US rejects Teslas bid to avoid tariffs on Chinese-made Model 3 brain in one of 1,000 produc
The company said in a securities filing on Monday that “our costs for producing our vehicles in the US have also been affected by import duties on certain components sourced from China”.
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The denials illustrate a systematic approach by the Trump administration to thwart China’s efforts to develop high-technology industries that it alleges had benefited from the theft and forced transfer of US intellectual property.
Made in China 2025, a programme aimed at growing China’s prowess in 10 strategic industries now dominated by the United States, is at the heart of trade negotiations and US demands for sweeping changes to China’s trade, industrial and intellectual property policies.
Those industries include new energy and autonomous vehicles, aerospace, semiconductors, biopharmaceuticals, robotics and artificial intelligence.
Tesla first made its request to exclude its Autopilot electronic control unit in July 2018, when the Palo Alto, California-based carmaker warned that “increased tariffs on this particular part cause economic harm to Tesla, through the increase of costs and impact to profitability”.
In a previously unreported March 15 letter, USTR general counsel Stephen Vaughn said the agency was denying Tesla’s request because it “concerns a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programmes”.
It was not clear when the letter was posted on a US government website, but a number of other exclusion denials were posted at the same time, including for industrial robots imported by Kawasaki Robotics USA and composite panels made by Hexcel in China for use in various Boeing aircraft.
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Some of the products cited in the 2025 denials were less hi-tech, including a wiring harness for a rear door imported by Lear’s Chinese joint venture, Kyungshin-Lear Sales and Engineering.
“The material composition of the product consists of insulated wire, connectors, terminals, tape, and conduit,” Kyungshin-Lear said in its request.
All told, USTR has received China tariff exclusion requests for nearly 13,000 products and denied 5,311. Of the denials, 1,166, or more than a fifth, contained the same denial language as the Tesla request, citing its links to Made in China 2025.
Tesla told USTR it was unable to find a manufacturer in the US, adding that “choosing any other supplier would have delayed the [Model 3] programme by 18 months with clean room set-up, line validation, and staff training”.
The Autopilot ECU 3.0, which is also used in the Model S and X, includes two printed circuit board assemblies, which Tesla calls “the brain responsible for Tesla’s Autopilot functionality” and the main safety system for the vehicle.
Other carmakers have sought similar exemptions but have not yet received answers. General Motors in late July sought an exemption to a 25 per cent US tariff on its Chinese-made Buick Envision sport utility vehicle. The Envision accounted for nearly 15 per cent of US Buick sales last year.
GM has also sought exclusions for dozen of parts, including push button ignition switches and transmission bearings.
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Nissan Motor Co and Fiat Chrysler Automobiles NV have also filed exclusion requests for parts, while Uber Technologies asked for an exclusion for electric bikes rented through the Uber app.
Even if the US and China reach a trade deal in the coming weeks to resolve their disputes, companies may not see tariff relief for months or possibly years.
People familiar with the talks say that some tariffs, especially those aimed at the Made in China 2025 industries, could remain in place as part of an enforcement mechanism.
US Vice-President Mike Pence said on Friday that the manner in which tariffs were removed would be part of that mechanism, which is aimed at ensuring that China lives up to its obligations in any agreement.
This article appeared in the South China Morning Post print edition as: U.S. rejects tesla’s plea for china tariff reliefrejects Tesla bid for tariff exemption
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