DIRECT DIAL/EMAIL

DMurphy@GDLSK.com

United States Trade Representative

Office of the U.S. Trade Representative

600 17th Street, N.W.

Washington, DC 20508

Attention: USTR Assistant General Counsel Arthur Tsao

September 21, 2018

Re: Docket No. USTR–2018–0025

PUBLIC DOCUMENT 

Request for Exclusion from the Determination of Action Pursuant to 

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

Technology Transfer, Intellectual Property, and Innovation 

Staples Contract & Commercial LLC

Our Reference: 7530-0890001

Dear Mr. Tsao:

In response to published notice,

1 on behalf of Staples Contract and Commercial LLC, 500 

Staples Drive, Framingham, MA 01702 (“Staples”), we respectfully request that certain 

automated guided vehicle (AGV) products used in distribution centers be excluded from the 

additional duties for the following reasons:

• Staples has no alternative source for supply, in the United States or elsewhere, for 

these products;

• Staples will suffer economic harm to its significant distribution operations in the 

United States, resulting in price increases for businesses that rely on Staples for 

their workplace solutions, and reducing Staples’ ability to create jobs by investing

in new warehouses; and

• Staples’ relationship with the supplier of these products does not implicate the 

concerns raised by China’s technology strategy.

 

1

 Procedures to Consider Requests for Exclusion of Particular Products from the Determination of 

Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, 

Intellectual Property, and Innovation (Docket Number USTR–2018–0025), 83 Fed. Reg. 32181 (July 11, 

2018). 
2

Staples is the purchaser of these products in the United States following importation from 

China. Staples does not resell the product after importation. As such, please note that in 

response to Question 11 of the Form to Request Exclusion of Product, the gross sales amount is 

zero percent.

 These products are classified under Harmonized Tariff Schedules of the United States 

(HTSUS) subheading 8427.10.8060, which provides for “fork-lift trucks; other works trucks 

fitted with lifting or handling equipment: Self-propelled trucks powered by an electric motor: 

Other: Automated guided vehicle (AGV).” Parts and components of the products are classified 

under HTSUS 8431.20.00 00 which provides for “parts suitable for use solely or principally with 

the machinery of headings 8425 to 8430: Of machinery of heading 8427.” 

Staples helps businesses work better by providing industry-leading products, services,

and expertise across office supplies, facilities, breakroom, furniture, technology, promotional 

products, and print and marketing services. Headquartered near Boston, Massachusetts, Staples

supports businesses of all sizes in the United States and Canada, with fast delivery capabilities 

across multiple channels, including direct sales, e-commerce and mobile. Staples currently has 

[__] distribution centers in the United States, with each one employing between [__] and [__]

people, forming the backbone of Staples’ supply chain operations.

I. PRODUCT DESCRIPTION

The products in question are components of a modular storage fetching system for 

inventory distribution centers, known as automated guided vehicles (AGVs). The components 

are imported together as a whole to form the [ ] model of AGV. The [ ] AGVs 

include a retrieval mechanism to pick batches of inventory from warehouse shelves into a cart, 

and a transport mechanism to move the cart to stations where Staples employees can assemble 

the inventory into specific orders for shipment to customers. The [ ] AGVs optimize the 

stations to allow employees to process a greater number of orders in a given amount of time, 

allowing Staples to compete from an efficiency perspective with Amazon and other large 

distributors. The [ ] AGVs also reduce the distance an employee has to walk on a given 

shift and save employees from having to move larger pallets from point to point within the 
3

warehouse, resulting in improved workplace health and safety. Staples’ employees are excited to 

be a part of implementing this next-generation solution. As detailed below, Staples is creating in 

the United States the intellectual property necessary to integrate and deploy the [________] 

AGVs in its warehouse environment, and retains full ownership of those developments. 

II. THE EXCLUSION CAN BE EASILY ADMINISTERED

The items can be identified by U.S. Customs & Border Protection based on the following 

factors on each customs entry. 

• Importer: Great Star Industrial USA, LLC, 9836 Northcross Center Court, 

Huntersville, NC 28078, [IOR No. ___________]

• Seller: Hangzhou Great Star Industrial Co., Ltd, No. 35, Jiuguan Road, Juibao 

Town, Hangzhou, Sheijiang Province, China 310019. MID: CNHANGREHAN.

• Manufacturer: Zhejiang Guozi Robotics Co., Ltd, 66 Dongxin Ave Building 4 

Floor 5, Hangzhou, Zhejiang, China 310053. MID: CNZHEGUO66HAN.

2

• Ultimate Consignee: Great Star Industrial USA, LLC, 9836 Northcross Center 

Court, Huntersville, NC 28078, [IOR No. ______________]

• Model Number: [_______________]

III. THE PRODUCTS ARE NOT AVAILABLE TO STAPLES FROM ANY 

OTHER SOURCE

Staples began experimenting with AGVs in its warehouses in 2005, with Kiva Systems, 

Inc. (“Kiva”), acquired by Amazon.Com, Inc. (“Amazon”) in 2012, as the supplier. In 2015, 

Kiva changed its name to Amazon Robotics, LLC and it became increasingly clear that (i) AGVs 

would be critical to fulfilling shipments to customers at a similar speed and cost to Staples’ 

competitors, including Amazon, and (ii) Amazon would no longer sell the Kiva AGVs or support 

those already purchased by other distributors, which Amazon confirmed in writing in early 2018. 

As a result, Staples ramped up its AGV deployment strategy and undertook a thorough

search for alternative suppliers, including multiple manufacturers based in the United States.

Staples found that the only vendor offering a combination of manufacturing capabilities and 

expertise in AGV dispatch systems comparable to Kiva, was Great Star Industrial USA, LLC and 

 

2 The MID was formerly CNZHEGUO309HAN.
4

its affiliated Chinese manufacturing operations (“Great Star”). For example, start-up companies 

in the United States like Locus Robotics, 6 River Systems, and Fetch might be able to address 

the transport functionality of the AGVs, but not the retrieval aspect. In addition, Great Star has 

been building AGVs across many different industry applications for a decade, and Staples 

believes any other supplier would require roughly $100 million in capital investment to match 

their manufacturing capabilities. 

On [_________], Staples and Great Star entered into a [____] supply and maintenance 

contract, which can only be terminated for [___________________________ 

__________________________________________]. The parties committed to a long-term 

relationship due to the investment necessary to jointly develop the hardware, software and 

systems for integrating Great Star’s AGVs into Staples’ warehouses. The parties have 

collaborated to create a solution where the technology owned by Staples, together with Great 

Star’s AGV technology such as chassis technology, traffic control, safety systems, and charging, 

is crucial for performance and product continuity in Staples’ supply chain. Staples is therefore 

contractually bound to source the AGVs from Great Star, and cannot procure them from any 

other supplier. 

Even if Staples was not contractually prevented from engaging an alternative supplier (if 

such supplier even existed), Staples estimates that it would still take until [___], along with 

significant capital expenditure, to develop the alternative technology required for any other

AGVs to operate in Staples’ warehouses. Staples has recently deployed AGVs in warehouse 

locations in [___________________], with planned deployments in

[____________________________________]. Staples would simply be unable to source the 

AGVs from any other supplier in the next [_____________], as required to maintain 

competitiveness in its supply chain.

IV. THE 301 DUTIES WILL CAUSE ECONOMIC HARM TO UNITED 

STATES BUSINESSES

Based on the long-term contract with Great Star, an initial [____] AGVs

[____________________] were supplied in 2017. (Staples did not import this product prior to 

2017.) For 2018, Staples will acquire [_________] AGVs at a cost of [$____________]. Staples
5

projects that it will purchase [__________] AGVs through [___] at an estimated cost of 

[$_________]. The additional duties will increase Staples’ cost for these AGVs by 

[$____________] in 2018 and [$________] through [____]. Please note that these projections 

are based on actual historical costs; costs may vary in 2018 and in the future. 

Staples would have no choice but to pass on these duties in the form of price increases to 

its customers. As described above, Staples must purchase the AGVs to stay competitive with 

Amazon and other distributors, and can only source them from China. Notably, Amazon would 

have a significant cost advantage and unfair competitive edge if the additional duties are 

imposed, since it has exclusive access to the former Kiva products. Staples’ customers include 

United States businesses of all sizes across many industries, and raising prices for the solutions 

that Staples provides would either harm Staples’ business or harm its customers, reducing 

economic growth in both cases. 

The duties would also force Staples to cancel or delay its investment in additional 

warehouse space in the United States, and impact its ability to create jobs. In 2018, Staples has 

built [____] large distribution centers in [____________] costing over [$________] for each 

building. These investments require using newer AGV technology to build the foundation for 

next generation fulfilment so that Staples can continue to stay competitive with Amazon and 

other competitors. These new distribution centers will generate more local employment, provide 

well-paying jobs, and foster community growth. 

Staples does not believe that employment in warehouse operations has been stunted by 

the increasing use of AGVs. According the Bureau of Labor Statistics, overall employment in 

warehousing and storage industry has increased steadily from 622,000 in January 2010 to 1.014 

million in January 2018, or a 36.6% increase. Additionally, as the labor market has tightened 

significantly over the past 24 months, the health and safety benefits of a modern warehouse 

supported by AGVs and related training opportunities would be attractive in securing needed 

employees. Subjecting the AGVs to the duties would cause economic harm by hampering 

Staples’ business growth and burdening its ability to invest in additional warehouses, thereby 

also reducing job creation. 

In summary, the duties would delay or prevent Staples’ plans for modernization of its 

remaining [____] distribution centers over the next [____] years, reducing associated
6

investments across the United States; negatively affect prices offered to U.S. businesses, 

impacting Staples’ ability to compete effectively with Amazon which would have an unfair 

advantage through its exclusive access to the Kiva AGV technology; and hurt new job creation 

in the states where Staples operates its distribution centers and where its customers do business.

V. THE [____________]AGVS DO NOT IMPLICATE CHINA’S 

TECHNOLOGY STRATEGY

Staples is well aware of the United States Trade Representative’s findings of its 

investigation into China’s acts, policies and practices related to technology transfer, intellectual 

property and innovation. However, none of those acts, policies and practices are involved in the 

case of the AGVs. Great Star informed us that there is no government ownership of Hangzhou 

Great Star Industrial Co., Ltd or Great Star Industrial USA LLC, and that Hangzhou Great Star 

stock is and has been traded on the Shenzhen exchange since 2010. Great Star further informed

us that the [____________] AGVs are not related to the “Made in China 2025” program, that 

Hangzhou Great Star has not received and does not receive any Chinese government support 

under the “Made in China 2025” program or any other Chinese government program, and that

Great Star developed the technology for the [___________] AGVs independently of any U.S. 

technology.

In addition, Staples is not attempting to do business in China when it comes to the 

[___________] AGVs, and is therefore not subject to any foreign ownership restrictions or 

technology transfer requirements. Similarly, there is no outbound investment from China to the 

United States, and Staples believes the deployment of the AGVs in its distribution business is not 

strategically important to the Chinese government’s industrial policy objectives. Neither is there 

any cyber-theft of intellectual property or sensitive commercial information related to the 

[_____________] AGVs. Staples is merely buying products that are manufactured in China, 

from a supplier whose manufacturing activities pre-date, and are far broader than, its relationship 

with Staples. As noted above, the duties will only harm businesses in the United States, and will 

not have a negative or deterrent impact on the Chinese manufacturer, as Staples is contractually 

obligated to buy the [____________] AGVs only from Great Star. 
7

More importantly, Staples was not subjected to any mandatory adverse licensing terms 

due to China’s technology regulations. The contract with Great Star provides that Staples will 

own the intellectual property developed to integrate the [_____________] AGVs into the 

warehouse environment, including but not limited to [__________________________] (the

“Staples IP”). The Staples IP is necessary to deploy the [____________] AGVs in an inventory 

distribution center, and Staples negotiated and will negotiate licenses to the Staples IP on an 

arms-length basis. 

In conclusion, because the [____________] AGVs in question can only be sourced from 

Great Star through [____]; the duties could cause severe economic harm; and the products are 

not strategically important, Staples requests that these products be excluded from the application 

of the 25% duty effective July 6, 2018. 

CERTIFICATION

We are requesting business confidential treatment, and hereby certify that disclosure of 

the information would endanger trade secrets or profitability, and that the business confidential 

information bracketed above is not customarily be released to the public.

Please contact us if you have questions about this submission.

Respectfully submitted,

GRUNFELD, DESIDERIO, LEBOWITZ, 

SILVERMAN & KLESTADT LLP

David M. Murphy

Tracey T. Gonzalez

10034498_1