Section 301 Tariffs

The U.S. trade relationship with China "significantly impacts” CTA members relying "on the global supply chain,” said Sage Chandler, vice president-international trade. She asked to appear at Aug. 20-23 hearings to oppose 10 percent Trade Act Section 301 tariffs proposed by the Office of the U.S. Trade Representative. Members identified 302 tariff lines of Chinese imports in USTR sights, with more than $109 billion in value, for which 10 percent duties “would be detrimental,” said Chandler's Friday filing. Harmonized Tariff Schedule codes that most worry members would affect startups using U.S. IP, research, design and engineering, said Chandler. Duties on those products would cause “substantial” harm to the entire IoT “ecosystem,” she said. What spooks Chandler most is a “single line item,” HTS 8517.62.00, listed as covering machines for reception, conversion and transmission or regeneration of voice, images or other data, she told us Monday. That “captures servers, gateways, modems,” plus “Bluetooth-enabled devices, like headsets, speakers, fitness trackers, smart health devices and watches,” she said. It exposes “basically the entire ecosystem of the internet,” she said. “You’re looking at what potentially could be pass-down costs everywhere along the chain for the Internet of Things."

U.S. Trade Representative Robert Lighthizer said the effort to get China to change its industrial policy and intellectual property practices will take years. “That’s not to say what we’re doing now will be in place for years,” Lighthizer said Thursday, testifying at a Senate Appropriations Subcommittee hearing on the Trump administration’s trade policy, including its proposed or implemented Trade Act Section 301 tariffs on imports from China. He was repeatedly pressed on how long the administration will keep the tariffs in place or threaten new ones, amid criticism from many sectors that the duties will disproportionately increase costs on American businesses and consumers without punishing the Chinese for allegedly unfair trade practices. Only Sen. Joe Manchin, D-W.Va., gave unalloyed support to the USTR on the North American Free Trade Agreement and tariffs. Other senators from both parties hammered Lighthizer with stories about how their constituents are losing money because of tariffs. The most heated exchange was between Rep. Brian Schatz, D-Hawaii, and Lighthizer. Schatz said because of the pressure from constituents when retaliatory tariffs and ordinary tariffs bite, the U.S. can't win a game of chicken with China. “They can wait us out,” he said. “They can endure more pain over time than we can.” When Lighthizer suggested Schatz doesn’t believe China is a threat to America’s economic future, Schatz cut him off. “It just means you don’t pick stupid fights!” he said. Lighthizer, his voice rising, said, “I don’t think it’s a stupid fight!”

Intel opposes the proposed 25 percent Trade Act Section 301 duties on semiconductor imports from China, it said in comments posted Wednesday in docket USTR-2018-0018. Intel is one of many tech interests arguing this week for removing Chinese semiconductor imports from the tariffs list because most semiconductors the U.S. imports are made in the U.S., shipped to China for final, low-end assembly, testing and packaging (ATP), and then shipped back to the U.S. “No rational U.S. semiconductor company is going to incur the very high costs and other risks raised by relocating an ATP facility in China with an already established ecosystem to a green field site in another country,” said Intel. It estimates it would cost $650 million to $875 million to move an ATP plant out of China. The Internet Association wants to testify at U.S. Trade Representative hearings Aug. 20-23 to urge removing 22 tariff lines “that cover products internet companies use to function on a daily basis,” said the company in a filing posted Thursday in docket USTR-2018-0026. IA wants excluded from proposed 10 percent tariffs “control or adapter units for automatic data processing machines” and other components. Imposing new duties on the 22 tariff lines“would not help to correct China's practices, but would cause disproportionate economic harm to American internet companies,” said the association. Friday is the deadline for requests to appear.

Several tech industry allies will testify Tuesday against 25 percent Trade Act Section 301 tariffs on imports from China on the Office of the U.S. Trade Representative's first of two days of hearings, said a new witness list. Sage Chandler, CTA vice president-international trade, will speak, as expected (see 1807200059). Logitech and Universal Electronics will argue for excluding remote controls and other devices imported from China, their comments in docket USTR-2018-0018 showed. The “vast majority” of Universal’s remotes are manufactured in Chinese factories that Universal owns and operates, said CEO Paul Arling, who will testify. Imposing the additional duties on those products “would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers,” by forcing higher subscription costs for pay-TV and over-the-top services, said Arling. Many of the spare parts and components U.S. companies import from China “are in fact made by other U.S. companies,” said Jonathan Davis, global vice president-industry advocacy at Semi, which represents electronics industry supply-chain interests. Those companies hold on to their own intellectual property and “only perform low-value manufacturing in China, while the high value-added work is completed in the United States,” said Davis. Josh Kallmer, senior vice president-global policy at the Information Technology Industry Council, will testify for excluding several tariff lines on diodes and integrated circuits, he told the USTR. David Isaacs, Semiconductor Industry Association vice president-government affairs, who will testify on the same panel as Kallmer, said that such tariffs on semiconductors would “fail to address problematic Chinese forced tech transfer and IP theft. Chinese companies export almost no semiconductors to the U.S. market. Most U.S. semiconductor imports from China are semiconductors designed and manufactured in the U.S., and then shipped to China for the final stage."

With the publication of the Office of U.S. Trade Representative’s notice in Wednesday’s Federal Register on procedures for requesting exclusions from Trade Act Section 301 tariffs on Chinese imports (see 1807080001), docket USTR-2018-0025 for posting such requests became active in the regulations.gov portal. No requests were posted yet by our Friday deadline. Exclusion requests are due by Oct. 9, and if granted will apply for a year retroactively to July 6, said the notice. Once a request is posted, the public will have 14 days to file responses to that request, it said. After that 14-day period, “interested persons” will have seven days to reply to those responses, it said. Though Oct. 9 is the deadline for the exclusion requests, “international trade team” lawyers at BakerHostetler are “advising clients to file as soon as possible in anticipation of the large administrative backlog that they expect.” Though the Trump administration’s threat to impose 10 percent tariffs on an additional $200 billion worth of Chinese imports (see 1807110034) “doesn't necessarily raise the risk of an all-out trade war, the tariffs would affect some industries and individual corporate borrowers,” said S&P Global Friday. Together with the 25 percent tariffs enacted July 6 on $34 billion in Chinese imports and the proposal to impose tariffs on another $16 billion in goods, “the total amount of $250 billion now represents about half the value of China's annual exports to the U.S.,” it said. The absence of an immediate “tit-for-tat” retaliatory response from China “lends hope to the belief that China-U.S. trade negotiations aren't completely off the table,” said S&P. “We are obviously not sanguine about the risk. Our current base-case assumption is that the tariffs, if imposed, will not likely greatly affect either economy. However, they would affect some industries and individual corporations.” The U.S.-China friction already is contributing to “jitters in the financial markets and is coloring business investment decisions,” said S&P. If China wants to retaliate with tariffs on U.S. goods, it “can’t match” the $200 billion figure because American imports to China totaled only $130 billion last year, it said: “Should China opt to pursue non-tariff actions that affect services and investments, it could damage global business and consumer confidence, investment prospects, and growth.”

The Chinese Embassy in Washington released a 1,300-word statement Thursday accusing U.S. Trade Representative Robert Lighthizer of “slander” for alleging that China uses unfair trade practices to gain advantages over its U.S. trade competitors. In announcing a new round of proposed 10 percent Trade Act Section 301 tariffs Tuesday on $200 billion worth of Chinese goods (see 1807110034), Lighthizer called China’s trade practices “an existential threat to America’s most critical comparative advantage and the future of our economy.” The retaliatory actions China took in response to the tariffs that took effect July 6 were "without any international legal basis or justification," said Lighthizer. The Chinese shot back, calling Lighthizer’s statement “a distortion of facts” and his accusations “groundless.” Any “underlying problems in the American economy and society are purely caused by domestic, structural reasons in the US,” said the embassy. China since February “engaged in four rounds of high-level economic talks with the US,” and reached “important consensus” on “strengthening trade and economic cooperation and avoiding a trade war,” it said. “But due to domestic politics, the US has gone back on its words, brazenly abandoned the bilateral consensus, and insisted on fighting a trade war with China. China has done its utmost to prevent the escalation of trade frictions. The United States is fully responsible for the current situation.” The tariffs the Trump administration implemented or proposed are “typical unilateralism, protectionism and trade bullying,” and are a “clear violation” of the basic World Trade Organization “principle of most-favored-nation treatment as well as the basic spirit and principles of international law,” said the embassy. That China was “forced to take” retaliatory “counteractions” against the tariffs was “an inevitable choice to defend national interest and global interest, and is perfectly rightful, reasonable and lawful," it said. Lighthizer's office didn't comment.

Tech interests fear ripple-effect consumer harms that may result from the Trump administration’s newest proposals to impose 10 percent Trade Act Section 301 tariffs on $200 billion worth of Chinese imports over intellectual property disagreements between the countries. The list of goods targeted for the 10 percent duties, released Tuesday in an Office of the U.S. Trade Representative notice, doesn't include meaningful end-user consumer tech products like TVs. Some networking gear was included, drawing concern from Commissioner Jessica Rosenworcel, CompTIA, CTA, the Information Technology Industry Council and Telecommunications Industry Association.

CTA, the Semiconductor Industry Association and others asked the Office of the U.S. Trade Representative to appear at a July 24 hearing to oppose 25 percent Trade Action Section 301 tariffs on more Chinese-sourced products related to alleged IP practices (see 1806150030), docket USTR-2018-0018 shows. CTA members identified 22 Harmonized Tariffs Schedule codes on the new tariffs list covering $6.6 billion worth of products they imported from China in 2017, said Sage Chandler, vice president-international trade. Chinese companies “export almost no semiconductors to the U.S. market,” said David Isaacs, SIA vice president-government affairs. Most U.S.semiconductor imports from China "are semiconductors designed and manufactured in the United States, and then shipped to China for the final stage of semiconductor fabrication,” accounting for 10-15 percent “of the value of the final product,” he said. Written comments are due July 23, post-hearing rebuttal comments July 31.

The Trump administration’s plan to impose Trade Act Section 301 tariffs of 25 percent on Chinese imports “may have gotten China’s attention," but they’re "unlikely to change China’s conduct -- and will cause significant collateral damage in the process,” the Progressive Policy Institute reported. The duties, though applied to “Chinese-origin” products, “would be paid by Americans and impose serious costs on the U.S. economy,” it said. A “smarter strategy” to “confront China’s mercantilism” would be for the U.S. “to work more closely with its trade partners” to curb the allegedly “abusive” trade behavior, said PPI. “China’s unfair policies and practices seriously threaten innovative businesses in many countries, and they -- and their governments -- can be key allies in pushing back.” It’s difficult to build a coalition against China when the administration “needlessly antagonizes allies,” as it did when it imposed steel and aluminum tariffs against them, it said. The U.S. also needs to “speak with a single voice” in “focused, results-oriented” trade negotiations with China, said the report. The administration “should designate a single, high-level official to negotiate with China about core trade issues related to China’s unfair innovation practices,” it said. “This official should also actively seek cooperation from allies on those issues.”

Stakeholders blasted President Donald Trump's threats to impose new Trade Act Section 301 tariffs of 10 percent on an additional $200 billion worth of goods from China. CompTIA has “no doubt that China needs to be held accountable” for unfair trade practices, said Elizabeth Hyman, executive vice president-public advocacy. “But additional tariffs are cutting off our nose to spite our face,” she said Tuesday. “Rather than using the blunt instrument of tariffs on China, more energy should be devoted to working with the U.S. Congress to develop productive solutions." China's retaliatory decision to impose 25 percent tariffs on $34 billion in U.S. imports, mirroring the administration’s Section 301 tariffs announced Friday (see 1806150030), shows China "has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology," said Trump Monday. Trump directed U.S. Trade Representative Robert Lighthizer to “identify” $200 billion worth of Chinese goods for additional 10 percent tariffs.