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1001 Pennsylvania Avenue, NW, Washington, DC 20004-2595  p202 624-2500  f202 628-5116

October 4, 2018

VIA ELECTRONIC FILING

SUPPLEMENTAL NARRATIVE

The Honorable Robert E. Lighthizer Docket. No.: USTR-2018-0025

United States Trade Representative

Office of the United States Trade Representative

600 17th St. NW

Washington, DC 20508

Re: Nissan North America America’s Request for Exclusion from Section 301 Tariffs for

OEM and Replacement Auto Parts

Dear Ambassador Lighthizer:

On behalf of Nissan North America, Inc. (“Nissan”), we hereby submit our requests to exclude

certain OEM and replacement parts from the tariffs enacted pursuant to Section 301 of the Trade Act

of 1974 (19 U.S.C. § 2411). These products are not economically and commercially available outside

of China, are not products benefiting from the “Made in China 2025” program, and the imposition of

additional duties on these products would significantly undermine Nissan’s competitive advantage in

the U.S. and global markets, while providing no beneficial impact to a U.S. entity. For these reasons,

Nissan respectfully requests that products discussed below be excluded from the Section 301 tariffs.
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1. Background

Nissan North America is a leading manufacturer of automobiles and auto parts in the

U.S. Headquartered in Franklin, Tennessee, Nissan’s operations include automotive styling,

engineering, and manufacturing throughout the country. Nissan maintains manufacturing facilities

in the U.S. for the production of core-models: vehicle manufacturing plants in Smyrna, Tennessee

and Canton, Mississippi, and two powertrain plants in Decherd, Tennessee. These facilities have a

combined production capacity of 1,090,000 vehicles and 1,500,000 powertrains annually. Nissan’s

Smyrna Vehicle Assembly Plant was the largest producing automotive assembly plant in North

America in 2017. Since 1981, Nissan has invested $11.8 billion into manufacturing in the U.S., and

it currently employs over 22,000 U.S. workers. We purchased $13 billion worth of U.S. parts and

materials in 2017, by partnering with more than 500 local suppliers in 30 states.

While Section 301 tariffs harm Nissan, they provide no benefits to the U.S. economy. A typical

automobile is comprised of 15,000 parts, from engines and transmissions to electronic sensors,

dashboard components, tires, and windshield wiper motors. Integrated supply chains that use domestic

and imported parts are essential for Nissan’s auto production and disruption of that complex supply

chain would have an adverse impact on Nissan’s U.S. operations.

2. Additional Tariffs Will Increase Costs and Impede Nissan’s Ability to

Compete on an International Scale

Nissan operates in the global automotive industry where competitors outside the United

States use similar parts and manufacturing/assembly processes. We compete on the basis of

innovation, design, reliability and efficiency. Supplemental duties imposed on component parts

produced outside the United States will create a competitive disadvantage for U.S. automobile

producers in the global market. Non-U.S. producers will be able to export finished vehicles to United
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States and emerging markets by using components without tariffs, while directly competing with

U.S.-produced automobiles that incorporate imported parts with supplemental tariffs. When Nissan

sells U.S- produced vehicles in the U.S. and other countries, Nissan will do so with a higher cost

structure than its competitors producing outside the United States, resulting in a competitive

disadvantage to Nissan in the United States and in export markets. In turn, this will increase the

incentive to move production out of the United States in order to remain competitive in the global

market.

3. Production of Subject Auto Components Are Concentrated in China

The auto parts industry is large and diverse, with imported products ranging from simple parts

such as windshield wiper blades to complex units such as engines. Automobile part manufacturers are

generally classified into tiers. Tier 1 manufacturers produce components and systems for new vehicles,

using parts furnished by Tier 2 and 3 suppliers. Tire 2 and 3 manufacturers typically focus on discreet

sub- products, such as gaskets or valves.

The U.S. auto parts industry is primarily in the Tier 1 segment and approximately two-thirds

of parts sold domestically are sourced from suppliers located in the United States. An estimated 70%

of the value originates with Tier 1 suppliers.1 Conversely, Tier 3 part suppliers are concentrated in

China, with China specializing in parts with lower value-added such as jacks, knobs, lights, rearview

mirrors, and exhaust manifolds. 2

Nissan imports some Tier 3 parts from China and incorporates them into more complex

components and automobiles that are produced in the U.S. These parts are imported due to centralized

global production within specific geographic regions, such that parts that are common to globally

1 See CRSReport forCongress, US-Chinese MotorVehicle Trade:Overviewand Issues(August 2013).

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Id.
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distributed vehicles are produced in a single country or region to maximize economies of scale and

promote efficient manufacturing. This is standard practice within the automotive industry. Relocating

portions of the supply chain to the U.S. would be a costly, rigorous and time consuming process, as

stated in the previous section.

The parts are also associated with older vehicle models and carried over to current

models. Retooling a new supplier for replacement parts for an older model year would be cost

prohibitive as substantial tools and R&D costs would be incurred to set-up set up a new supplier of

low-volume replacement parts.

Additionally, various types of auto parts affected by the tariff increases include electronic

components, such as junction block assemblies, terminals and relays. Nissan strategically plans

regional concentration of global production. Relocation of individual parts would substantially

increase production cost.

4. The Automotive OEM Qualification Requires an Extended Transition Time When

Changing Suppliers

Changing suppliers to mitigate the tariff impact is not a viable option for Nissan. One of the

automotive industry’s most widely used international standards for quality management is ISO/TS

16949. An ISO/TS 16949 certification is required for vendors suppling materials and components to

the automotive industry.3 As a result, the universe of potential alternate suppliers is limited to those

suppliers with existing ISO/TS 16949 certifications. The process for ISO/TS 16949 certification is at

least one year, and more typically 2 years. In the absence of a ISO/TS 16949 certification, Nissan is

generally unable to purchase from a supplier. Given the extended period to identify and certify new

3 As fromSeptember 2018,ISO/TS 16949:2009 will become IATF 16949:2016, see, e.g.,

https://isosa fe.com.au/blog//how -to-quickly-migrate -from -isots-169492009-to-iatf-16949 and

http://www.sgs.com/e n/news/2016/06/transition-to-the -new-iso-ts-16949-2016-sta ndard-with-sgs.
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suppliers, simply changing its supply base to reduce the impact of the 301 Tariffs is not possible.

Beyond ISO/TS 16949, all raw materials and components incorporated into Nissan vehicles

undergo a rigorous selection and approval process. First, part and material development requires

several months of research and development. The development process is followed by the qualification

process which takes place between Nissan and its suppliers to ensure the properties meet Nissan’s

requirements. Nissan can only introduce the parts into the vehicle after the part has completed the

qualification process.

The qualification process is lengthy and arduous with complicated steps involved. It begins with

the co-development of a new component with a proposed supplier. It then follows with testing and

developing samples which requires significant technical requests. Nissan then develops material

performance requirements, validates the performance of the material, reviews the qualification results,

and approves the supplier’s part to be used in OEM production. While the qualification process varies

by component, the qualification timeframe ranges from 12 to 20 months. The chart below illustrates a

typical qualification cycle in the automotive industry:
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5. The Subject Components Are Not Strategically Important or Related to “Made in

China 2025” or Other Chinese Industrial Programs

The Section 301 tariffs are specifically designed to protect U.S. manufacturers from the impact

of the Chinese government’s China 2025 plan. To the best of Nissan’s understanding, none of the

Nissan imported products supports the China 2025 efforts. China’s polices in the automotive sector

are limited to the production of new energy vehicles such as electric and fuel cell vehicles, and

components dedicated to those vehicles. This includes developing engines, automatic transmission

assemblies, batteries, electric motors, sensors, and electronic fuel cells for electric and fuel cell

vehicles. The “Made in China 2025” is specifically limited to the following automotive parts:

High-efficiency internal combustion engine: Passenger car gasoline engine thermal

efficiency ≥ 40% with domestic component rate of 40%. Heavy commercial vehicle

diesel engine thermal efficiency ≥52% with domestic component rate of 60%.

Key components for high-efficiency internal combustion engine: Breaking through the

technology of variable valve, variable compression ratio, pressurization, and efficiency

of post-processing, with a goal of reaching the market share of 35%; Breaking through

the technology of 250bar gasoline injection and 2000bar or above diesel injection, with

a goal of reaching the market share at 15%; Breaking through the waste recovery

technology.

Electronic control system: The engine and transmission electronic control system. The

domestic market shares of domestic core controllers shall reach to 20%; key sensors

shall reach to 80%; hybrid core controllers shall reach to 80%; the chips for controllers

shall reach to 30%; and the application of independent real-time operating system shall

reach to 50%.

Hybrid motor/battery/special engine: Passenger car -- 20s effective specific power ≥

4kW / kg; commercial vehicle -- 30s effective ratio torque ≥ 19Nm / kg; the battery

cell power exceeding 8kW / kg; inverter power density exceeding 20kW / L with an

efficient, and highly reliable special engine for hybrids.

Medium and low voltage assist and energy recovery technology: The market share of

domestic parts reach to 30%, with a goal of reducing the battery cost to 3.6 yuan/Wh,

and achieving the integrated power unit power density ≥11kW/L (including heat sink).

Efficient automatic transmission: Breaking through the key technologies of dual clutch

automatic transmission (DCT), continuously variable transmission (CVT), automatic
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transmission (AT) above 6 speeds, mechanical automatic transmission (AMT), etc.,

and achieving industrialization with a goal of reaching for more than 40% of the market

share.

Key components for automatic transmission: Breaking through the technology for

clutch assembly, high-pressure silent oil pump, electro-hydraulic coupling hydraulic

valve body, and hydraulic torque converter, and achieving industrialization with a goal

of reaching for more than 40% of the market share of the key components.

Lightweight parts: Lightweight parts such as steel/aluminum hybrids, aluminum/fiber,

and carbon fiber bodies with a goal of reaching to 20% of the market. Application of

lightweight technology on body, body closures, wheels, subframes, transmission

housings, brakes, wiring harnesses, wire controls and more.

Low rolling resistance tire: Improving the wet-slip, wear and noise performance of

domestic energy-saving tires, reducing the rolling resistance by 30%, and reducing the

fuel over 6%. The goal is to reach for more than 50% of the market share.

None of the component parts imported by Nissan are part of the industries identified above.

Finally, the 301 duties seek to remedy coerced technology transfers via limited joint-venture

partnerships. This consideration is inapplicable to the parts at issue because the Chinese government

permits foreign auto parts companies to own more than 50% of a Chinese parts producer. Many U.S.-

based parts producers have also established operations there such as Delphi, Visteon, Johnson

Controls, Lear, Arvin Meritor, and TRW, along with other leading foreign producers such as Bosch,

Denso, Magna, and Yazaki. Indeed, seven of China’s 10 largest parts manufacturers are foreignbased. Moreover, Nissan has measures to safeguard its proprietary manufacturing and technology

information. Our suppliers have not benefited from the Chinese Government’s acts, policies or

practices identified by the USTR as being unreasonable or discriminatory and that burden or restrict

U.S. commerce. To the contrary, our suppliers increase U.S. commerce by complementing U.S.

operations. Therefore, the technology transfer issues identified by the USTR are inapplicable to the

parts imports by Nissan.
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* * * * * * * 

Request for Confidential Treatment

Nissan hereby requests business confidential treatment for certain information identified in

brackets in the comments above. Nissan certifies that the data include, inter alia, business trade

secrets, commercial or financial information and certain other information, the disclosure of

which would endanger trade secrets or profitability, and that the information would not customarily

be released to the public. Nevertheless, Nissan has provided a public version of this submission

which can be placed in the public file for inspection.
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CONFIDENTIAL DOCUMENT

---NOTFOR PUBLIC RELEASE---

Attachment 1

Specification Sheet
Organization Name:

Note: Representatives submitting on behalf of an organization must enter information below.

Requestor Representative:

Section 301 Investigation: China's Acts, Policies, and Practices Related to Technology 

Transfer, Intellectual Property, and Innovation - Form to Request Exclusion of Product

When submitting a product exclusion request using this form, enter the specified 

information in the following fields and explain the basis and rationale for your statements. 

By completing this form, you certify that the information provided is complete and 

correct to the best of your knowledge. 

1. Indicate whether the comment contains business confidential information (BCI), is a public

document, or is a public version of a BCI document.

3.

2. Please provide a complete and detailed description of the product of concern:

4.

5. Requestor's relationship to the product:

CONTINUED BELOW

*

10-digit HTSUS item number* for product you wish to address in this product exclusion request:

Use numerical characters only with no special characters (example: 1023456789). For help in finding 

the HTSUS item number associated with your product, see https://hts.usitc.gov/

1

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6. Does this submission in regulations.gov include additional attachments?

Please indicate whether any additional attachment contains business confidential

information (BCI), is a public document, or is a public version of a BCI document.

VERSION 1

Requestor Information

Requestor Name (Last, First):
END 2

8. Is this product, or a comparable product, available from sources in the United States?:

VERSION 1

11. Please provide information in support your request, taking account of the instructions

provided in Section B of the Federal Register notice (note: text entered below can extend

beyond the apparent size of this box).

9. Is this product, or a comparable product, available from sources in third countries?:

10. Please provide the value and quantity (with units) of the Chinese-origin product of concern

that you purchased for each calendar year specified. Limit this figure to the products

purchased by your firm (or by members of your trade association) alone. Please provide 

estimates if precise figures are unavailable.

2016 Value:

2015 Value:

2017 Value:

2016 Quantity:

2015 Quantity:

2017 Quantity: