U.S. rejects Tesla bid for tariff exemption for Model 3 'brain'

U.S. trade officials rejected Tesla Inc`s bid for relief from President Donald Trump`s 25 percent tariffs on the Chinese-made computer "brain" of its Model 3 electric vehicles, one of more than 1,000 product denials linked to China`s industrial development plans.

According to documents filed by U.S. Trade Representative`s office (USTR) and reviewed by Reuters, Tesla`s and other tariff exclusion requests for Chinese-made products from aircraft parts to biotechnology instruments were all denied because they were deemed "strategically important" to the "Made in China 2025" programme.

Tesla did not return requests for comment. Tesla has a separate pending tariff exclusion request for duties on the Chinese-made Model 3 Center Screen.

The company in a securities filing on Monday said that "our costs for producing our vehicles in the U.S. have also been affected by import duties on certain components sourced from China."

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 U.S. 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 U.S. 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. ECONOMIC HARM

Tesla first made its request to exclude its Autopilot electronic control unit in July 2018, when the Palo Alto, California-based automaker warned: "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 programs."

It was not clear when the letter was posted on a U.S. 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 Corp in China for use in various Boeing Co aircraft.

Some of the products cited in the 2025 denials were less high-tech, including a wiring harness for a rear door imported by Lear Corp`s Chinese joint venture, Kyungshin-Lear Sales and Engineering LLC.

"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. NO U.S. SOURCES

Tesla told USTR it was unable to find a manufacturer in the United States, adding that "choosing any other supplier would have delayed the (Model 3) programme by 18 months with clean room setup, 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.

Tesla has a separate pending tariff exclusion request filed in December for duties on the Chinese-made Model 3 Center Screen.

Other exclusion requests also cited the lack of U.S. sources. Kawasaki said there are no industrial robots manufactured in the United States, and it only produces robots in China and Japan.

In a previously unreported request, Tesla also asked USTR to waive tariffs on the 17-inch cockpit touchscreen control panel that displays navigation, media, audio, climate control, energy display, and all in-cabin controls.

Other automakers have sought similar exemptions but have not yet received answers.

General Motors Co in late July sought an exemption to a 25 percent U.S. tariff on its Chinese-made Buick Envision sport utility vehicle. The Envision accounted for nearly 15 percent of U.S. Buick sales last year.

GM has also sought exclusions for dozen of parts, including push button ignition switches and transmission bearings.

Nissan Motor Co and Fiat Chrysler Automobiles NV have also filed exclusion requests for parts, while Uber Technologies Inc asked for an exclusion for electric bikes rented through the Uber app.

Even if the United States 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.

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 has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)