Tech Group Won 37 Deferrals, Zero Removals Among 140 List 4 Tariff Exemptions It Sought
Of the 140 Harmonized Tariff Schedule subheadings that the Consumer Technology Association urged the Office of the U.S. Trade Representative in its June 17 comments to remove from List 4 Section 301 tariff exposure, the association won 37 deferrals to Dec. 15 in key product areas like smartphones, laptops and tablets and PC monitors when the final lists were released Aug. 13 (see 1908130033). The remaining subheadings face 10 percent tariff exposure when the duties on the newly configured List 4A take effect Sept. 1.
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CTA won zero removals among the roughly two dozen HTS subheadings that USTR struck from the original list of 3,805. The removals granted were for a variety of frozen seafood products, religious books and for industrial equipment and materials, including for natural barium sulfate (HTS 2511.10.10) and tower cranes (HTS 8426.20.00). None was remotely close to the industrial goods and consumer tech end-user products for which CTA sought exemptions. CTA Vice President-International Trade Sage Chandler didn’t comment on Aug. 14.
Of the consumer tech goods facing 10 percent tariff exposure beginning Sept. 1, finished TVs from China (HTS 8528.72.64) and the broad category of smart speakers, Bluetooth headphones and smartwatches (HTS 8517.62.0090) were the most significant in terms of their annual customs value and high retail visibility. Both classifications escaped tariffs in earlier rounds -- TVs in List 1, Bluetooth headphones in List 3. They’re now united on List 4A, facing 10 percent duties starting in less than three weeks.
“The reason that TVs were on the original list back in April 2018 was that China is not the only source,” emailed Bob O’Brien, president of Display Supply Chain Consultants, who predicted in mid-June that finished TVs wouldn't escape the tariffs if any List 4 duties were imposed. “The idea behind the first list of $50 billion in imports was to find items where an alternative supply was available. In this case that alternative supply is Mexico.”
The U.S. imported 9.28 million finished TV sets from China in 2019's first half, vs. Mexico’s 7.52 million, according to Census Bureau statistics accessed Aug. 14 through the International Trade Commission’s DataWeb tool. Shipments from Mexico were up 30 percent from a year earlier; China’s increased 23.4 percent. The average value of Mexico-sourced TVs was more than twice that of the Chinese set, but the average value of the Mexican product declined 8.4 percent, while the average Chinese TV increased in value 5.3 percent.
Imports from all countries other than China and Mexico increased 32 percent in the first half to 1.1 million sets, O'Brien said. The share of TV unit imports from China declined a fraction of a percent, "but still rounds to 52% of all imports," he said. "While it appeared in 2017 that Vietnam would become a major source for TVs imported into the US, TV imports from Vietnam have almost disappeared, down 98% Y/Y. Thailand has become the preferred alternate source, as TV imports from that country increased 126% Y/Y in the first half in unit terms, and 125% in revenue terms."
JLab Audio CEO Win Cramer rejoiced last year when the Bluetooth headphones and earbuds his company imports under HTS 8517.62.0090 and sells to big-box retailers were removed from List 3 (see 1809180025). When the news reached JLab Aug. 13 that its HTS 8517.62.0090 goods will face immediate tariffs on List 4A, it hit Cramer like “a kick in the gut,” he emailed us.
Cramer is “unsure and confused” why USTR “decided at one point to agree with us” that Bluetooth headphones didn’t belong on the tariffs list “and then turn course.” USTR didn’t comment about the recent decision. Asked about JLab’s strategy going forward, Cramer said: “We can't build one as we have no clue what the rules might be. While a sound bite of ‘just build it in America’ might sound great. The reality is far different. These products were never built here. The supply chain doesn't exist here.” JLab is “creating jobs” in the U.S., he said. “Now it's all at risk.”
When JLab's goods were removed from List 3 exposure in September, “you gave us the confidence that we could move past this chapter in our company history and turn the page to focus on innovation, growth, and doing what we do best, designing, marketing, selling, and supporting awesome audio products that any American can afford,” Cramer testified at the June 24 List 4 hearing of the USTR 301 Committee. “I'm here today because our products came back on the list -- what is called List 4 -- and I'm here to ask for them to be removed again.”