Rielly and Brendan Carr indicating they support the plan.

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.

U.S. importers of Chinese goods inundated the Office of the U.S. Trade Representative with more than 2,800 List 4A tariff-exclusion requests in the 24 hours before the web portal went dark as scheduled at 11:59 p.m. EST Friday, showed our docket review. A huge backlog of List 3 exclusion requests awaits USTR disposition.

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.

World Trade Organization members extended a moratorium on customs duties on data transfers. Renewed at every opportunity since 1998, it remains at least until the WTO’s conference in June. Members also agreed Tuesday “to continue work under the existing 1998 work programme on e-commerce in the beginning part of 2020,” the body said. The International Chamber of Commerce said the actions underscore the continued importance of the body, despite no functioning dispute settlement mechanism due to appellate vacancies. "The shutdown of the Appellate Body is, without doubt, a blow -- but we shouldn’t slip into exaggerated claims about the imminent death of the WTO. ... WTO committees will continue the essential daily work of resolving trade frictions, while new rule making -- in areas such as services, investment and e-commerce -- is advancing at a rate not seen for over a decade,” said ICC Secretary General John Denton.

Qualcomm has monopoly power in two key chip markets, maintained by refusing licenses to rival chipmakers, the FTC argued to the 9th U.S. Circuit Court of Appeals (see 1910100017). Oral argument is set for 9:30 a.m. Feb. 13 in San Francisco. Qualcomm and DOJ said previously that the lawsuit and lower court’s injunction threaten national security, given Qualcomm’s role in leading 5G advancement against Chinese rivals. The FTC called those claims “purely speculative.” Intel supported the commission in the case, also announcing it agrees with the district court’s finding “Qualcomm’s licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years, and harmed rivals, OEMs and end consumers.” Intel claims it “suffered the brunt of Qualcomm’s anticompetitive behavior, was denied opportunities in the modem market, was prevented from making sales to customers and was forced to sell at prices artificially skewed by Qualcomm.” Ericsson and Samsung previously argued in favor of Qualcomm, with Samsung saying contract and patent law are “better suited” for settling disputes about fair, reasonable and nondiscriminatory (FRAND) terms. American, Japanese and German automaker groups said prices of cars with 5G will likely increase if Qualcomm wins. The Alliance of Automobile Manufacturers and Denso with Continental Automotive Systems filed briefs. “Automakers have been forced into unnecessary and inefficient [standard-essential patent] licensing negotiations ... even though chip sales that exhaust patent rights ... would negate the need for such negotiations while allowing the patentee to be compensated for its inventions based on the price charged for a chip,” the alliance argued. That will worsen if Qualcomm practices are ratified, it said. The Computer & Communications Industry Association supports the agency, saying Qualcomm has an “antitrust duty” to license competing chip manufacturers on FRAND terms. Open Markets also supported the FTC, saying in a release that Qualcomm practices compel “smartphone and tablet producers to pay exorbitantly high amounts for their chips.” The company didn’t comment Monday. The 9th U.S. Circuit Court of Appeals scheduled Feb. 10 oral argument on challenges of FCC wireless infrastructure orders (see 1912020018).

Both the C-Band Alliance and erstwhile member Eutelsat are pitching to the FCC transition plans for how to clear 300 MHz of the 3.7-4.2 GHz band. In talks with eighth-floor aides, Eutelsat backed private market-based deals for spectrum clearing instead of an FCC auction. But it worries none of the proposals is detailed and transparent enough to let the agency make a decision. Eutelsat left CBA in September (see 1909030041).

The International Chamber of Commerce urged the World Trade Organization to permanently ban tariffs on “cross-border data flows,” as a temporary ban soon expires. A 1998 moratorium should be made permanent to continue digital trade growth and prevent “trade barriers and burdensome customs duties,” ICC said Tuesday. Since the moratorium, “consumers have gained unprecedented access to new products and services” and international businesses accessed new markets. Three countries suggested ending the moratorium, including Indonesia, “going so far as to create tariff codes for ‘software and other digital goods transmitted electronically,” the business lobby said.

World leaders should commit to pursuing a multilateral approach on tax policy for digital services and avoid unilateral measures (see 1908190043), a tech industry coalition told member countries attending the G7 Leaders’ Summit, which begins Saturday. The Internet Association, Information Technology Industry Council, ACT|The App Association, BSA|The Software Alliance, Computer & Communications Industry Association and various Japanese trade groups signed. They recommended leaders oppose forced disclosure of source code, algorithms, encryption keys or other sensitive data as a “condition of doing business.” They recommend leaders quickly agree on the World Trade Organization joint statement initiative on e-commerce and permanently implement a WTO moratorium on customs duties on electronic transmissions. The group seeks “open format and machine-readable data sets to foster innovation and competitiveness” in artificial intelligence technologies and to “enhance and generate business opportunities for small and medium-sized enterprises.” France's new digital sales tax, retroactive to Jan. 1, has attracted much skepticism from U.S. tech; the country's embassy hasn't commented.

Five of the top eight consumer tech product categories in terms of 2018 customs value temporarily escaped 10 percent List 4 Section 301 tariff exposure at least until Dec. 15 (see 1908130015), well after imports will have arrived for the peak holiday selling season, per Office of the U.S. Trade Representative documents released Tuesday. Bluetooth headphones, smartwatches, smart speakers and finished TVs from China face immediate 10 percent tariff exposure Sept. 1.