As 25 percent tariffs took effect Thursday on a second tranche of Chinese imports worth about $16 billion, CTA, in its toughest words yet, urged the Trump administration to end its “failing” strategy of trying to use the higher duties to punish China. It's “not working” but instead is “damaging” American businesses and consumers, said CTA President Gary Shapiro. It's “failing to change China's behavior” on intellectual property theft, “putting extreme pressure on American innovation and businesses that invent, design and engineer their IP in the United States,” said Shapiro. Of the nearly five dozen line items that CTA asked U.S. Trade Representative Robert Lighthizer last month to remove from the second tranche, the final version deleted one: alginic acid and derivatives used for many commercial applications (see 1808080028). CTA and other tech interests are fighting administration efforts to impose a third tranche of 25 percent duties on $200 billion worth of Chinese imports, including on IoT-critical connected devices (see 1808220056 or 1808170014). The administration by now "should know something it questioned several months ago: tariffs will not get China to change its unfair trade practices," testified Jonathan Gold, National Retail Federation vice president-supply chain and customer policy, at public hearings Thursday. "Instead, these tariffs threaten to increase costs for American families and destroy the livelihoods of U.S. workers, farmers, manufacturers and small-business owners. There is still time to prevent these harmful consequences. We hope this week’s discussions between the U.S. and China will pave the way for real action that will resolve these ongoing problems and end the trade war before it further escalates."

A “proof of concept” test set to begin in September will allow brainstorming and early stage testing on the use of blockchain technology in processes for the North American Free Trade Agreement and the Central America Free Trade Agreement, Vincent Annunziato, director of Customs and Border Protection’s Business Transformation and Innovation Division, told reporters last week at the CBP 2018 Trade Symposium in Atlanta. CBP will consider not only the technical capabilities of blockchain and any business benefits but also whether use of the technology fits with the agency’s regulatory and policy scheme. CBP will look at whether blockchain can be used in country of origin verification procedures, so the supplier can send origin information directly to CBP and the importer doesn’t have to worry about “tracking a piece of paper” from the carrier to the broker and into its own files. By the end of 2018, once the proof of concept is completed, CBP and trade community participants will put together an assessment and make recommendations based on the results of testing. CBP was planning to launch the test this fall after the Commercial Customs Operations Advisory Committee identified NAFTA and CAFTA origin procedures as a viable starting point. Annunziato distinguished the proof of concept from a pilot: proof of concept is intended to see if new technology works for specified uses, and once it’s complete the proof of concept will be taken down. Should CBP find a given use of blockchain promising, he said, it may then create a “more robust” pilot that works “within the confines” of any regulations and policies that needed to be changed and could lead to operational changes.

The Office of the U.S. Trade Representative should expand its use of the Generalized System of Preferences to encourage beneficiaries to make policy and enforcement changes, the Information Technology and Innovation Foundation said in a report released Monday. The agency's foreign trade barrier and intellectual property reports should more directly guide decisions "to self-initiate reviews of whether GSP beneficiaries are breaching the program’s trade, market access, or intellectual property criteria," the ITIF said. The USTR is already reviewing GSP benefits for Indonesia, India, Kazakhstan, Thailand and Turkey over various issues. If the GSP reviews don't produce the intended changes, "USTR should partially or fully suspend or withdraw that country’s access to GSP benefits -- as this has clearly dragged on for far too long for many GSP beneficiaries," the ITIF said. The criteria for GSP "graduation," based on income and trade competitiveness, should be more strictly enforced, it said. That should start "with revoking Turkey’s access to the program," the ITIF said.

CTA identified 380 tariff codes that would cause “significant harm” to the consumer technology industry’s member companies and to consumers resulting from the third installment of Trade Act Section 301 duties against Chinese imports, blogged Sage Chandler, CTA vice president-international trade, Tuesday. She cited codes identifying items that allow access to the internet, including servers, desktop computers, printed circuit assemblies and connected devices. Connected devices cover a "vast array of tech products" including e-readers, smartwatches, speakers and fitness devices, plus the components and the infrastructure products that make them work, such as modems, routers and gateways, Chandler said. Tariffs, as a remedy to shortcomings in Chinese national policy and practice, are more likely to cause “adverse short- and long-term consequences to our economy than incentivize change in China's discriminatory IP practices,” she said. If enacted, new tariffs affecting $200 billion in trade will continue the “destructive ripple effect” the Trump administration started with the first round of tariffs that affected the tech industry and the U.S. economy as a whole, Chandler said. Products on the proposed tariff list “disproportionately impact small companies, many of which manufacture and assemble in the United States, and startup companies that design and engineer U.S. intellectual property.” A CTA study said 25 percent tariffs on printed circuit board assemblies and connected devices will cause price increases of up to 6 percent, even affecting products made entirely with U.S. labor and components. CTA estimates those increases will cause a consumer spending drop of 12 percent. “Price shock and drop in demand have the potential to devastate our industry,” said Chandler, with the impact of a 25 percent tariff on connected devices alone expected to cost American consumers an extra $3.2 billion annually. “That contradicts USTR's stated aim in the product selection process of avoiding goods commonly purchased by American consumers,” she said. Technology tariffs are “counterproductive,” said the trade specialist, at a time when the U.S. is looking to achieve “digital integration, advanced telecommunications technology and increase internet access for rural populations.” Tariffs are taxes on Americans, not foreign governments, she said, and they "undermine the competitiveness of American companies.” Tech firms that testified Tuesday in a second day of public hearings on the tariffs were asked about the practicality of sourcing products from countries other than China. Brilliant Home Technology did an "evaluation" of where it could source products other than from China, and did so "before we knew about tariffs," said CEO Aaron Emigh. The company found quality in Vietnam and Indonesia couldn't match Chinese standards, he said. India could manufacture the product well, but since most of the components come from China, extending the supply chain in that way would introduce risks Brilliant felt weren't worth it, he said. "In our estimation it was not practical to manufacture anywhere outside of China," he said.

Comments are due Monday on a complaint from Sipco requesting a Trade Act Section 337 import ban of wireless mesh networking products that allegedly infringe its patents. Its Aug. 6 complaint to the International Trade Commission alleged Emerson Electric and subsidiaries and Analog Devices and its Linear Technology are among those manufacturing or importing the infringing products, used for monitoring or controlling wireless remote devices in industrial environments by way of a self-healing network. Sipco requests limited exclusion orders and cease and desist orders banning import and sale of Emerson Electric and Analog wireless mesh networking products. Sipco’s petition is "unfounded" and Emerson can't "comment as there is related litigation pending" in U.S District Court in Atlanta, said a spokesperson. Analog didn't comment Friday.

An initiative to let foreign-trade zones take part in e-commerce distribution is in the early stages, after Customs and Border Protection ruled the role of FTZs is limited, said Jim Swanson, CBP director-cargo and conveyance security and controls, during a panel Tuesday at the agency's trade event in Atlanta. "We have had discussions with key folks out there at both the Hill and from the various associations where there's a lot of discussion going on about what that really means and what the path forward." E-commerce has had much smaller effects on the export side at CBP, Swanson said. The de minimis on the export side, at $2,500, "has always been a lot higher" and most e-commerce goods are below that level, he said.

Headset maker Plantronics thinks it can limit its exposure to Trade Act Section 301 tariffs on Chinese imports because “we really source our products quite globally,” said CEO Joe Burton on an earnings call last week. The Office of the U.S. Trade Representative is proposing a third tranche of 25 percent tariffs on $200 billion worth of Chinese imports, including goods imported under the Harmonized Tariff Schedule’s 8517.62.00 subheading, which covers Bluetooth headphones (see 1807300002). Plantronics sources a “substantial amount” of its products from Mexico, said Burton. “We do have some in China, but some in many other countries around the world as well.” The impact to Plantronics “obviously” will depend on the “final list of products” for which tariffs get imposed, as well as “the specific rates and implementation timing, which I think is all open at this point,” said Chief Financial Officer Pam Strayer. “We are watching it carefully and to prepare for it, we are looking at alternatives in our supply chain.” The company is “in a good position because we have a manufacturing facility in Mexico,” she said. “It does allow us to potentially reduce some of the impact.”

Nokia slammed Huawei for comments the Chinese company made in an Aug. 6 filing on an FCC proposal to bar USF support for products from companies seen as posing a national security threat (see 1808080021). Huawei said in the filing that other equipment providers serving the U.S. market, including Nokia, also have ties to China. “Huawei claims that Nokia has ‘deep ties’ to the Chinese government and that these ties are ‘(at least) equally strong’ to those of Huawei,” the Finnish equipment maker said in docket 18-89. “This is pure sophistry. Nokia is a well-known, publicly traded company with a 153-year heritage of market leadership, ethical business conduct, and trustworthiness that is without peer in our industry.” Of its China-based joint venture Nokia added, "Nokia itself remains in complete control of the decision making." Nokia said it has never been accused of being “influenced inappropriately by any government anywhere.” Huawei didn't respond.

Imports at the major U.S. retail container ports set record highs in June and July and appear poised to set a third in August, said the National Retail Federation Thursday. It’s all the result of retail sales rising and retailers “rushing to bring merchandise into the country” ahead of 25 percent Trade Act Section 301 tariffs on Chinese imports, said NRF. After U.S. Trade Representative Robert Lighthizer put a first tranche of 25 percent tariffs into effect July 6 on $34 billion worth of Chinese goods (see 1806150030), his office finalized a second to take effect Aug. 23 on $16 billion worth (see 1808080028) and last week put out for comment a proposal to hike the duty rate to 25 percent from 10 percent on a third tranche of goods worth about $200 billion (see 1808010018). “Tariffs on most consumer products have yet to take effect but retailers appear to be getting prepared before that can happen,” said Jonathan Gold, NRF vice president-supply chain and customs policy. “We’re seeing new record levels every month this summer. Much of that is to meet consumer demand as tax reform and a thriving economy drive retail sales, but part of it seems to be concern over what’s to come. The good news for consumers is that avoiding tariffs holds off price increases that will inevitably come if the reckless and misguided trade war is allowed to continue.” U.S. ports handled 1.85 million 20-foot-long cargo containers or their equivalents in June, a 7.8 percent increase from the same month a year earlier, said NRF. It estimates ports handled 1.88 million containers in July, a 4.4 percent increase year-over-year, and forecasts August container imports will be up 4.4 percent to 1.91 million, it said. “The volatility and non-fact-based decisions coming from Washington have created uncertainty" in the retail sector, said Hackett Associates, the contractor that compiled the port-tracking statistics for NRF.

Element Electronics, in an emailed statement Tuesday, stopped well short of committing to close its Winnsboro, South Carolina, LCD TV assembly factory to escape the higher costs of the 25 percent Trade Act Section 301 tariffs on LCD panel imports from China being proposed on a third tranche of duties. The Office of the U.S. Trade Representative released its final list Tuesday in the second tranche of 25 percent duties, those to take effect Aug. 23 (see 1808080028). A Columbia, South Carolina, newspaper reported Tuesday that Element will close the plant in October and terminate its remaining 126 employees (see 1808070010). The “teammates” who work at Winnsboro “are at risk of layoff as a result of the trade-war related tariffs on our television parts,” said Element in the statement. “As we are the only USA assembler of televisions, we believe the inclusion of our parts on the list of affected products is accidental and resolvable.” Element is “working hard to have our parts removed from the tariff list and we remain hopeful that the closure of our South Carolina factory will be avoided,” said the company. “Until then, everyone at Element, especially the potentially impacted teammates at the factory, are completely committed to business-as-usual at an otherwise thriving Element.” Just "simply the announcement" July 10 of the proposed tariffs on LCD panels from China “triggered the need” for immediate factory cutbacks because of the likely impact the duties would have on the supply chain, said Element last month (see 1807200056).