Harmonized Tariff Schedule

About three of four smartphones imported to the U.S. come from China, and those would rise in cost by 22 percent under U.S.-proposed fourth tranche 25 percent duties, said a study for CTA, posted Tuesday in docket USTR-2019-0004. Tariffs would generate a 14 percent cost increase in phones shipped to the U.S. from all countries, it told the U.S. trade representative. The average phone retail price would rise about $70, it said. U.S. consumers will be “forced to reduce overall purchases by 28 percent,” it said. Tariffs on Chinese laptops and tablets imported to the U.S. under Harmonized Tariff Schedule’s 8471.30.01 subheading would raise pricing by 19 percent, said the study. It estimates the retail price of the average laptop would rise $120. Tariffs on videogame consoles imported from China would seriously harm U.S. consumers, said Microsoft, Nintendo and Sony Interactive Entertainment in rare joint comments by the rivals for the removing HTS 9504.50.00 goods from List 4. In 2018, more than 96 percent of the consoles imported to the U.S. came from China, they said. “It would cause significant supply chain disruption to shift sourcing entirely to the United States or a third country, and it would increase costs -- even beyond the cost of the proposed tariffs -- on products that are already manufactured under tight margin conditions.” Proposed penalties on semiconductors and the IT industry “will harm America’s tech companies, and are an ill-equipped tool” to curb China’s “problematic” trade practices, said the Semiconductor Industry Association. The administration’s previous tariffs “encompass nearly the entire semiconductor supply chain,” said SIA. The proposed List 4 tariffs “now threaten virtually all information technology products -- and purchasers of semiconductors -- including key consumer products,” it said. Also, Tuesday was Day II of USTR hearings on proposed List 4 duties, which will stretch to June 25 (see 1906180030).

Some smartphones and TVs from China imported to the U.S. under the 8528.72.64 Harmonized Tariff Schedule are on the list of goods the U.S. will subject to 25 percent duties, as are a broad assortment of other consumer tech goods, said an Office of U.S. Trade Representative notice Monday. The $300 billion in goods on the list (see 1905130022) are the biggest tranche of the four so far and represent virtually all of the remaining Chinese imports not previously dutied. A single day of public hearings on the proposed duties is set for June 17. The notice appears to be flexible on scheduling additional days of hearings. Roughly 350 witnesses testified on the List 3 tariffs in hearings that spanned six days in late August. June 10 is the due date for filing requests in docket USTR-2019-0004 at regulations.gov to appear at the hearing and place in the record a summary of expected testimony at the public hearing. Written comments are due June 17. Smartphones are the largest of eight classifications of consumer tech products that would bear the biggest brunt of the penalties, CTA Vice President-International Trade Sage Chandler emailed us Tuesday. “The import values of the products that hit our members are massive.” The customs value of smartphones imported from China last year under the HTS 8517.12.00 subheading exceeded $44.8 billion, said Chandler. Laptops and tablets imported under HTS 8471.30.01 were the next biggest category germane to CTA members, she said, worth $38.7 billion. The broad assortment of goods imported under HTS 8517.62.00 was worth $23.9 billion in 2018 customs value, she said, with smart speakers, Bluetooth headphones, smartwatches and fitness trackers included. Current tariffs have “hurt consumers, rattled supply chains for U.S. manufacturers and businesses, and created uncertainty across economies,” said Naomi Wilson, Information Technology Industry Council senior policy director-Asia. “Additional tariffs threaten to needlessly escalate this conflict.” On the big hit smartphones stand to take should the tariffs go through, CTIA declined comment for now. It may have something to say “in coming days as we discuss further with members,” emailed a spokesperson. AT&T, T-Mobile and Verizon didn’t comment, nor did Apple or Samsung.

U.S. importers whose Chinese goods were on the water when the List 3 Section 301 tariffs went up to 25 percent early Friday can assign their goods a special new 9903.88.09 heading on the Harmonized Tariff Schedule to enter at the old 10 percent duty rate, said the U.S. Trade Representative Thursday night. This obviates importers needing to pay the 25 percent duty at ports of entry and then seek refunds, under Customs and Border Protection's “in the meantime” guidance earlier Thursday (see report in the May 10 issue). Goods bearing the special HTS heading need to enter the U.S. on or before June 1 to qualify, said USTR. CBP will issue “instructions on entry guidance and implementation,” it said.

Plastic iPad 2 “Smart Cover” cases are classifiable in the Harmonized Tariff Schedule as articles of plastic dutiable at 5.4 percent, not as duty-free accessories for automatic data processing machines, said the Court of International Trade in a decision made public Tuesday. Apple argued for the case’s duty-free classification as an accessory because it also functions as a stand. But the court agreed with a Customs and Border Protection ruling that the cases are explicitly excluded from that classification. Apple didn’t comment.

The Office of the U.S Trade Representative issued its first list of product exclusions from the 25 percent Trade Act Section 301 tariffs on Chinese imports, granting full or partial exemptions for nearly two dozen 10-digit Harmonized Tariff Schedule subheadings, said a notice posted Friday at the agency’s website. The exclusions apply retroactively to July 6, the date the first tranche of tariffs took effect, and will remain in effect until one year after the USTR’s notice is published in the Federal Register.

The FCC approved a declaratory ruling and order designed to speed the deployment of small cells and 5G across the U.S. Commissioner Jessica Rosenworcel, whose vote had been in doubt (see 1809200007), partially dissented and partially concurred Wednesday.

Tariffs “remain the wrong solution to real problems” in thwarting allegedly unfair Chinese trade and IP practices, said the Internet Association in comments posted in docket USTR-2018-0026. The comments previewed testimony that Jordan Haas, the group’s director-trade and international policy, gave at hearings Wednesday. Haas testified on the same panel as a Telecommunications Industry Association representative, who said tariffs would “handicap” the U.S. in its 5G “contest” against China (see 1808130051).

Micro Electronics and GlobiTech were among the tech interests joining many hundreds of companies asking to testify during four days of hearings beginning Aug. 20 against the proposed third tranche of tariffs on an estimated $200 billion worth of Chinese imports. Requests were due Monday in docket USTR-2018-0026 under the deadline U.S. Trade Representative Robert Lighthizer extended when he announced Aug. 1 he'll “consider,” at President Donald Trump’s direction, raising the third tranche of proposed duties to 25 percent from 10 percent (see 1808010073). Lighthizer in an Aug. 7 notice said he reserves the option to “extend the length of the hearing depending on the number of additional interested persons who request to appear.” Micro Electronics CEO Richard Mershad wants to testify for removing six Harmonized Tariff Schedule line items, said comments posted Tuesday. Computers and parts it identified aren't available in big quantities outside China, said the parent of an electronics retailer. GlobiTech wants to testify against tariffs on the raw materials it imports from China under HTS 3818.00.00 to manufacture silicon epitaxial wafers, said the company. Those wafers are a $3 billion “subset” serving the global semiconductor industry, it said. “As the world's largest supplier of silicon epitaxial products, chances are that smartphone that you are holding has ‘some GlobiTech in it.’"

Tech interests virtually struck out in their attempts to persuade U.S. Trade Representative Robert Lighthizer to spare their products and components from a second tranche of 25 percent Trade Act Section 301 tariffs on imports from China. Despite heavy industry lobbying to exclude semiconductors and other key parts from the second round of new levies, the list Lighthizer released Tuesday contains 279 tariff lines of goods worth about $16 billion in trade value, a mere 2 percent reduction from 284 lines in the originally proposed list released June 15 (see 1806150030). The new tariffs will take effect Aug. 23, said Lighthizer, who soon will announce a "process" for seeking exclusions from the new duties.

The Trump administration’s proposed Trade Act Section 301 tariffs on Chinese goods imported to the U.S. under the Harmonized Tariff Schedule’s 8517.62.00 subheading targets equipment “critical for the build-out of high-speed broadband internet” and related IoT technologies, said the Telecommunications Industry Association in comments posted Saturday in docket USTR-2018-0026. The comments were filed July 27, when 10 percent tariffs were still on the table, days before U.S. Trade Representative Robert Lighthizer announced he will “consider” hiking the duties to 25 percent (see 1808010018).