ii

TABLE OF CONTENTS 

I. EXECUTIVE SUMMARY .................................................................................................. 1 

II. U.S. STAKEHOLDER FOR THIS REQUEST .............................................................. 3 

III. BACKGROUND TO EXCLUSION REQUEST ............................................................ 4 

IV. DESCRIPTION OF PCBA FOR EXCLUSION REQUEST ...................................... 6 

V. USTR SHOULD EXCLUDE PCBA .................................................................................. 7 

A. It Is Not Feasible To Find Alternate Source For PCBA ................................................. 7 

B. Imposition Of Additional Tariffs Causes Undue Harm To U.S. Interests ................. 9 

C. Tariff On PCBA Does Not Remedy Chinese Industrial Policy .................................. 11 

D. Additional Factors Support Exclusion Of PCBA ........................................................... 12 

VI. CONCLUSION ...................................................................................................................... 15 
1

I. EXECUTIVE SUMMARY OF REQUESTED EXCLUSION UNDER 

SUBHEADING 9030.90.2500 FOR PRINTED CIRCUIT BOARD ASSEMBLIES 

On behalf of Varex Imaging Corporation (“Varex”), an American manufacturer of 

components for medical X-ray imaging equipment based in Salt Lake City, Utah with 1,400 

employees across the United States, we respectfully submit these comments in support of Varex’s 

request to exclude its imported printed circuit board assemblies for X-ray detectors (“PCBA”), 

which are classifiable under subheading 9030.90.2500 on the Harmonized Tariff Schedule of the 

United States (“HTSUS”), which specifically covers printed circuit assemblies for radiation 

detectors.2

 We make this submission pursuant to the notice and request for comments (“July 11 

Notice”) that the Office of the United States Trade Representative (“USTR”) published in the 

Federal Register on July 11, 2018.3 As explained below, there are strong and compelling reasons 

to exclude the PCBA from the additional Section 301 tariffs that USTR has imposed at 25% ad 

valorem on certain Chinese-origin goods, which went into effect on July 6, 2018. These reasons 

are vital to Varex and the United States’ continued technological leadership in the field of 

diagnostic x-ray imaging. Utah’s Congressional delegation supports Varex’s request. 

The following list summarizes the key considerations for this exclusion request. 

 As an American company, Varex relies on the imported PCBA to manufacture 

products in the United States for global sales. Varex’s export-focused strategy 

contributes positively to the U.S. balance of trade generally and with China in 

particular. 

 Despite fierce competition overseas, Varex is a leading manufacturer of X-ray 

imaging components and the only manufacturer of its kind remaining in the United 

States. Its leadership could be lost as a result of the Section 301 tariffs on parts that 

it sources from China and from retaliatory tariffs by China on Varex’s products. 

                                                            

2

 Please see Exhibit 1 for a full description of the PCBA that are the subject of this exclusion request. Please see 

Exhibit 2 for a copy of a customs entry summary for one of these importations. 

3

 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, 83 Fed. Reg. 32,181 (USTR July 11, 2018) (Docket Number USTR-2018-0025). 
2

 Because of federal regulations and practical limitations, it is not feasible to find an 

alternate source for the PCBA without significant delay and cost. Varex carefully 

vets each supplier to ensure the high quality of Varex’s products. Because Varex’s 

customers are original equipment manufacturers (“OEMs”) who incorporate 

Varex’s products into completed X-ray imaging systems and must be able to rely 

on Varex’s high quality, Varex could lose sales during a lengthy vetting process to 

find a new supplier. The OEM customers may switch to Varex’s foreign 

competitors rather than undergo this delay. 

 The 25% tariff places Varex at a severe disadvantage vis-à-vis foreign competitors 

in the European Union (“EU”), Japan, and South Korea who are not subject to this 

increased cost of production. 

 Varex employs about 1,400 manufacturing and other employees in Salt Lake City, 

Utah and across the United States. These jobs are potentially at risk if Varex loses 

sales to foreign competitors who are not subject to the cost increase. 

 As a leading innovator in X-ray imaging equipment, Varex needs strong global 

sales to support its product development efforts and maintain the United States’ 

technological advantage in this industry. The loss of sales attributable to this 25% 

tariff will chip away at America’s technological edge in X-ray imaging products. 

 Despite the fact that Varex’ fastest growing end market is China, Varex has fought 

hard to keep the vast majority of its manufacturing operations in the United States 

in part to protect its technological advantage against loss of control over intellectual 

property that might occur if it moved manufacturing abroad. Varex faces fierce 

competition from foreign companies, however, and the Section 301 tariffs will 

impact its ability to remain competitive into the next technological cycle in the 

constantly innovating medical device field. 

 The imposition of the 25% tariff on the PCBA has no effect on China’s “Made in 

China 2025” innovation-focused policy. The PCBA are merely low-value inputs 

for the high-tech products that Varex continues to make in the United States. 

 The fact that there have been no trade remedy proceedings with respect to the 

PCBA under U.S. international trade laws, and the absence of any submissions in 

the previous Section 301 hearings in support of tariffs on these items, demonstrate 

that there are no U.S. producers who have any interest in obtaining this tariff. 

 The tariffs inevitably will have negative impacts on the consumers of Varex’s 

products in the United States, including healthcare providers who necessarily will 

incur increased equipment costs that add to the already high cost of healthcare in 

America. The tariffs thus run counter to the general public policy to rein in rising 

healthcare costs in the United States. 

 Because they fully understand the above burdens placed upon Varex by the tariffs, 

Utah’s Congressional delegation supports Varex’s exclusion request. Please see 
3

Exhibit 3 for a letter from Senator Orrin G. Hatch, and Exhibit 4 for a joint letter 

from Representatives Chris Stewart, Mia Love, and John Curtis. 

II. U.S. STAKEHOLDER FOR THIS REQUEST 

Varex is a leader in the design and manufacture of X-ray tubes, high energy x-ray sources 

and linear accelerators, flat panel image detectors, connectors, collimators and image processing 

software; all key components of X-ray imaging systems. From medical imaging that detects, 

diagnoses, and protects patients, to other applications in cargo screening and border security, 

Varex’s components are widely used by X-ray imaging system manufacturers. With its corporate 

headquarters in Salt Lake City, Utah, and manufacturing operations at multiple locations in the 

United States, Varex employs approximately 1,400 persons in the United States, and more than 

2,000 employees worldwide. 

In the face of fierce competition overseas from the EU, Japan, and South Korea, Varex is 

the only manufacturer of its kind remaining in the United States. Established as its own separately 

publicly traded company in January 2017, Varex was previously a subsidiary and part of Varian 

Medical System, Inc., a world leader in X-ray imaging technology. Varex inherited more than 70 

years of experience as an industry innovator, having contributed significantly to the United States’ 

technological edge in this area. More information about Varex and its products can be found on 

the company’s website at www.vareximaging.com. 

Varex seeks to build upon its technological foundation and promote U.S. commercial 

interests around the world through the sales of U.S.-made X-ray imaging components. To realize 

this outward-looking business strategy, Varex needs to invest in ongoing research and 

development and to improve the manufacture of high-quality products through the manufacturing 

know-how and hard work of its U.S.-based employees at multiple locations across the country. 

The importation of low cost inputs is a critical part of that long-term growth strategy, which allows 
4

Varex to compete with producers who are based in the EU, Japan, and South Korea. 

Varex (and its predecessor Varian) have spent many years and through significant effort to 

identify, select, and qualify its foreign suppliers, who must satisfy Varex’s rigorous standards to 

comply with U.S. federal medical device safety regulations and to provide customers with highquality, reliable medical products. Because of this significant investment in the careful 

development of its supply chain, Varex stands to suffer significant economic adversity from the 

25% tariff, as it would be extremely difficult and time-consuming to find an alternate source, while 

losing sales to foreign competitors who do not suffer from the same disadvantages. 

USTR’s Section 301 tariff threatens to erode Varex’s leadership position. Unless an 

exclusion is granted for parts that Varex imports to manufacture its X-ray imaging components, 

Varex will face additional hurdles that its foreign competitors do not encounter. Foreign 

competitors will continue to benefit from lower-cost inputs from China without facing the same 

25% increase to their input cost. Furthermore, China has imposed retaliatory tariffs on Varex’s 

X-ray imaging products in that market in response to the Section 301 tariffs, which threatens 

Varex’s plans to expand overseas sales and contribute to the U.S. economy. 

III. BACKGROUND TO EXCLUSION REQUEST 

On April 6, 2018, USTR published a notice (“April 6 Notice”) that invited comments on a 

proposed 25% ad valorem tariff on certain imports from China that represent an estimated annual 

aggregate value of $50 billion.4

 The proposed tariffs are intended to address USTR’s 

determination that the Government of China engages in certain trade practices that are adverse to 

U.S. commercial interests. USTR specifically cited an industrial innovation policy called “Made 

                                                            

4

 Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action 

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

Property, and Innovation, 83 Fed. Reg. 14,906 (USTR Apr. 6, 2018). 
5

in China 2025” that seeks to support the growth of native industries in several key sectors.5 

Following that announcement, USTR received numerous public comments on the potential 

impact of these proposed tariffs on U.S. industries and consumers. These commentators included 

both manufacturers of medical devices who noted that the increase to cost of production would 

have severe impacts on their business, as well as consumers of medical X-ray devices who 

expressed concern for the potential increase to the already high cost of healthcare in the United 

States. As examples, we attach as Exhibit 5 submissions by the Medical Imaging & Technology 

Alliance; Advanced Medical Technology Association; and American Medical Association.

USTR also convened public hearings on May 15 to 17, 2018 on the proposed list of tariffs. 

During those three days, not a single person spoke in favor of the 25% tariffs on medical X-ray 

imaging equipment and parts. In fact, the only person to speak on the subject argued against the 

imposition of tariffs on medical X-ray imaging equipment and parts, because of its severe impact 

on U.S. manufacturers who rely on imported parts from China.6

 We attach the relevant excerpt 

from the Hearing Transcript as Exhibit 6. 

On June 20, 2018, USTR published a finalized list of Section 301 tariffs on 818 HTSUS 

subheadings (“List 1”).7

 USTR explained that it accounted for both the written comments and 

testimony at the hearings to devise that finalized list, which represents an estimated $34 billion in 

annual imports from China. USTR also indicated that it only included HTSUS subheadings that 

relate to “industrially significant technology,” which mostly means the “Made in China 2025” 

                                                            

5

 Id. at 14,907. 

6

 Section 301 Tariffs Public Hearing Transcript, May 16, 2018 (USTR-2018-0005-3075), at 115-117 (testimony of 

Kyle Pitsor, National Electrical Manufacturers Association). 

7

 Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to 

Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property and 

Innovation, 83 Fed. Reg. 28,710 (USTR June 20, 2018). 
6

industrial policy.8 USTR announced that List 1 would take effect on July 6, 2018. 

In the July 11 Notice, USTR set forth a process for U.S. stakeholders to seek relief from 

List 1. According to that notice, each submission must contain the following information: 

 Product description 

o “Identification of the particular product in terms of the physical 

characteristics (e.g., dimensions, material composition, or other 

characteristic) that distinguish it from other products within the covered 8-

digit {HTSUS} subheading. 

o “The 10-digit subheading of the HTSUS most applicable to the particular 

product requested for exclusion.” 

o The “annual quantity and value of the Chinese-origin product that the 

requestor purchased in each of the last three years.” 

 Factors in support of exclusion 

o “Whether the particular product is available only from China,” including 

“whether the particular product and/or a comparable product is available 

from sources in the United States and/or in third countries.” 

o “Whether the imposition of additional duties on the particular product 

would cause severe economic harm to the requestor or other U.S. interests.” 

o “Whether the particular product is strategically important or related to 

‘Made in China 2025’ or other Chinese industrial programs.” 

o Any additional information that may be relevant for consideration. 

As explained below, Varex’s requested exclusion satisfies all of these factors. 

IV. DESCRIPTION OF PCBA FOR EXCLUSION REQUEST 

Varex designs and manufactures its X-ray imaging components in the United States, which 

downstream X-ray systems manufacturers purchase for incorporation into completed X-ray 

diagnostic or other medical imaging systems. To manufacture its components, Varex uses some 

imported parts that Varex also designed itself, including the PCBA that Varex uses to manufacture 

                                                            

8

 Id. at 28,711. 
7

its components. 

The PCBAs that are the subject of this exclusion request is classifiable under HTSUS 

9030.90.2500, because they are printed circuit board assemblies for a radiation detector. The 

imported PCBAs are distinct, because they have certain dimensions and specified part model 

numbers, which identify them as uniquely suited for X-ray flat panel detectors. They are not parts 

for any other type of radiation instrument or apparatus that would be classifiable under the same 

HTSUS subheading. Please see Exhibit 1 for a complete description of the PCBAs that are the 

subject of this exclusion request. Please see Exhibit 2 for a copy of a customs entry summary for 

one of these importations. 

V. USTR SHOULD EXCLUDE PCBA (HTSUS SUBHEADING 9030.90.2500) 

FROM SECTION 301 TARIFFS 

A. It Is Not Feasible To Find Alternate Source For PCBA 

USTR’s July 11 Notice requires an explanation as to “whether the particular product and/or 

a comparable product is available from sources in the United States and/or in third countries.”9

 As 

explained below, Varex cannot find a feasible alternative supplier that is not based in China for 

the PCBA. At present, there are no alternate suppliers in the United States or third countries who 

could provide comparable items, which are designed and manufactured to precise specifications, 

and any switch would require lengthy delays to ensure quality. As such, the List 1 tariffs unfairly 

penalize Varex as an American producer of high-quality X-ray imaging equipment when producers 

in other countries do not encounter this same obstacle. 

Varex (and its predecessor Varian) have invested years to develop a supply chain of 

qualified and reliable Chinese suppliers of the PCBA. This heightened diligence ensures 

                                                            

9

 83 Fed. Reg. at 32,182⸺32,183. 
8

compliance with the requirements of the U.S. Food and Drug Administration (“FDA”), as well as 

the high quality standards that Varex itself requires to satisfy its customers. Because Varex’s Xray imaging products, which incorporate the PCBA, are subject to FDA requirements, this 

stringent vetting process helps to ensure continuing compliance with those requirements. 

This high level of quality is vital to the health and safety of X-ray equipment operators and 

patients, and the performance of the equipment. Unless the flat panel X-ray detectors (which 

incorporates the PCBA) are manufactured precisely, the detectors may not function correctly. The 

flat panel detectors have wide-ranging applications in critical areas such as medical and veterinary 

treatment and security screening devices. It is vital that Varex sources only from reliable suppliers 

who can satisfy Varex’s exacting standards, in order to ensure that the flat panel detectors will 

provide accurate results in the furtherance of public welfare and safety. It is neither practical nor 

responsible to suddenly switch suppliers without ensuring that they are able to produce parts that 

meet FDA’s and Varex’s high standards. 

Varex estimates that it would take ] to identify a suitable alternate supplier 

outside of China. The vetting process requires a supplier to [

]. Varex likely will need to consider and reject a number of potential suppliers before 

identifying a suitable candidate that has both the capacity and ability to meet Varex’s requirements. 

Redacted

Redacted

[
9

Varex’s OEM customers in turn would need to await this lengthy delay from the recertification 

process. These delays could undermine Varex’ leading position in the global market as its OEM 

customers switch to competing foreign sources to avoid this disruption. 

Furthermore, this change in supplier will increase the cost of manufacturing by 

approximately [ ] as compared to importing from China without the 25% tariff. Even 

after switching suppliers, Varex may continue to lose sales to foreign competition from producers 

in the EU, Japan, and South Korea because those rivals are not subject to the same additional cost 

on PCBAs, and thus could competitively price their products to undercut Varex. In view of these 

competitive pressures, there are no real alternatives to sourcing from China without the List 1 

tariffs, because any alternative sources, even if and when found, would still inflict a significant 

handicap on Varex in price competition vis-à-vis foreign producers for international sales – 

including sales of completed X-ray imaging components and systems to China.

B. Imposition Of Additional Tariffs Causes Undue Harm To U.S. Interests

In its July 11 Notice, USTR asks whether “the imposition of additional duties on the 

particular product would cause severe economic harm to the requestor or other U.S. interests.”10 

The List 1 tariffs on PCBAs cause severe harm to U.S. manufacturers like Varex with no 

discernible benefit for U.S. interests. Here is a summary of these considerations. 

 Tariffs are extremely costly to U.S. manufacturing. In 2017, Varex sourced the

PCBA for its U.S. manufactured flat panel detectors from a supplier in China, and

imported [ ] in the aggregate value of [ ] in 2017. Varex

anticipates the need to import PCBA in the aggregate value of

] to meet its requirements. The additional 25% ad valorem tariff on these

imports significantly increases the cost of production.

 Tariffs are counterproductive for U.S. exports. Like other manufacturers, Varex

relies on the selective use of imported inputs to reduce its total cost of production

in order to competitively price its X-ray imaging products. By taxing Varex’s

10 83 Fed. Reg. at 32,183. 

Redacted Redacted Redacted

Redacted

[
10

PCBA at 25%, USTR has introduced an additional cost to production that Varex’s 

overseas competitors do not face. Varex’s competitors in the EU, Japan, and South 

Korea are now in a position to undercut Varex price-wise both in China and around 

the world. 

 Tariffs are counterproductive for rebalancing trade with China. For the same 

reason that tariffs on inputs harm global sales by U.S. manufacturers, the cost 

increase also places Varex’s products at a competitive disadvantage in the Chinese 

market. The loss of sales for U.S. companies, including Varex itself, in China 

adversely impacts the U.S. balance of trade with China. 

 Tariffs cause significantly more harm to U.S. interests than any marginal 

benefit that could be derived. In 2017, total imports from China under HTSUS 

subheading 9030.90.2500 amounted to $3,966,747, as compared with total overall 

imports of $505,467,954,379 from China. Thus, the total contribution of items 

under this tariff subheading to the U.S. trade deficit with China was only about 

0.0008 percent. In view of this fact, the List 1 tariff has negligible impact on the 

overall trade deficit with China, while undermining American manufacturers like 

Varex. 

 Tariffs actually promote the “Made in China 2025” industrial policy. Because 

China’s X-ray equipment industry is in its early stages, it is not able to compete 

generally with well-known brands from other countries. By increasing the cost of 

U.S.-made products and making them less competitive for sales in China, the 

Section 301 tariffs will simply reduce the presence of U.S. goods in China, which 

in turn protects the new Chinese industry from American competition and only 

serves to help incubate and develop such nascent Chinese competition against U.S. 

producers such as Varex. This outcome is directly contrary to USTR’s stated 

purpose in issuing the List 1 tariffs. 

 Tariffs jeopardize American jobs in manufacturing. Because the increased cost 

of production will make U.S.-made goods uncompetitive relative to foreign-made 

goods, there is a real risk that U.S. manufacturers like Varex will lose out to foreign 

competitors not just in overseas markets, but also within the U.S. market itself. 

Foreign competitors from the EU, Japan, and South Korea could make significant 

inroads into the U.S. market for X-ray imaging equipment, because goods 

originating from those countries will not face the same tariffs. Varex estimates that 

it will lose sales in 2019 as compared to how it would have performed without the 

List 1 tariffs. Loss of both domestic and international market share inevitably leads 

to reduced sales revenues, and potential loss of American jobs in the manufacturing 

sector, like the 1,400 highly skilled workers that Varex currently employs. 

 Tariffs are harmful for American innovation. Varex is the only remaining 

American manufacturer in its segment. Keeping the vast majority of its 

manufacturing in the United States has helped Varex to protect its technological 

advantages and its manufacturing know-how. To maintain its leadership as a 

producer of X-ray imaging equipment, Varex must continue to invest in research 
11

and development (“R&D”) of new products. Because Varex has just one line of 

business (X-ray imaging equipment), it is unable to sustain significant margin or 

revenue loss and continue to invest in R&D. In fact, its financial viability as a U.S. 

manufacturer would be threatened not just by the Section 301 tariffs but also by 

retaliatory tariffs in China that target Varex U.S.-manufactured products. In this 

case, Varex could be required to explore strategic alternatives, including a shutdown of its U.S. manufacturing and/or a sale of its business to one of its foreign 

competitors. At best, reduced innovation as a result of the impact of the tariffs 

would mean Varex over time would transition to being a commodity supplier and 

would lose its leadership position in its field. At worst, the U.S. would lose entirely 

its leadership position in the X-ray imaging field, not to mention the manufacturing 

jobs and know-how, which are represented by Varex in the United States. 

C. Tariff On PCBA Does Not Remedy Chinese Industrial Policy 

In the July 11 Notice, USTR asks whether “the particular product is strategically important 

or related to ‘Made in China 2025’ or other Chinese industrial programs.”11 However, the List 1 

tariffs on PCBA cannot address any Chinese industrial policy that was the alleged basis for the 

Section 301 tariffs. In the USTR’s published report dated March 22, 2018 (“301 Report”),12 

USTR cited concerns that are wholly irrelevant to the X-ray imaging components that Varex 

manufactures, such as medical robots and other high-value advanced medical devices.13 Varex’s 

PCBAs are merely inputs for the high-value final products that Varex continues to manufacture in 

the United States. These PCBAs are not the final products that appear to be the focus of Chinese 

industrial policies, and the continued supply of the PCBA from China will not in any way support 

that “Made in China 2025” program’s stated objectives. Low-value inputs of this nature are simply 

not the aim of that program. 

In reality, the 25% tariff on the PCBA is actually self-defeating from the U.S. perspective. 

U.S. manufacturers such as Varex depend on the use of low-cost inputs from China to produce the 

                                                            

11 83 Fed. Reg. at 32,183. 

12 Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, 

Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974 (USTR Mar. 22, 2018). 

13 Id. at 129 & n.778. 
12

high-value X-ray imaging products that USTR in theory seeks to protect and prevent China from 

dominating in export markets. However, the 25% tariff on these inputs imposes an additional cost 

of production that makes the U.S.-made final products uncompetitive relative to foreign products, 

including those made by the nascent industry in China. 

In other words, the 25% tariff actually tends to protect Chinese producers, not American 

producers, because the Chinese producers do not face the same 25% increase in cost of these 

inputs. By making U.S.-made products less competitive price-wise in the Chinese market, the List 

1 tariffs serves to shield China’s infant industry in X-ray imaging products from American 

competition, thereby giving the nascent Chinese industry more room to grow at the expense of 

American goods. Thus, USTR’s 25% tariff as applied to the PCBA actually helps the “Made in 

China 2025” industrial policy. For the above reasons, American trade and manufacturers’ 

associations have spoken out against the tariffs.14 We urge USTR to reconsider its course of action 

to undo this absurd result. 

D. Additional Factors Support Exclusion Of PCBA 

In the July 11 Notice, USTR invites requestors to provide any additional factors that 

support the requested exclusion.15 We respectfully submit the following for consideration: 

 There is no U.S. domestic industry that benefits from additional tariffs on 

Chinese-origin parts for X-ray imaging components. Before USTR imposed the 

25% tariffs at issue here, there were no allegations of unfair trade practices 

regarding X-ray imaging equipment from China. There also were no trade remedy 

proceedings under any U.S. trade laws concerning these items. The absence of such 

allegations and proceedings demonstrates the absence of any domestic industry that 

could actually benefit from these tariffs. Even if a U.S. supplier of the PCBA were 

to emerge, the lengthy customer re-qualification process combined with Varex 

inability to supply on a price-competitive basis in the meantime, would mean at 

best a loss in Varex’ leadership position and at worst threaten its financial viability. 

                                                            

14 See, e.g., “U.S. Chamber’s Donohue Statement on New Tariffs against China,” available at

https://www.uschamber.com/press-release/us-chamber-s-donohue-statement-new-tariffs-against-china. 

15 83 Fed. Reg. at 32,183. 
13

X-ray imaging equipment is Varex’ main product line. It will not be able to sustain 

losses in this area for an extended period of time. 

 The increased cost of production will translate to higher healthcare costs, to 

the detriment of the American public. During the public comments period, 

numerous professional and trade associations voiced their opposition to the tariffs 

on X-ray imaging components and parts from China. They consistently cited the 

threat to U.S. healthcare cost containment from the increased cost of medical 

equipment if vital parts and components were to become subject to these 25% tariffs 

(see Exhibit 5). 

 Varex has measures in place to prevent the loss of control over intellectual 

property in China. To the extent that USTR’s 301 Report expressed concerns 

over potential loss of intellectual property interests through partnership with 

Chinese suppliers, Varex believes that it has adequate measures to guard against 

such loss. In fact, its principal protection has been that critical manufacturing 

operations have been located in the United States, which has helped protect it from 

loss of manufacturing know-how to overseas competitors. 

 Utah’s Congressional delegation clearly supports Varex’s exclusion request. 

Please see the supporting letter dated August 15, 2018 from Senator Orrin G. Hatch, 

which we attach as Exhibit 3. Please see also the joint supporting letter dated 

September 7, 2018 from Representatives Chris Stewart, Mia Love, and John Curtis, 

which we attach as Exhibit 4. 

 USTR has not provided sufficient legal basis to impose Section 301 tariffs on 

the PCBA. In its April 6 Notice, USTR explained that the List 1 tariffs are 

remedies based upon USTR’s findings under Sections 301(b) and 304(a) of the 

Trade Act of 1974.16 Under Section 301(b), USTR has the authority to take 

discretionary action that is “appropriate” to address any “act, policy, or practice of 

a foreign country {that} is unreasonable or discriminatory and burdens or restricts 

United States commerce.”17 In other words, the statute limits the USTR’s power in 

this context to only actions that are reasonably calculated to alleviate the problems 

that USTR has found to exist under Sections 301(b) and 304(a). Moreover, USTR 

must adhere to the stated reasons for imposing the List 1 tariffs, and not deviate 

from such stated reasons.18 By imposing the List 1 tariffs on PCBA, USTR has not 

satisfied either requirement.

                                                            

16 83 Fed. Reg. at 14,907 (citing 19 U.S.C. §§ 2411(b), 2414(a)). 

17 19 U.S.C. § 2411(b). 

18 “Unexplained inconsistency is ... a reason for holding an interpretation to be an arbitrary and capricious change 

from agency practice under the Administrative Procedure Act.” Nat’l Cable Telecommunications Ass’n v. Brand 

X Internet Servs., 545 U.S. 967, 981 (2005). See also SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. 

Cir. 2001) (quoting Transactive Corp. v. United States, 91 F.3d 232, 237 (D.C. Cir. 1996)) (“As the District of 

Columbia Circuit has noted, it is well-established that ‘an agency action is arbitrary when the agency offers 

insufficient reasons for treating similar situations differently.’”). 
14

On March 22, 2018, USTR published its 301 Report, which USTR has cited to 

justify the List 1 tariffs. With respect to X-ray imaging components and parts, 

USTR’s 301 Report made absolutely no findings that specifically relate to these 

items. At most, USTR cited the Chinese State Council’s 2015 public notice relating 

to the “Made in China 2025” policy, which includes a generic reference to 

“advanced medical devices.”19 However, in the expanded discussion of that 

industrial policy goal, USTR only cited China’s focus on medical robotics as the 

actual policy objective relating to medical technology.20 The PCBA clearly have 

no relationship whatsoever to medical robotics. USTR did not make any specific 

findings that China’s act, policy, or practice relates in any way to medical X-ray 

imaging technology in general or these types of PCBAs in particular. Because 

USTR did not make any such determination pursuant to Section 301 with respect 

to medical X-ray imaging components and parts, Varex believes there is no legal 

justification under Section 301 for the imposition of List 1 tariffs on the PCBA. 

Please see Exhibit 7 for relevant excerpts from the 301 Report. 

Insofar as the 301 Report cited China’s focus on “advanced medical devices” and 

“advanced industrial machinery,” the PCBA does not meet either specification. 

The PCBAs are a relatively low-value input for U.S.-made X-ray equipment. The 

PCBAs are not themselves the high-value final products that appear to be the focus 

of the “Made in China 2025” industrial policy. In any event, the purchase of parts 

that are custom-tailored and destined only for U.S. or other manufacturers of X-ray 

equipment cannot advance any industrial policy that is meant to promote the sales 

of Chinese-made “advanced medical devices,” because the final, high-value item 

(X-ray imaging component or system) is usually not made in China. As explained 

above, the tariffs actually have the unfortunate effect of helping Chinese industrial 

policy by making American goods uncompetitive vis-à-vis any goods made by 

nascent Chinese producers who do not face the same added cost. Accordingly, the 

List 1 tariffs, as applied to the PCBA, cannot be an “appropriate” response as 

required under Section 301, and the tariffs lack rational basis because they do not 

achieve the USTR’s stated purpose. 

Furthermore, USTR has not explained the deviation from the stated rationale for 

the HTSUS subheadings that appear in List 1. In the Federal Register notice that 

issued List 1, USTR stated, “USTR and the interagency Section 301 Committee 

have carefully reviewed the extent to which the tariff subheadings in the April 6, 

2018 notice include products containing industrially significant technology, 

including technologies and products related to the ‘Made in China 2025’ 

program.”21 In other words, USTR suggested that any tariff subheadings that 

remained on List 1 must relate to significant technology or the “Made in China 

2025” program. As explained above, there is no basis for finding that the PCBA 

                                                            

19 301 Report, at 14 & n.67 (citing Made in China 2025 Notice § 3(6)). 

20 Id. at 129 & n.778. 

21 83 Fed. Reg. at 28,711. 
15

constitutes any significant, advanced medical technologies targeted by Chinese 

industrial policy. Thus, the inclusion of PCBA in List 1 contradicts USTR’s stated 

reason, and such lack of reasoning cannot pass muster.22

VI. CONCLUSION 

For the reasons stated above, Varex respectfully requests that USTR exclude the PCBA for 

radiation detectors (which Varex uses to manufacture flat panel X-ray detectors in the United 

States) from the List 1 tariffs on items classified under HTSUS subheading 9030.90.2500. It is 

not commercially feasible for Varex to obtain these articles from alternate sources, because of the 

stringent standards imposed by Varex on its supplier base, and the need to ensure that the finished 

product incorporating these inputs will comply with FDA regulations. At the same time, the tariffs 

increase the cost of production, which places U.S.-made goods at a severe disadvantage as 

compared to competing EU, Japanese, and Korean goods. Indeed, the additional 25% tariff even 

serves to protect nascent Chinese producers from U.S. competition. All of these foreign-made 

goods will make significant inroads at the expense of U.S.-made goods both abroad and within the 

United States, because the foreign producers can continue sourcing low-cost inputs from China to 

make the higher-value products without facing the same 25% tariff. This loss of sales to foreign 

competitors is harmful for America’s balance of trade with other countries, America’s ability to 

maintain manufacturing know-how and technological leadership, and American healthcare cost 

containment, because these tariffs will only fuel the rising cost of vital medical equipment that 

incorporate these products. We thus strongly urge USTR to reverse this disastrous course and 

grant the requested exclusion. 

 

                                                            

22 Nat’l Cable, 545 U.S. at 981. 


EXHIBIT 1
a

EXHIBIT 1: PRODUCT DESCRIPTION 

The imported printed circuit board assemblies (“PCBA”) for x-ray detectors are specially 

designed and manufactured to specifications. These articles are classifiable under HTSUS 

subheading 9030.90.2500, which specifically describes “Printed circuit assemblies” that are “Parts 

and accessories” for “Instruments and apparatus for measuring or detecting ionising radiations.” 

The PCBAs are of various shapes and sizes of approximate dimensions, including 4 inches by 9 

inches, 2 inches by 10 inches, 5 inches by 9 inches, 7 inches by 7 inches, 7 inches by 8 inches, 6 

inches by 11 inches, and 10 inches by 11 inches. They are populated with various electronic 

components. Illustrations of these imported PCBAS appear below. 

The PCBAs are distinguishable from all other imported printed circuit boards, because they 

are designed specifically for X-ray flat panel detectors of the type that would be separately 

classifiable under HTSUS 9030.10.0000. They are not parts of any other type of instrument or 

apparatus that detects or measures other types of radiation that would be classifiable under the 

same subheading. These PCBAs are marked, labeled, or packaged with the following part model 

numbers: 36758, 36741, 42701, 82017, 82019, 93284, 128994, 29188, 29186, 34182, 24649, 

24638, 82759, 82761, 115439, 108035, 5188, 94949, 92518, 121083, 5308, 92890, 507, 509, 

28895, 83578, 28899, 28897, 28183, 34868, 29253, 29258, 45524982, 45524968, PT-001590, PT001520, 45524963, PT-002309, 45524962. 

The specifications of the imported PCBAs are suited for installation into a finished X-ray 

flat panel detector, which may range in size including, for example, 20cm x 20cm, 30cm x 30cm, 

43cm x 36cm and 43cm x 43cm.i After importation, the PCBAs are incorporated in the United 

States into a flat panel detector that will detect Röntgen or “X” radiation rays as they pass through 

some type of subject matter and convert those rays into electronic digital images for subject 

analysis or diagnosis (including applications in medical and veterinary imaging, industrial 

applications to identify harmful substances or defects, and cargo security screening). During 

manufacturing, the imported PCBAs will be connected to a TFT photodiode array on which a 

Cesium Iodide solid scintillator is deposited. When exposed to ionizing radiation, the scintillator 

re-emits the energy as light which the PCBA assembly converts into electronic image data. 

Because the imported PCBAs are parts for the X-ray flat panel detectors, and the detectors include 

a scintillator, the PCBAs are classifiable under HTSUS 9030.90.2500 as “Part and accessories: 

For articles of subheading 9030.10: Printed circuit assemblies,” meaning parts and accessories of 

“Instruments and apparatus for measuring or detecting ionizing radiations.” 

The photographs below depict the PCBAs that are the subject of this request as they appear 

at the time of importation into the United States. 

                                                            

i

 We recognize that the July 11 Notice asks that the product description not identify the imported article in terms of 

its “actual use or chief use.” At the same time, the July 11 Notice asks for tariff classification under the HTSUS as 

part of the description. In this case, the HTSUS tariff subheading, 9030.90.2500, specifically references the enditem – that is “Printed circuit assemblies” that are “Parts and accessories” for an apparatus that detects X-ray. We 

thus explain how the imported PCBAs are parts for flat panel X-ray detectors that are separately classifiable under 

9030.10. 
b
c

  
d
e
EXHIBIT 2
Not Susceptible to Public 

Summary 
EXHIBIT 3


EXHIBIT 4


EXHIBIT 5a
 1300 North 17th Street ▪ Suite 900

Arlington, Virginia 22209

Tel: 703.841.3200

Fax: 703.841.3392

www.medicalimaging.org

1

May 10, 2018

The Honorable Robert Lighthizer 

United States Trade Representative 

600 17th Street NW 

Washington, DC 20508 

RE: China 301 Public Comments (Docket USTR-2018-0005) 

Dear Ambassador Lighthizer,

As the leading trade association representing the manufacturers of medical imaging devices and 

radiopharmaceuticals, the Medical Imaging and Technology Alliance (MITA) takes this 

opportunity to present comments on Docket No.: USTR-2018-0005 regarding proposed remedies 

under the U.S. Trade Representative’s (USTR) Section 301 investigation of China's trade 

practices and policies.

MITA has significant concerns about the proposed tariffs on the importation from China of 

medical imaging devices and the components used to manufacture medical imaging devices. 

While we understand and support the Administration’s commitment to a fair and balanced 

trading relationship with China, we do not believe that applying additional tariffs on medical 

imaging products and their components will serve this aim. Rather, we believe that the 

implementation of the proposed tariffs would cause harm to the U.S. medical imaging industry, 

including the hospitals and patients that we serve. 

The American medical technology industry is a true national economic success story. Our 

industry provides jobs for more than 400,000 people, paying salaries about 40 percent higher

than the national average ($58,000 vs. $42,000), and invests nearly $10 billion in research and 

development annually to advance patient care in the U.S. and around the world. The industry is 

fueled by innovative companies, the majority of which are small businesses, with 80 percent of 

companies having fewer than 50 employees. Unfortunately, the proposed tariffs will harm our 

ability to stay competitive and adversely affect the U.S. economy in ways that will be harmful to 

access to patient care. 

Responses to a recent MITA survey about the proposed tariffs represent a majority of the U.S. 

medical imaging industry. Of those that responded and that are affected by the tariffs, 100 

percent of medical imaging manufacturers said they would invest fewer resources in research 

and development and 100 percent said they would reduce workforce if the tariffs were put into 

effect. Consistent with these responses, one commenter said:

• [Company Y] has been investing in the American market, creating new, high paying jobs 

with excellent insurance benefits. Our products deliver high quality medical equipment 
2

to the healthcare market. A new tax would require this small company to lay off 

employees and also significantly raise the cost of healthcare as manufacturers will have 

to either cut R & D or pass on the 25% increase to the end users (healthcare providers).

Another commenter said:

• The proposed tariffs on health care technology would harm U.S. manufacturing 

competitiveness globally and decrease U.S. exports, including, ironically, U.S. exports to 

China.

Specifically, MITA is concerned about imaging equipment and their components being included 

on the list and in the proposed remedies for the following reasons: (1) the current remedy 

proposal amounts to a double-tax on U.S. manufacturers; (2) as a general rule medical 

imaging devices should be exempt from trade sanctions as a humanitarian good; and (3) the 

proposed tariffs do not address the challenges of our industry in China and therefore will not 

achieve desired outcomes. 

(1) USTR’s Proposal Amounts to a Double-Tax on Manufacturers. The U.S. medical 

imaging industry plays a significant role in global health and is known for providing innovative 

medical imaging solutions around the world. As a result of their global presence, a substantial 

proportion of the trade impacted by the proposed tariffs would simply be inter-company trade. 

That is – the shipment of components between two manufacturing facilities owned by the same 

exact company. For example, it is quite common that products will be imported from a 

manufacturer in China to their manufacturing facility in the U.S., where they are substantially 

transformed by and re-exported – often to China. Taxing these products on both ends of the 

supply chain could serve as a disincentive to manufacture in the U.S. 

(2) Medical Imaging Devices should be exempt from trade sanctions as a humanitarian 

good. Trade remedies and sanctions are not uncommon in today’s world; however, medical 

devices more generally – and medical imaging equipment in particular – are traditionally left out 

of the scope of these measures. Medical devices are integral to global public health and 

disrupting the trade flows and adding cost of these products should be avoided in an effort not to 

impede patient access to health care.

(3) Tariffs on medical imaging devices will not achieve desired outcomes. Lastly, but perhaps 

most importantly, we believe that the proposed tariffs do not address the challenges of our 

industry and as a result will not achieve the desired outcomes set forth by the administration. 

Ambassador Lighthizer has been clear in his intention to address the trade deficit and to protect 

those industries identified in “Made in China: 2025.” We share the Administration’s concern 

about the so-called “Made in China 2025” policy, particularly as it related to the subsidizing of 

local companies, shielding them from competition and pressuring foreign companies to hand 

over technology. While we realize that high-end medical technology products are included in 

China’s initiative, the market access barriers our industry faces in China are not related to tariffs, 

but instead largely to procurement and investment restrictions. Raising tariffs on imports from 

China will not lead to reciprocal treatment in those areas where we believe it is lacking and will 

instead add an additional burden for U.S. manufacturers. 
3

Additionally, if the Administration is looking to address the U.S. trade deficit with China, the 

U.S. medical imaging industry is not the place to look. The medical device industry across the 

board runs very balanced trade with China and the medical imaging devices targeted by the 

Special 301 remedies in fact run a trade surplus with China. As such, additional tariffs on

medical imaging devices will not only result in a lower trade deficit, but could in fact have the 

opposite impact. 

***

In conclusion, we share the Administration’s goal to address unfair Chinese economic practices 

and create a level playing field that will give all Americans a better chance to succeed. 

Unfortunately, we believe that the current proposal as it relates to medical imaging devices and 

their components is in fact at odds with this goal. 

As such, the proposed tariffs would threaten the vitality of an economically sound U.S. industry 

and could stifle medical innovation across the spectrum of academic, public and private 

institutions which could in turn result in the loss of jobs, reduced R&D, and slowed capital 

expansion. While we are strongly opposed to the currently proposed tariffs, we applaud the 

Administration goal to fight for a fair reciprocal trading relationship with China. We would 

welcome the opportunity to further discuss the challenges our industry faces in China and how 

the Administration might be able to act in this space to further the interests of the U.S. medical 

imagining industry in China. 

If you have any questions, please don’t hesitate to reach out to me at (703) 841-3235 or 

phope@medicalimaging.org. Thank you for your consideration.

Sincerely,

Patrick Hope

Executive Director, MITA

MITA is the collective voice of medical imaging equipment and radiopharmaceutical manufacturers, 

innovators and product developers. It represents companies whose sales comprise more than 90 percent 

of the global market for medical imaging technology. These technologies include: magnetic resonance 

imaging (MRI), medical X-Ray equipment, computed tomography (CT) scanners, ultrasound, nuclear

imaging, radiopharmaceuticals, and imaging information systems. Advancements in medical imaging are 

transforming health care through earlier disease detection, less invasive procedures and more effective 

treatments. The industry is extremely important to American healthcare and noted for its continual drive 

for innovation, fast-as-possible product introduction cycles, complex technologies, and multifaceted 

supply chains. Individually and collectively, these attributes result in unique concerns as the industry 

strives toward the goal of providing patients with the safest, most advanced medical imaging currently 

available.
EXHIBIT 5b
1

SUBMISSION OF RALPH F. IVES

ON BEHALF OF

THE ADVANCED MEDICAL TECHNOLOGY ASSOCIATION

TO

THE COMMITTEE ON SECTION 301

MAY 10, 2018

Introduction

About AdvaMed

The Advanced Medical Technology Association (AdvaMed), with headquarters in 

Washington D.C., represents about 350 manufacturers of the full range of medical 

technology – cardiovascular and orthopedic implants, in vitro diagnostics, surgical devices, 

and diagnostic equipment. These technologies improve and save patients’ lives around the 

world. While AdvaMed represents large well-known manufacturers, about 75 percent of 

our members are America-based small and medium size enterprises. 

The U.S. medical device industry is spread throughout all 50 states, with 13,699 facilities. 

We are directly responsible for over 500,000 high paying American jobs − an estimated 2 

million jobs (direct and indirect) − and generating $150 billion annually in direct economic 

output.

AdvaMed Request

AdvaMed shares the Administration’s opposition to Chinese policies that discriminate 

against U.S. firms. We are also concerned that China could implement the goals of its

“Made in China: 2025” policy in a way that leads to additional or strengthened 

discriminatory practices. 

However, we believe the Action Plan we developed, in consultation with key U.S.

Government agencies, to address our industry’s specific issues should be the basis for the 

Administration’s engagement in China on medical technology. This Action Plan has 

already shown some success. We do not endorse using USTR’s proposed tariff increases 

on products affecting our industry at this time, but urge negotiations based on our Action 

Plan.

We ask that increased tariffs on harmonized tariff schedule (HTS) codes for medical 

technology products and components (as listed in Annex 1) and related components (in 
2

Annex 2) not be implemented when Ambassador Lighthizer announces the final list of 

products that would be subjected to an additional 25 percent tariff because:

• the inadvertent impact would be inconsistent with the President’s objectives for 

balanced trade and of targeting products included in “Made in China: 2025”;

• a large share of the imports on the list are components and semi-finished products, 

which are used by our manufacturers to make products in the United States that are 

competitive in a global market;

• our industry enjoys a nearly balanced trade relationship with China;

• U.S. tariffs would leave the highly regulated medical technology industry 

particularly vulnerable to Chinese retaliation using tariffs and nontariff measures;

• the medical technology products on the USTR list account for over half of all 

medical technology imports from China – a higher proportion than most other 

industries;

• U.S. trade retaliation and sanctions measures historically have not included medical 

products due to humanitarian reasons;

• the import tax has the potential to disrupt some patient access;

• our industry did not participate in the Section 301 process; and

• our industry was not included in the Section 301 investigation or report, which does 

not reflect the more comprehensive strategy for our industry in our Action Plan.

The U.S. Medical Technology Industry

The medical technology industry is an American success story. Many of the medical 

devices and diagnostics on the market today trace their origins to U.S. inventors. The U.S.

industry remains the leading creator of innovation in the global market. And, that 

innovation is rapid. The average lifespan of a new medical device is about 18-24 months –

e.g., an improvement in a pacemaker today is likely to be overtaken by another 

breakthrough by 2020.

The U.S. industry has been historically competitive globally, and we remain so. The U.S.

industry is one of the few manufacturing and technology industries that has consistently 

run a trade surplus. U.S. exports of medical technology to the world totaled $52.5 billion in 

2017, and imports were $51.4 billion – for a surplus of $1.1 billion. 

But over time that surplus has diminished. In 2007, the United States exported $34.7 

billion and imported $29.1 billion – for a surplus of $5.5 billion. The ratio of the surplus to 

total medical technology trade was nine percent in 2007 compared to one percent in 2017 –

indicating a decreasing relative surplus. This change is a result of competitive pressures in 

other countries – as business people in other markets expand their own medical technology 

industries – but also because of government measures that favor local firms – e.g., 

“localization” preferences, including in China. 
3

Impact of USTR’s Proposed Actions

USTR’s Proposed Actions

In its announcement of April 4, 2018, USTR proposed to impose additional 25 percent 

tariffs on $50 billion of U.S. imports from China. AdvaMed, working with U.S. 

Government (USG) officials and an outside consultant, determined that over $2.7 billion of 

the products on USTR’s list are HTS categories for medical devices and diagnostics, and 

many other products are used as components in medical technology products (e.g., circuit 

boards, disk drives, motor parts, etc. – as in Annex 2). Taken together, we estimate that the 

imposition of an additional 25 percent duties will impact at least $3 billion of medical 

devices and diagnostics, and related components, entering the United States from China. 

The medical technology products on the USTR list represent over 50 percent of total U.S.

imports of medical technology from China and about six percent of the total USTR list. 

If the tariffs on these products were to go into effect, the impact would have the unintended 

consequences of adversely affecting our industries’ competitiveness and of being 

inconsistent with the President’s stated trade policy objectives. We urge that the following 

consequences be seriously considered. We ask that the increased tariffs do not apply to 

medical technology products (in Annex 1) when Ambassador Lighthizer implements the 

final retaliation list.

Adverse Impact on US Competitiveness

The U.S. medical technology industry is the most innovative and competitive in the world. 

There are many reasons for this leadership – including our decades of advancement, the 

high percent of revenue devoted to R&D, efficient supply-chain sourcing, and USG 

support for leveling the playing field around the world. Another key factor is the industry’s 

consistently strong espousal of open markets – in the United States and in other countries. 

These factors combine to allow U.S. firms to manufacture the best medical technology for 

patients in the most efficient way, to grow our industry in the United States, and to hire 

more American workers.

Rising healthcare costs around the world are putting pressure on governments to cut costs, 

including in the United States. While we have evidence demonstrating that medical 

technology can help alleviate cost pressures over time, downward pressures on prices 

continue – including through the use of price controls in some countries – such as 

maximum sales prices in Chinese provinces. The U.S. industry must be efficient to thrive.

Increasing our supply-chain costs through higher tariffs would exacerbate our 

competitiveness problem – with China, Europe, Japan, and many others. AdvaMed 

member companies source components and semi-finished products from all over the 

world, including China, to complete the manufacturing process of medical technologies

here at home for domestic use or export. We cannot accurately calculate the final cost 

impact of higher tariffs, as the initial tariff hike reverberates and escalates through the 
4

various levels of the supply chain. That is, the tariff increase of 25 percent in the imported 

component could end up being some multiple of that amount as it is used in intermediate 

products for resale to the next level of processing and on to the final product.

Shifting the source of inputs for finished medical technologies also involves costs. FDA 

has regulations affecting changes to input used in manufacturing medical technology. 

Depending on the risk classification of the product and the use of the component being 

changed, FDA may require a supplemental submission to the FDA. If this were to occur, 

changes in sourcing could lead to delays of several months to possibly a year, as this would 

require identifying a suitable alternative, notifying FDA, inspecting and validating the 

specific manufacturing process (e.g., installation, performance, operations), and submitting 

supplemental registration data. Even if a company believes its product with a new 

component would not need specific FDA approval, the firm would still be required to use 

resources to validate that the component from the new source meets specifications, which 

can also take several months. 

The tariff increase acts as a tax on our members. The president and Congress recently 

again suspended the 2.5 percent device tax on revenue earned from sales of medical 

technology in the United States. The reason this suspension enjoyed overwhelming 

bipartisan support was because there was clear recognition that this tax undermined U.S.

competitiveness and costs U.S. jobs. For some AdvaMed members, the effect of the tariff 

increases would offset gains from suspension of the medical device tax and reduce future 

R&D spending due to shareholder demands – adversely impacting U.S. competitiveness to 

pioneer the next generation of life-saving diagnostics and therapies. U.S. jobs would likely 

be lost.

Finally, if the USTR objective in its final retaliation list were to try to avoid raising input 

costs for U.S. industry and, instead, to focus on finished products coming from China, that 

appears to be very difficult to do. We cannot accurately calculate the relative shares of 

components versus finished medical technology imported from China. The HTS frequently 

combines components and finished products, making it difficult to estimate the relative

value of each. Our members identified 90 non-medical technology HTS codes for parts 

and components on the USTR list that are used in their medical technology products

(Annex 2). Our rough estimate is that over 60 percent of the medical technology products 

on USTR’s list are components and semi-finished products used to manufacture finished 

products in the United States. However, the actual figure could be different.

Inconsistent with USTR Objectives

The Administration’s broad objective for bilateral trade with China is to substantially 

reduce the U.S. trade deficit. In addition, Ambassador Lighthizer has been clear that the 

USTR retaliation list is intended to target products from those industries identified in the

“Made in China:2025” initiative. We recognize that high-end medical technology products 

are included in China’s plan. 
5

Increasing import tariffs on the medical technology products on the USTR list is not

consistent with reducing the trade deficit in our industry. The United States enjoys a trade 

surplus with China for the medical devices and diagnostics on the USTR list and has a 

negligible trade deficit overall with China that continues to shrink. This reciprocal trade 

relationship in our industry should mean that including these products on the list is 

contrary to the Administration’s trade deficit objective – i.e., if a trade deficit requires 

corrective measures, no action should be necessary when trade is balanced. 

USTR action could undercut our sales in China. Our members have enjoyed a vibrant 

growth of trade with China, which imports about 70 percent of its total use of medical 

technology. China’s consumption of medical technology quadrupled during the past 

decade. U.S. medical technology exports to China have grown every year and exceeded 

$4.7 billion in 2017; imports from China were about $5 billion. The Chinese industry has 

also grown rapidly during this period. U.S. firms still have a substantial advantage over 

Chinese companies when it comes to R&D, manufacturing, and export of high-value 

medical technology. Chinese patients also strongly prefer foreign brands.

In addition, USTR action could adversely affect U.S. medical technology companies’ 

participation in China’s plan to vastly improve healthcare. There are significant 

opportunities for U.S. medical technology under “Healthy China 2030,” which lays out 

several ambitious public health goals in addition to addressing major demographic shifts 

and increases in the incidence of non-communicable diseases. This plan is somewhat at 

odds with “Made in China: 2025,” in that China will continue to rely heavily on foreign 

medical technology in the years ahead to meet growing demand and achieve these public 

health goals. We need the USG to contribute to making the U.S. industry more 

competitive, not less, so that our industry can contribute to fulfilling this critical healthcare 

need and expand U.S. sales in China.

It is also not possible for USTR to accurately target “Made in China: 2025” products

because of the limitations of the HTS. The antiquated HTS codes cannot differentiate 

among the many categories of medical technology products. The HTS was developed in 

the 1980s − before most medical technology on the market today were invented. The 

World Health Organization reports that there are over 22,000 generic groups of medical 

technologies and 2 million types of products. The HTS has only about 120 lines for 

medical devices and diagnostics, which is clearly inadequate to target types of products.

In addition, the USTR list does not, and cannot, distinguish between the “new” types of 

medical technology China has specifically targeted in “Made in China: 2025” from the 

products that have been on the market for years. China has identified “new” high-end 

medical technology,” including:

• medical imaging equipment including MRI, CT, PET-CT, integrated PET-MRI and 

other new imaging equipment;

• clinical laboratory equipment including molecular diagnostic equipment, automated 

microbial detection systems, high resolution optical imaging systems;
6

• advanced treatment equipment such as image-guided radiotherapy equipment, highdefinition electronic endoscopes, high-definition confocal endomicroscopy; and

• rehabilitation and medical monitoring devices (including wearable devices).

We estimate that the majority of medical technology products on the USTR list are not 

even the categories identified by the Chinese for “Made in China: 2025.” The USTR 

algorithm seems to be aggregating all of the medical technology HTS codes and assuming 

they are included in the “Made in China: 2025” plan.

U.S. medical technology investment in China is important for our competitiveness with 

China and globally. Despite the challenges we identified, our members have invested in 

China, as they have in other countries. The reasons for overseas investments vary but are 

usually aimed at providing patient access to medical devices and diagnostics in the most 

timely and affordable means possible, as well as to remain competitive. Achieving these 

objectives often means that our members’ investments need to be located close to patients 

and supply chains. For example, most U.S. medical technology firms’ investments in 

China are done to supply the Chinese and surrounding markets. Some of that investment is 

also to manufacture components for medical technology products, including those finished 

in the United States. A few members ship finished products from China to the United 

States to respond to demand, which comes primarily from U.S. hospitals that could

otherwise not afford the more expensive equipment.

Investing in China is not new. Our members have operated in China for many decades, 

some more than 100 years. A 2017 AdvaMed survey revealed that these investments 

accounted for roughly $1 billion in fixed assets as of 2016, with 30 percent of our members 

reporting investments of more than $80 million. 

While our members have experienced a vibrant commercial relationship with China, we 

recognize the competitive threat from China. Analysis by the International Trade 

Commission (ITC) shows that the medical technology industry in China (represented by 

both Chinese and foreign companies) appears to be moving up the value chain. This 

increase includes: (1) capital equipment, such as advanced medical imaging equipment 

(e.g., computed tomography (Cat Scans) and magnetic resonance imaging (MRI); (2) 

implantable devices such as cardiac pacemakers and orthopedic implants; (3) nonimplantable devices, such as ventilators, infusion pumps, surgical supplies, and diagnostic 

test kits. Of course, all products entering the U.S. market must have FDA approval and 

from facilities that must be subjected to FDA inspections.

We provide this analysis because we want USG officials to understand that we are not 

underestimating the competitiveness of the Chinese industry or the potential threat from 

the power and resources of the Chinese government. We have voiced our concerns about 

Chinese policies, including about “Made in China: 2025,” which sets the goals of 

increasing the use of domestic high-end medical devices in county hospitals to 70% by 

2025, and the percentage of domestic content in core components by up to 80% by 2025. 

While “Made in China: 2025” was highlighted in the Section 301 Report, there was no 

mention of the specific measures China might use to meet these broad goals for our 
7

industry. Imposing higher tariffs on medical technology imports from China will not help 

U.S. competitiveness or achieve the President’s objectives for our industry.

Inconsistent with Public Health

Including medical technology products on the USTR list is troubling from a public health 

perspective. Healthcare products have been consistently recognized as being exempt from 

trade sanctions – even with countries which the United States considers to be security 

risks. For example, the Trade Sanctions Reform and Export Enhancement Act of 2000 and 

all subsequent sanctions legislation, embargoes, and policy disputes with other countries to 

date, have indicated that key humanitarian products, including medical devices, should be 

excluded from such trade measures. The fundamental rationale is that patients should have 

access to basic human necessities. Therefore, we believe medical technology should be 

exempted from USTR’s Section 301 list for humanitarian reasons alone. 

We are also concerned that imposing an import tax of medical technology could be 

disruptive to patient access in some areas, especially if the tariff were to be imposed for a 

lengthy period. When a 25 percent tax is introduced into a market, those costs have to be 

absorbed somewhere − by the manufacturer, the distributor, the customer (hospital/lab) or 

the patient. In the U.S. healthcare market – with payments for medical technology largely 

coming indirectly from insurance companies, Medicare, and out-of-pocket patient 

expenses – manufacturers have very limited ability to pass on cost increases. (That is, 

hospitals purchase the medical technology from the manufacturers or distributors, and the 

hospitals are reimbursed for procedures involving medical devices and diagnostics by 

private parties or the government.)

While it is not possible for us to forecast the precise balance of these forces, we are 

concerned that a 25 percent tax puts pressure on the system and could force the industry to 

cut costs to compensate in areas R&D and jobs. Steadily declining Medicare 

reimbursement rates already are causing razor-thin margins for some manufacturers; an 

additional tax makes it even more difficult to continue to supply these products.

AdvaMed Involvement in China

AdvaMed has been deeply engaged in China since 2005, when we began collaboration 

with the Chinese Government on a variety of regulatory, ethical business practices, and 

payment issues. We first hired a part-time employee in 2007. We now have an office in 

Shanghai, with a staff of four, which we expect to expand to eight by the end of this year. 

Of course, some of our members have been selling medical devices and diagnostics in 

China for several decades and have developed their own relationships with Chinese 

officials and other stakeholders.

During the period in which AdvaMed has been intensely engaged on Chinese policies, we 

have experienced challenges, frustrations, failures and successes – with several of those 

achievements coming under the Trump Administration. We will not catalogue these issues 
8

in this testimony – as we have been fortunate to enjoy the support of USG agencies − such 

as USTR, Commerce, State, Treasury, and the U.S. Embassy – and have documented these 

areas over the years. We greatly appreciate this assistance and believe USG involvement 

has been directly responsible for whatever successes we have experienced. However, we 

remain concerned that USTR actions and Chinese reactions could undermine our mutual 

progress for industry and patients alike.

Chinese Retaliation

China’s response to the $50 billion USTR tariff list did not include medical devices and 

targeted only two categories of diagnostics. However, because of the aggregate nature of 

the HTS and lack of harmonization between the US and Chinese HTS codes, we cannot 

determine the exact value of these U.S. exports to China. 

Chinese patients would continue to have access to innovative U.S. medical technology, 

which is the leading supplier to China -- accounting for over 30 percent of its medical 

device and diagnostic imports. However, if the United States expands the value of its list 

by $100 billion, China would likely include additional categories of U.S. medical 

technology. China would look for countries outside the United States – Europe, Japan, 

Southeast Asia – as alternative sources. A series of tit-for-tat retaliatory tariffs would 

adversely impact our industry in the United States and their business with China.

The Chinese government has greater legal flexibility in imposing non-tariff barriers and

restrictions than does the USG. The Chinese regulatory authority, which until the recent 

government reorganization was the Chinese Food and Drug Administration (CFDA), must 

approve all foreign medical devices and diagnostics for safety and effectiveness – just as 

USFDA does in the United States. Central government officials can influence the timing of 

regulatory approval decisions for U.S. medical devices, delaying market access. Likewise, 

public hospitals, operated by some level of government authority (central, provincial, city) 

are responsible for over 80 percent of healthcare delivery in China. These government 

authorities can impose limitations on the amount of U.S. medical devices and diagnostics 

purchased.

In addition to these potential Chinese actions that could directly target U.S. medical 

technology, the Chinese Government has additional tools to foster a hostile environment in 

China. For example, Chinese authorities could launch investigations under its antimonopoly laws, its anti-corruption laws, or its new cybersecurity laws. Even if no violation 

were found, the investigations themselves are chilling, costly and undermine U.S. business 

confidence. 
9

Section 301 Investigation and Report

Investigation

AdvaMed and our members chose not to participate in the Section 301 investigation, 

which was focused on intellectual property (IP) theft and forced technology transfers. 

While these issues are of some concern to our members, they are not the primary obstacles 

we face in accessing the Chinese market. We proposed an Action Plan beginning in August 

2017 to USTR, Commerce and Treasury − first suggested by Ambassador Lighthizer in a 

Congressional hearing − to address specific problems facing our industry in China 

(described below).

We recognize that our industry has problems in China that need to be resolved. Our 

members continue to face an overly burdensome regulatory system to approve our medical 

devices and diagnostics for Chinese patients. We are still very concerned about provincial 

tendering procedures that drive down prices to uncompetitively low levels and sometimes 

overtly discriminate against foreign manufactures. Likewise, we see substantial threats 

from a non-transparent national price negotiation system that could block our members’ 

access to public hospitals for an unspecified time period – perhaps two-years or more. We 

remain very worried about the potential implications of future Chinese policies on the U.S.

medical technology industry, including possible measures that could come from “Made in 

China: 2025.”

USTR Report

We applaud the lengthy and detailed Section 301 report USTR issued on March 22. This 

report contains considerable analysis of the two major areas of the USTR investigation –

theft of IP and forced technology transfer. The report covers China’s abuses in these areas 

affecting several important U.S. industries.

However, the medical technology industry is not cited in the 182-page document. The 

report provides no evidence of IP theft involving our industry. The report includes no 

mention of forced technology transfer in the medical technology industry. The report does 

not include our issues.

Despite the lack of analysis and findings on our issues, the relative share of medical 

technology imports on the USTR list appears to be out of proportion to the import shares 

of most other industries that were actually mentioned in the Section 301 report. The burden 

to our industry would be greater than most of those the Section 301 action is intended to 

benefit. This does not seem fair or reasonable.

Alternative Approach

AdvaMed and our members do not endorse imposing import tariffs on medical technology 

as a means of changing China’s behavior in our industry at this time. Indeed, we believe 
10

that these tariffs could undermine our efforts to obtain and maintain access to China’s 

market on a mutually reciprocal basis, as well as impact our global competitiveness. 

The AdvaMed Action Plan laid out clear issues in the regulatory and payment areas that 

need to be addressed by China for our industry to obtain access to the Chinese market 

comparable to the access that the Chinese medical technology industry enjoys in the

United States. For example:

• Clinical trial requirements imposed based on international best practices;

• UDI system based on international standards

• End of country-of-origin requirements;

• Continued postponement of national pricing system for medical technology;

• Implementation of two-invoice systems only if appropriate for medical technology;

• Central tendering systems that do not disadvantage U.S. firms.

These are areas in which we have seen some concrete benefits from working with Chinese 

officials. To be clear, we realize that implementation must be secured, that additional 

progress must be made, that we need strong USG support, and that China could revert to 

behavior that adversely affects our industry. We believe that working to press for progress 

with our Action Plan, despite these caveats, is better than imposing tariff restrictions now.

We believe our approach represents the spirit of reciprocal trade embodied in the 

President’s statements. We recommend that USTR present a specific action plan for our 

industry, including time lines for completion, to the Chinese government. If comparable

reciprocity is not achieved within reasonable times lines, USTR could then consider 

appropriate action. 

Conclusion and Request

We believe our analysis shows that the U.S. medical technology industry was not the focus 

of the USTR investigation or subsequent findings. Our industry would be less competitive 

if import tariffs were increased on the products in Annex 1 and 2. Our industry was not 

mentioned in the Section 301 report. Furthermore, we provided USTR and other USG 

agencies a specific proposal – in the form of an Action Plan − to address our issues. In 

brief, the imposition of additional import tariffs on medical devices and diagnostics 

coming from China would be the wrong action at the wrong time. For these reasons, we 

respectfully request that increased tariffs on imports of the products in Annexes 1 and 2 not 

be imposed when Ambassador Lighthizer decides to retaliate against China’s practices 

affecting IP and forced technology transfers.
11

Annex 1

List of Medical Technology on USTR’s Section 301 List

30021200 - Antisera and other blood fractions including human blood and fetal bovine 

serum

30021500 - Immunological products, put up in measured doses or in forms or packings 

for retail sale

30049092 - Medicaments nesoi, in dosage form and packed for retail

30051010 - Adhes Dressngs Coated or Impreg With Pharma Substs

30061000 - Sterile Surgical Catgut, Similar Sterile Mater Etc

30061001 - Sterile surgical catgut, suture materials, tissue adhesives for wound 

closure, laminaria, laminaria tents, and absorbable hemostatics

30062000 - Blood-Grouping Reagents

30063010 - Opacifying Preparations Etc. Cont Antigens Etc.

30067000 - Gel preparation use human/veterinary medicine lubricant in surgical 

operation, physical exam or coupling agent tween body & med instrumen

30069100 - Appliances Identifiable For Ostomy Use

84192000 - Medical, Surgical or Laboratory Sterilizers

84199050 - Parts Of Medical, Surgical or Laboratory Sterilize

90181100 - Electrocardiographs, and Parts and Accessories

90181130 - Electrocardiographs

90181160 - Printed Circuit Assemblies For Electrocardiographs

90181190 - Parts and Accessories For Electrocardiographs,Neso

90181200 - Ultrasonic Scanning Apparatus

90181300 - Magnetic Resonance Imaging Apparatus

90181400 - Scintigraphic Apparatus

90181940 - Apparatus, Functional Exploratory Examination& Pts

90181955 - Patient Monitoring Systems

90181975 - Printd Circ Assemb For Parameter Acquisition ModulElectro-diagnostic 

apparatus nesi, and parts and accessories thereof nesi Ultraviolet or infrared ray 

apparatus used in medical, surgical, dental or veterinary sciences, and parts and 

accessories thereof 
12

90181995 - Electro-diagnostic apparatus nesi, and parts and accessories thereof nesi 

Ultraviolet or infrared ray apparatus used in medical, surgical, dental or veterinary 

sciences, and parts and accessories thereof

90182000 - Ultraviolet or Infrared Ray Apparatus, & Pts & Acc

90183100 - Syringes, With or Without Needles; Pts & Access

90183200 - Tubular Metal Needles & Needles For Sutures &Parts

90183900 - Med Needles. Nesoi, Catherers Etc and Parts Etc

90184100 - Dental drill engines, whether or not combined on a single base with other 

dental equipment, and parts and accessories thereof

90184980 - Instruments and apparatus used in dental sciences, nesi, and parts and 

accessories thereof

90185000 - Other Ophthalmic Instruments & Appliances & Parts

90189010 - Optical Mirrors and Reflectors

90189020 - Optical Instruments and Appliances and Parts,Nesoi

90189030 - Anesthetic Instruments and Appliances and Parts

90189060 - Electro-Surgical Instruments & Appliances & Parts

90189064 - Defibrillators

90189068 - Printed Circuit Assemblies For The Defibrillators Of Subheading 

9018.90.64

90189075 - Electromedical instruments and appliances nesi, and parts and accessories 

thereof

90189080 - Inst & Appliances For Medical,Surgical, Etc,Nesoi

90191060 - Psychological Aptitude Testing Apparatus& Pt,Nesoi

90192000 - Ozone,Oxygen,Etc Therapy, Respiration Apparatus,Pt

90211000 - orthopedic or Fractre Appliances, Parts & Accessor

90212980 - Dental fittings and parts and accessories thereof, other than of plastics

90213100 - Artificial Joints and Parts and Accessories Therof

90213900 - Artificial Joints & Parts & Accessories Therof,Nes

90214000 - Hearing Aids

90215000 - Pacemakers For Stimulating Heart Muscles

90221200 - Computed Tomography Apparatus

90221300 - Appts Base On X-Ray For Dental, Uses, Nesoi
13

90221400 - Appts Base On X-Ray, Medical,Surgical,Vetnry,Nesoi

90222100 - Appts Base On Alpha,Beta,Etc. Radiation,Medical,Etc.

90223000 - X-Ray Tubes

90229005 - Radiation Generator Units

90229015 - Radiation Beam Delivery Units

90229025 - High Tension Generators,Desks,Chair,Etc.

90229040 - Parts and Accessories Of X-Ray Tubes

90229060 - Pts Of Apparatus Based On The Use Of X-Rays

90229095 - Pts,Use Alpha,Beta/Gamma Radiations, Etc., Nesoi

90251120 - Clinical Thermometers Liquid-Filled
14

Annex 2

List of Non-Medical Device Inputs for Manufacturing Medical Devices in the U.S.

40169915 - Caps, lids, seals, stoppers and other closures, of noncellular vulcanized 

rubber other than hard rubber

73181600 - Iron or steel, nuts

73202050 - Iron or steel, helical springs (o/than suitable for motor vehicle suspension)

76061260 - Aluminum alloy, plates/sheets/strip, w/thick. o/0.2mm, rectangular (incl. 

sq), clad

76082000 - Aluminum alloy, tubes and pipes

84135000 - Reciprocating positive displacement pumps for liquids, not fitted with a 

measuring device, nesi

84136000 - Rotary positive displacement pumps for liquids, not fitted with ameasuring 

device, nesi

84137020 - Centrifugal pumps for liquids, not fitted with a measuring device, nesi 

84138100 - Pumps for liquids, not fitted with a measuring device, nesi

84139190 - Parts of pumps, nesi

84149090 - Parts of air or vacuum pumps and ventilating or recycling hoods

84186901 - Refrigerating or freezing equipment nes

84199050 - Parts of molten salt cooled acrylic acid reactors, nesi; parts of certain 

medical, surgical or laboratory sterilizers, nes

84199095 - Parts of machinery, plant or laboratory equipment for the treatment of 

materials by a process involving a change of temperature, nesoi

84213980 - Filtering or purifying machinery and apparatus for gases, other than intake 

air filters for internal combustion engines or catalytic conv.

84239090 - Other parts of weighing machinery, including weights 

84283900 – Continuous action elevators and conveyors, for goods or materials, nesi

84289002 - Machinery for lifting, handling, loading or unloading, nesi

84313900 - Parts suitable for use solely or principally with the machinery of heading 

8428, nes

84433250 - Single function units other than printer units (machines which perform 

only one of the functions of printing, copying or facsimile transmiss

84439925 - Parts and accessories of printers, neso

85361000 - Fuses, for a voltage not exceeding 1,000 V
15

84602400 - Other grinding machines, numerically controlled

84661001 - Tool holders and self-opening dieheads for use solely or principally with 

machines of headings 8456 to 8465, nesoi 

84662010 - Work holders for machine tools used in cutting gears

84662080 - Work holders for machine tools other than those used in cutting gears, 

nesoi 

84716080 - Optical scanners and magnetic ink recognition devices not entered with the 

rest of a ADP system

84717040 - ADP magnetic disk drive storage units, disk dia. n/ov 21 cm,not in cabinet, 

w/o attached external power supply, n/entered w/rest of a system

84717060 - ADP storage units other than magnetic disk, not in cabinetsfor placing on a 

table, etc., not entered with the rest of a system

84717090 - ADP storage units other than magnetic disk drive units, nesoi, not entered 

with the rest of a system

84779085 - Parts of machinery for working rubber or plastics or for the manufacture of 

products from these materials, neso

84798200 - Machines for mixing, kneading, crushing, grinding, screening, sifting, 

homogenizing, emulsifying or stirring, nesi

84799094 - Parts of machines and mechanical appliances having individual functions, 

not specified or included elsewhere in chapter 84, neso

84807180 - Molds for rubber or plastics, injection or compression types, other than for 

shoe machinery or for manufacture of semiconductor devices

84819090 - Parts of taps, cocks, valves and similar appliances for pipes, boiler shells, 

tanks, vats or the like, nes

84821050 - Ball bearings other than ball bearings with integral shafts

84829965 - Parts of other ball or roller bearings, nesi 

84839080 - Parts of transmission equipment, nesi 

85011040 - Electric motors of an output of under 18.65 W, other than synchronous

valued not over $4 each 

85013120 - DC motors nesi, of an output exceeding 37.5 W but not exceeding 74.6 W

85030075 - Parts of electric motors under 18.65 W, other than commutators, stators or 

rotors

85043200 - Electrical transformers other than liquid dielectric, having a power 

handling capacity exceeding 1 kVA but not exceeding 16 kVA
16

85044040 - Electrical speed drive controllers for electric motors (static converters)

85049041 - Parts of power supplies (other than printed circuit assemblies) for 

automatic data processing machines or units thereof of heading 8471

85049065 - Printed circuit assemblies of the goods of subheading 8504.40 or 8504.50 

for telecommunication apparatus

85049075 - Printed circuit assemblies of electrical transformers, static converters and 

inductors, nesoi

85049096 - Parts (other than printed circuit assemblies) of electrical transformers, 

static converters and inductors

85065000 - Lithium primary cells and primary batteries

85059075 - Other electromagnets and parts thereof, and parts of related 

electromagnetic articles nesi

85238020 - Discs, tapes, solid state non volatile storage devices, "smart cards" and 

other media for the recording of sound or of other phenomena, whet

85285933 - Color video monitors w/flat panel screen, video display diagonal > 34.29 

cm, not with VCR/player, not subj US note 13

85299022 - Other printed circuit assemblies suitable for use solely or principally with 

the apparatus of headings 8525 to 8528, nesi 

85299083 - Other parts of television apparatus (other than television cameras), nesi

85322300 - Ceramic dielectric fixed capacitors, single layer

85322900 - Fixed electrical capacitors, nesi

85334080 - Electrical variable resistors, other than wirewound, including rheostats and 

Potentiometers

85361000 - Fuses, for a voltage not exceeding 1,000 V 

85362000 - Automatic circuit breakers, for a voltage not exceeding 1,000 V

85364900 - Relays for switching, protecting or making connections to or in electrical 

circuits, for a voltage exceeding 60 but not exceeding 1,000 V 

85365090 - Switches nesoi, for switching or making connections to or in electrical 

circuits, for a voltage not exceeding 1,000 V 

85369040 - Electrical terminals, electrical splicers and electrical couplings, wafer 

probers, for a voltage not exceeding 1,000 V

85369085 - Other electrical apparatus nesi, for switching or making connections to or 

in electrical circuits, for a voltage not exceeding 1,000 V, nesoi 
17

85389060 - Molded parts nesi, suitable for use solely or principally with the apparatus 

of heading 8535, 8536 or 8537 

85389081 - Other parts nesi, suitable for use solely or principally with the apparatus of 

heading 8535, 8536 or 8537

85414020 - Light-emitting diodes (LED's) 

85414070 - Photosensitive transistors

85414080 - Photosensitive semiconductor devices nesi, optical coupled isolators

85444990 - Insulated electric conductors nesi, not of copper, for a voltage not 

exceeding 1,000 V, not fitted with connectors

85447000 - Optical fiber cables made up of individually sheathed fibers

90029095 - Mounted optical elements, nesi; parts and accessories of mounted optical 

elements, nesi 

90132000 - Lasers, other than laser diodes

90138070 - Liquid crystal and other optical flat panel displays other than for articles of 

heading 8528, nesoi

90258015 - Nonelectrical barometers, not combined with other instruments

90258040 - Thermographs, barographs, hygrographs and other recording instruments, 

other than electrical

90258050 - Combinations of thermometers, barometers and similar temperature and 

atmosphere measuring and recording instruments, nonelectrical

90262080 - Instruments and apparatus, other than electrical, for measuring or checking 

the pressure of liquids or gases

90278025 - Nuclear magnetic resonance instruments

90278045 - Electrical instruments and apparatus for physical or chemical analysis, 

measuring viscosity, checking heat, sound, light, etc., nesi

90279045 - Printed circuit assemblies for instruments and apparatus of subheading 

9027.80

90279054 - Parts and accessories of electrophoresis instruments not incorporating an 

optical or other measuring device

90279056 - Parts and accessories of electrical instruments and apparatus of subheading 

9027.20, 9027.30, 9027.50 or 9027.80

90308200 - Instruments and apparatus for measuring or checking electrical quantities, 

nesoi: for measuring or checking semiconductor wafers or devices

90318080 - Measuring and checking instruments, appliances and machines, nes
18

90319091 - Parts and accessories of measuring or checking instruments, appliances and 

machines, nesoi 

90321000 - Automatic thermostats

90328960 - Automatic regulating or controlling instruments and apparatus, nesi
EXHIBIT 5c
May 11, 2018 

Ambassador Robert E. Lighthizer 

United States Trade Representative 

Office of the United States Trade Representative 

600 17th Street, NW

Washington, DC 20508

RE: Notice of Determination and Request for Public Comment Concerning Proposed 

Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices 

Related to Technology Transfer, Intellectual Property, and Innovation [Docket No.: 

USTR-2018-0005] 

Dear Ambassador Lighthizer: 

On behalf of the physician and student members of the American Medical Association (AMA), I 

urge you to consider the impact of including products that are essential to ensuring patient access 

to medical devices, prescription medication, or essential components of the foregoing listed on 

the Annex to the Notice of Determination and Request for Public Comment Concerning 

Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and 

Practices Related to Technology Transfer, Intellectual Property, and Innovation [Docket No.: 

USTR-2018-0005]. Although we appreciate that the intent is to ensure that U.S.-based industries 

are placed on an even playing field in the U.S. and globally, we are concerned that the factors 

that the Office of the U.S. Trade Representative (USTR) analysts used to assess impact on 

consumers may not have adequately accounted for the impact on patient health outcomes when 

patients and health care providers are either not able to obtain established prescription 

medication, medical devices, or their essential component parts, or access is disrupted which 

could undermine stabilized patient care. 

We understand that analysts have assessed products to determine if placement on the Annex list 

is likely to cause disruptions to the U.S. economy and tariff lines that are subject to legal or 

administrative constraints. We further understand that the remaining products were ranked 

according to the likely impact on U.S. consumers, based on available trade data involving 

alternative country sources for each product. The proposed list was then compiled by selecting 

products from the ranked list with lowest consumer impact as identified by the USTR analysts. 

Currently, the Administration and the Congress are working to address the rapid increase in 

prescription medication costs. We urge careful consideration of retention of any products used in 
Ambassador Robert E. Lighthizer 

May 11, 2018 

Page 2 

the manufacture of prescription medication even where an alternative country source exists. The 

cost associated with switching sources could precipitate shortages and spikes in higher prices. A 

complete analysis should be undertaken in conjunction with the Food and Drug Administration 

as well as impacted manufacturers of prescription medication to ensure that any product on the 

Annex list will not precipitate shortages or spikes in prices. Patients and physicians are already 

straining under the burden of persistent shortages and rapidly rising costs of prescription 

medication. 

In addition to prescription medication, the AMA strongly urges careful consideration of the 

impact on the availability of medical devices. Items such as x-ray machines, ultrasounds, 

computed tomography scanners, orthopedic appliances, needles, syringes, and other items play 

an essential role in the provision of health care in the U.S. With foreign countries playing an 

increasingly larger role in the manufacture of medical technologies used in this country, there is 

significant concern that the proposed tariffs could increase the manufacturing costs of these 

products, with these increased costs ultimately passed on to American patients. At a time of 

increasingly strained budgets and rising health care costs, the AMA strongly cautions against any 

actions that may result in higher costs to American patients and the U.S. health care systems and 

urges the Administration to reconsider its application of tariffs to medical devices and 

technologies.

The AMA appreciates the opportunity to provide comment and stands ready to serve as a 

resource to aid in this consideration. If you have questions, please contact Shannon Curtis, 

Assistant Director of Federal Affairs, Shannon.curtis@ama-assn.org or 202-789-8510. 

Sincerely, 

James L. Madara, MD 
EXHIBIT 6
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

1

 UNITED STATES TRADE REPRESENTATIVE

 + + + + +

 301 COMMITTEE

 + + + + +

 SECTION 301 TARIFFS PUBLIC HEARING

 + + + + +

 WEDNESDAY

 MAY 16, 2018

 + + + + +

 The 301 Committee met in the Hearing

Room of the U.S. Trade Representative, 500 E

Street, SW, Washington, D.C., at 9:00 a.m.,

William Busis, Brooks Allen, and Arthur Tsao, CoChairs, presiding.

PRESENT

BROOKS ALLEN, Chair U.S. Trade Representative

WILLIAM BUSIS, Chair, U.S. Trade Representative

ARTHUR TSAO, Chair, U.S. Trade Representative

ALEXANDER ABAJIAN, Council of Economic Advisors

MICHAEL ADJEMIAN, Council of Economic Advisors

CHRISTOPHER BLAHA, Department of Commerce

SARAH BONNER, Small Business Administration

JULIA HOWE, U.S. Trade Representative

NICOLE KORKOS, Council of Economic Advisors

SAGE MITCH, Department of the Treasury

DEWEY MOORE, Department of State

BRYAN O'BYRNE, Small Business Administration

MAUREEN PETTIS, Department of Labor

KATE PSILLOS, Department of Commerce

PETER SECOR, Department of State

ADAM SULEWSKI, Department of Homeland Security,

 Customs and Border Protection

TIMOTHY WINELAND, U.S. Trade Representative
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

4

 C-O-N-T-E-N-T-S

Opening Statement from Chair . . . . . . . . . . . 7

Congressional Comments:

 Representative Kevin Cramer (ND) . . . . . . 9

Panel Seven

David French, National Retail Federation . . . . .16

Rick Helfenbein, American Apparel &

 Footwear Association . . . . . . . . . . . .20

Anne Hoef, Mabuchi Motor America Corporation . . .25

Julia Hughes, U.S. Fashion Industry

 Association. . . . . . . . . . . . . . . . .30

Nicole Vasilaros, National Marine

 Manufacturers Association. . . . . . . . . .34

Richard Wolff, JST Power Equipment . . . . . . . .40

Panel Eight

Billy Milligan, Commercial Metals Company. . . . .57

Charlie Murrah, Southwire Company, LLC . . . . . .62

Gregory Owens, Sherrill Manufacturing/

 Liberty Tabletop . . . . . . . . . . . . . .66

Brad Thompson, Columbia Forest Products. . . . . .71

Sheila Anderson, Daktronics, Inc.. . . . . . . . .76

Douglas Wagner, International Imaging

 Materials, Inc.. . . . . . . . . . . . . . .82

Panel Nine

Amb. Karan Bhatia, General Electric Company. . . .97

Jonathan Davis, SEMI . . . . . . . . . . . . . . 103

John Pfeifer, Mercury Marine . . . . . . . . . . 108

Kyle Pitsor, National Electric Manufacturers

 Association. . . . . . . . . . . . . . . . 113

Dylan Reed, Advanced Energy Economy. . . . . . . 118

Evi Christou, Dana Corporation . . . . . . . . . 124

Mark Maroon, Maroon Group, LLC . . . . . . . . . 130
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

113

1 The tariffs will reduce U.S. jobs,

2 hurt American consumers, and will not deter

3 China. Furthermore, Mercury Marine is a U.S.

4 company; this will hit us to the exclusion of

5 everyone else. Mercury will carry the full

6 weight and the full burden. Accordingly, USTR

7 should remove outboard engines from the proposed

8 Section 301 tariff list. 

9 Thank you for your attention and I

10 welcome any questions that you may have.

11 MR. BISHOP: Thank you, Mr. Pfeifer. 

12 Our next witness is Kyle Pitsor of the National

13 Electrical Manufacturers Association. Mr.

14 Pitsor, you have five minutes.

15 MR. PITSOR: Thank you. Mr. Chairman

16 and members of the Section 301 Committee, thank

17 you for the opportunity to provide the following

18 remarks on behalf of the National Electrical

19 Manufacturers Association on the proposed

20 determination of action pursuant to Section 301

21 to address China's acts, policies, and practices

22 related to technology transfer, intellectual
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

114

1 property, and innovation. 

2 My name is Kyle Pitsor and I serve as

3 Vice President for Government Operations. NEMA

4 represents nearly 350 electrical equipment and

5 medical imagining manufacturers that account for

6 360,000 American jobs in more than 7,000

7 facilities across the United States. Our

8 industry produces $106 billion in shipments per

9 year, with $36 billion exported.

10 NEMA shares the concerns of the Office

11 of the U.S. Trade Representative regarding

12 China's industrial policies and intellectual

13 property practices. The outcomes of discussions

14 between the U.S. and China should assure a more

15 level playing field through the application of

16 clear, binding, and enforceable trade rules and

17 compliance with international norms of

18 intellectual property protection.

19 While some NEMA member companies

20 manufacture their own products in their own

21 factories in China, many others source finished

22 goods as well as components from contractual
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

115

1 partners in China. In particular, many companies

2 source components from China into the U.S. to

3 support their U.S. manufacturing operations.

4 Placing a 25 percent tariff on over

5 100 product types within or adjacent to NEMA's

6 product scope will not help support, and could

7 materially injure, the global competitiveness of

8 our industries, their manufacturing operations,

9 and their U.S. employment base.

10 We've estimated that the 2017 value of

11 China's shipments on the NEMA member list was

12 approximately $9 billion, slightly less than one13 fifth of the entire $50 billion of imports

14 targeted by the proposals.

15 Writ large, if 25 percent tariffs were

16 to be implemented as proposed, they would

17 represent a tax increase on U.S. electro-industry

18 companies and their customers of at least $2.25

19 billion.

20 NEMA member products include equipment

21 used widely in industrial, commercial, and

22 residential environments. For example,
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

116

1 programmable logic controllers that run factory

2 lines in manufacturing facilities, certain types

3 of electric motors, controls that enable the more

4 energy efficient use of motors, light emitting

5 diodes that are used to manufacture energy

6 efficient lightbulbs and light fixtures, traffic

7 signaling and control equipment, transformers and

8 switch gear used in the electrical grid, electric

9 wiring cable, residential thermostats, and

10 medical imaging technologies, including CT, MRI,

11 ultrasound, and X-ray products.

12 There's a list of targeted products in

13 my testimony and also in our written comments

14 that we filed on May 11.

15 Should the administration decide to

16 proceed with the application of tariffs in this

17 matter, NEMA recommends any tariffs be applied

18 for as short a time as possible as a precursor to

19 a negotiated outcome that addresses the Chinese

20 practices outlined in the 301 report.

21 NEMA also urges the administration to

22 narrow the scope of the proposed tariff list so
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

117

1 it does not do disproportionate harm to U.S.

2 production manufacturers, including the exclusion

3 from the tariff list of, number one, inputs for

4 which non-Chinese substitutes are not readily

5 available or able to meet U.S. manufacturer or

6 federal standards. Secondly, inputs that come

7 from wholly-owned U.S. facilities within China,

8 since those reflect regular commercial decisions 

9 rather than China's efforts to force technology

10 transfer, and the impact would disproportionately

11 hurt U.S. rather than Chinese business. And

12 thirdly, inputs from China that have a high

13 percentage of U.S. content.

14 In addition, inasmuch as NEMA member

15 companies export roughly one-third of their U.S.

16 production, it is critical that duty drawback be

17 available to exporters for any Section 301

18 tariffs so those tariffs do not undermine U.S.

19 product competitiveness in the global market and

20 do not harm the U.S. manufacturing base and their

21 employment.

22 In conclusion, the imposition of
(202) 234-4433 Washington DC www.nealrgross.com

Neal R. Gross and Co., Inc.

118

1 broad-based tariffs is accompanied by collateral

2 damage up and down the global supply chain that

3 is better avoided. If tariffs are perceived by

4 the administration to be necessary, we would

5 request that the use of tariffs be on a much

6 narrower scope of products and very short-lived.

7 We look forward to further dialogue on

8 these proposals and urge the administration to

9 consider and pursue alternative measures to bring

10 about change to Beijing's strategic and

11 entrenched industrial and IP policies and to

12 establish free and fair trade. Thank you.

13 MR. BISHOP: Thank you, Mr. Pitsor. 

14 Our next witness is Dylan Reed of Advanced Energy

15 Economy. Mr. Reed, you have five minutes.

16 MR. REED: Thank you to the members of

17 the Committee today. My name is Dylan Reed and I

18 represent Advanced Energy Economy. AEE and its

19 state partner organizations represent more than a

20 thousand companies that span the advanced energy

21 industry and its value chains. Altogether, we

22 represent over 50 different advanced energy
EXHIBIT 7
OFFICE of the UNITED STATES TRADE REPRESENTATIVE

EXECUTIVE OFFICE OF THE PRESIDENT 

FINDINGS OF THE INVESTIGATION INTO 

CHINA’S ACTS, POLICIES, AND PRACTICES 

RELATED TO TECHNOLOGY TRANSFER, 

INTELLECTUAL PROPERTY, AND INNOVATION

UNDER SECTION 301 OF THE TRADE ACT OF 1974

March 22, 2018
1

CONTENTS

I. Overview................................................................................................................................. 3

A. Core Elements of Section 301............................................................................................. 3

B. Background to the Investigation ......................................................................................... 4

1. Initiation of the Investigation........................................................................................ 5

2. China’s Bilateral Commitments to End its Technology Transfer Regime and to 

Refrain from State-Sponsored Cyber Intrusions and Theft .......................................... 6

3. Input from the Public .................................................................................................... 9

C. China’s Technology Drive................................................................................................ 10

II. China’s Unfair Technology Transfer Regime for U.S. Companies in China ....................... 19

A. Introduction....................................................................................................................... 19

1. Key Elements of China’s Technology Transfer Regime ............................................ 19

2. A Persistent Problem for U.S. Business...................................................................... 22

B. Foreign Ownership Restrictions as Used in China’s Technology Transfer Regime ........ 23

1. The Foreign Investment Catalogue and Technology Transfer ................................... 24

2. Illustrative Examples of China’s Use of Investment Restrictions to Pressure 

Technology Transfer................................................................................................... 29

C. Administrative Review and Licensing Processes as Used in China’s Technology Transfer 

Regime .............................................................................................................................. 35

1. Technology Transfer Pressure in Administrative Approvals and Licensing .............. 36

2. Forced Disclosure of Sensitive Technical Information .............................................. 41

D. China’s Acts, Policies, and Practices Are Unreasonable.................................................. 43

E. China’s Acts, Policies, and Practices Burden or Restrict U.S. Commerce....................... 45

III. China’s Discriminatory Licensing Restrictions.................................................................... 48

A. Introduction....................................................................................................................... 48

B. Foreign Licensing Restrictions and China’s Technology Transfer Regime ..................... 48

1. Different Outcomes for U.S. Companies versus Chinese Competitors...................... 51

2. Indemnification Against Infringement Claims ........................................................... 51

3. Ownership of Improvements to Licensed Technology............................................... 52

4. Use of Technology after the Technology Contract Expires........................................ 53

C. Concerns Raised by Other Trading Partners..................................................................... 54

D. China’s Acts, Policies, and Practices are Discriminatory................................................. 55

1. Justifications for Discrimination................................................................................. 55

2. Acts, Polices, and Practices of Other Countries ......................................................... 57

E. China’s Acts, Policies, and Practices Burden U.S. Commerce ........................................ 60

IV. Outbound Investment............................................................................................................ 62

A. Introduction....................................................................................................................... 62

B. Policy and Regulatory Framework ................................................................................... 66

1. Major Policies to Acquire Foreign Technology.......................................................... 66

2. The Chinese Outbound Investment Approvals System .............................................. 70

3. Sectors “Encouraged” for Outbound Investment........................................................ 77

4. Outbound Investment Policy in Technology and Sectoral Policies............................ 78

5. State-Backed Actors.................................................................................................... 80
2

C. Impact of Policies and Implementing Measures on Chinese Investment in the United 

States................................................................................................................................. 97

1. Chinese Investment Activity in the United States: Analysis of Data ........................ 98

2. Effect of State Policies and Implementing Measures on Chinese Acquisitions....... 102

3. Leveraging “International Innovation Resources” Through Engagement with Silicon 

Valley........................................................................................................................ 142

D. China’s Acts, Policies, and Practices are Unreasonable ................................................. 147

E. China’s Acts, Policies, and Practices Burden U.S. Commerce ...................................... 150

V. Unauthorized Intrusions into U.S. Commercial Computer Networks and Cyber-Enabled 

Theft of Intellectual Property and Sensitive Commercial Information ............................. 153

A. Introduction..................................................................................................................... 153

B. China’s Acts, Policies, and Practices Regarding Unauthorized Intrusions into U.S. 

Commercial Computer Networks and Cyber-Enabled Theft of Intellectual Property and 

Sensitive Commercial Information ................................................................................. 154

1. The Chinese Government’s Extensive Cyber Activities .......................................... 154

2. The United States Department of Justice Indicted Chinese Government Hackers in 

May 2014 .................................................................................................................. 157

3. China’s Institutional Framework Supports Cyber Intrusions into U.S. Commercial 

Networks................................................................................................................... 164

4. China’s Recent Cyber Intrusion Activities Against U.S. Commercial Networks .... 167

C. China’s Acts, Policies, and Practices Regarding Cybertheft of Intellectual Property Are 

Unreasonable................................................................................................................... 171

D. China’s Acts, Policies, and Practices Regarding Cybertheft of Intellectual Property 

Burden U.S. Commerce .................................................................................................. 173

VI. Other Acts, Policies, and Practices of China ...................................................................... 177

A. Introduction..................................................................................................................... 177

1. Measures Purportedly Related to National Security or Cybersecurity ..................... 177

2. Inadequate Intellectual Property Protection.............................................................. 179

3. China’s Anti-Monopoly Law.................................................................................... 180

4. China’s Standardization Law.................................................................................... 181

5. Talent Acquisition..................................................................................................... 181

B. Conclusion ...................................................................................................................... 182
I. Overview

10

Because USTR self-initiated this action, no particular company or group of companies was 

required to step forward and file a Section 301 petition to initiate this investigation. Moreover, 

in making this determination, USTR and the interagency Section 301 committee took into 

account not just investigation submissions and testimony but also public reports, scholarly 

articles, and other reliable information. In addition, business confidential information has been 

provided and considered as part of the record in this investigation, so that companies could share 

sensitive information without the threat of business loss or retaliation. 

C. China’s Technology Drive 

Official publications of the Chinese government and the CCP set out China’s ambitious 

technology-related industrial policies. These policies are driven in large part by China’s goals of 

dominating its domestic market and becoming a global leader in a wide range of technologies, 

especially advanced technologies. The industrial policies reflect a top-down, state-directed 

approach to technology development and are founded on concepts such as “indigenous 

innovation” and “re-innovation” of foreign technologies, among others. The Chinese 

government regards technology development as integral to its economic development and seeks 

to attain domestic dominance and global leadership in a wide range of technologies for economic 

and national security reasons.24 China accordingly seeks to reduce its dependence on 

technologies from other countries and move up the value chain, advancing from low-cost 

manufacturing to become a “global innovation power in science and technology.”

25 In pursuit of 

this overarching objective, China has issued a large number of industrial policies, including more 

than 100 five-year plans, science and technology development plans, and sectoral plans over the 

last decade.26 Some of the most prominent industrial policies include the National Medium- and 

Long-Term Science and Technology Development Plan Outline (2006-2020) (MLP),

27 the State 

Council Decision on Accelerating and Cultivating the Development of Strategic Emerging 

Industries (SEI Decision)

28

, and, more recently, the Notice on Issuing “Made in China 2025”

(Made in China 2025 Notice).

29

The MLP, issued in 2005 and covering the period 2006 to 2020, is the seminal document 

articulating China’s long-term technology development strategy. The MLP recognizes the 

country’s “relatively weak indigenous innovation capacity,” its “weak core competitiveness of 

enterprises,” and the fact that the country’s high-technology industries “lag” those of more 

developed nations.”

30

 

 

24 See James Lewis, Submission, Section 301 Hearing 1 (Sept. 2017).

25 CCP State Council Releases the “National Innovation-Driven Development Strategy Guidelines §2(3) [Chinese], 

XINHUA NEWS, May 19, 2016, http://news.xinhuanet.com/politics/2016-05/19/c_1118898033.htm.; see also TAI 

MING CHEUNG ET AL., U.S.-CHINA ECON. & SEC. REV. COMM’N, PLANNING FOR INNOVATION: UNDERSTANDING 

CHINA’S PLANS FOR TECHNOLOGICAL, ENERGY, INDUSTRIAL AND DEFENSE DEVELOPMENT [hereinafter “IGCC

REPORT”] xiii (2016).

26 IGCC REPORT at 30.

27 Notice on Issuing the National Medium- and Long-Term Science and Technology Development Plan Outline

(2006-2020) [hereinafter “MLP”] (State Council, Guo Fa [2005] No. 44, issued Dec. 26, 2005).

28 Decision on Accelerating the Cultivation and Development of Strategic Emerging Industries (State Council, Guo 

Fa [2010] No. 32, issued Oct. 10, 2010).

29 Notice on Issuing “Made in China 2025” (State Council, Guo Fa [2015] No. 28, issued May 8, 2015).

30 MLP §1.
I. Overview

11

As its focus, the MLP identifies 11 key sectors, and 68 priority areas within these sectors, for 

technology development.31 It also designates eight fields of “frontier technology,” 32 within 

which 27 “breakthrough technologies” will be pursued, and highlights four major scientific 

research programs.

33 The MLP also establishes the cross-cutting goal of reducing the rate of 

dependence on foreign technologies in the identified sectors to below 30% by the year 2020.34 

The MLP strategy for securing sought-after technology development includes several key 

elements, which continue to have a negative impact on U.S. and other foreign companies:

 A top-down national strategy, in which implementation requires the mobilization and 

participation of all sectors of society35 and the integration of civil and military 

resources;36

 Prioritization of certain industries and technologies for development,37 particularly those 

that can advance “sustainable development,” “core competitiveness,” “public service,” 

and “national security” objectives.38

 Leveraging state resources and regulatory systems;39

 Import substitution to be achieved through “indigenous innovation”

40 and re-innovation 

based on assimilation and absorption of foreign technologies;41 and

 Promoting Chinese enterprises to become dominant in the domestic market42 and 

internationally competitive enterprises43 in key industries.

The MLP set in motion a web of policies and practices intended to drive innovation and reinnovation. For example, Section 8(2) of the MLP calls for “enhancing the absorption, digestion, 

 

31 The sectors include energy, water and mineral resources, environment, agriculture, manufacturing, transportation, 

information and services, population and health, urbanization, public security and national defense.

32 The areas include biotech, information technology, advanced materials, advanced manufacturing, advanced 

energy technology, marine technology, laser technology and aerospace technology.

33 The fields include protein science, nanotechnology, quantum physics and developmental and reproductive 

science.

34 MLP § 2(2) ¶ 3, Guiding Directives, Development Targets, and Comprehensive Arrangements. 

35 MLP § 2(1). (“In sum, we must make enhancing indigenous innovation capacity our national strategy, and 

implement it in all aspects of modernization construction and in every industry, sector and region.”). §8(5) also 

guides “all types of financial institutions and private funds to participate in science and technology development.”

36 MLP § 8(7).

37 MLP § 3 sets out the “Key Sectors and their Priority Issues.”

38 MLP § 3, Preamble.

39 MLP § 9.

40 MLP § 2(1).

41MLP §§ 2(1), 8(2). The term “introduce” used throughout MLP refers to introduction of technology through 

foreign investment. This is made more explicit in the measures defining and discussing IDAR below. 

42 MLP § 2(2) states dependence on foreign technology should be reduced to only 30% by 2020.

43 See IGCC REPORT at 157. See also MLP § 2.
I. Overview

12

and re-innovation of introduced technology.”44 Following the issuance of the MLP, China 

detailed these policies in the Several Supporting Policies for Implementing the “National 

Medium- and Long-Term Science and Technology Development Plan Outline (2006-2020)” 

(MLP Supporting Policies)

45 and the Opinions on Encouraging Technology Introduction and 

Innovation and Promoting the Transformation of the Growth Mode in Foreign Trade (IDAR 

Opinions),

46 which articulate the concept of Introducing,47 Digesting,48 Absorbing,49 and Reinnovating50 foreign intellectual property and technology (IDAR). The IDAR approach involves 

four steps, each of which hinges on close collaboration between the Chinese government and 

Chinese industry to take full advantage of foreign technologies: 

 Introduce: Chinese companies should target and acquire foreign technology. Methods of 

“introducing” foreign technology that are specifically referenced include: technology 

transfer agreements, inbound investment, technology imports, establishing foreign R&D 

centers, outbound investment, and the collection of market intelligence by state entities 

for the benefit of Chinese companies.51 Technology to be “introduced” from overseas

includes “major equipment that cannot yet be supplied domestically”, as well as 

“advanced design and manufacturing technology”;

52 conversely, the government 

discourages imports of technologies for which China is already deemed to “possess 

domestic R&D capabilities.”

53

 Digest: Following the acquisition of foreign technology, the Chinese government should 

collaborate with China’s domestic industry to collect, analyze, and disseminate the 

information and technology that has been acquired.

54

 Absorb: The Chinese government and China’s domestic industry should collaborate to 

develop products using the technology that has been acquired. The Chinese government 

should provide financial assistance to develop products using technology obtained 

through IDAR, including foreign trade development funds, government procurement, and 

fiscal incentives.55 To absorb foreign technologies, authorities have established 

engineering research centers, enterprise-based technology centers, state laboratories, 

national technology transfer centers, and high-technology service centers.56 

 

44 MLP §§ 2(1), 8(2).

45 Several Supporting Policies for Implementing the “National Medium- and Long-Term Science and Technology 

Development Plan Outline (2006-2020)” (State Council, Guo Fa [2006] No. 6, issued Feb. 7, 2006).

46 Several Opinions on Encouraging Technology Introduction and Innovation and Promoting the Transformation of 

the Growth Mode in Foreign Trade (MOFCOM, NDRC, MOST, MOF, GAC, SAT, SIPO, SAFE, Shang Fu Mao Fa 

[2006] No. 13, issued July 14, 2006).

47 English translation of Chinese term yinjin.

48 English translation of Chinese term xiaohua.

49 English translation of Chinese term xishou.

50 English translation of Chinese term zai chuangxin.

51 IDAR Opinions § 7-9, 11-12. See also IGCC REPORT at 118-119.

52 MLP Supporting Policies § 28, 29.

53 MLP Supporting Policies § 29.

54 IDAR Opinions § 7; MLP Supporting Policies § 31.

55 IDAR Opinions § 15, 18; MLP Supporting Policies § 30, 32. 

56 IGCC REPORT at 118.
I. Overview

13

 Re-innovate: At this stage, Chinese companies should “re-innovate” and improve upon 

the foreign technology. The ultimate objective is to develop new, home-grown products 

that are competitive internationally, so as to “allow enterprises to possess more 

indigenous intellectual property for core products and core technologies.”57

The IDAR approach embraces a strong role for the Chinese government in guiding and 

assisting Chinese industry in technology development and has had profound implications, in 

particular, for the way in which China has sought to introduce foreign technologies into 

China over the last decade. It has spurred Chinese government ministries and government 

officials to pursue an array of aggressive implementing acts, policies, and practices, 

including those that are the subject of this investigation.

China has continued to emphasize the IDAR approach since it was first articulated in 2006 in 

broad-ranging five-year plans and technology development plans issued by China’s State 

Council, central government ministries and provincial and municipal governments, and the 

CCP. The IDAR approach also has been incorporated into numerous economic development 

plans for specific sectors, such as integrated circuits.

58

In 2010, the Chinese government announced another seminal technology development strategy, 

which calls for the accelerated development of seven so-called “strategic emerging industries” 

(SEIs): (1) energy efficient and environmental technologies, (2) next generation information 

technology, (3) biotechnology, (4) high-end equipment manufacturing, (5) new energy, (6) new

materials, and (7) new energy vehicles.59 The 12th Five-year National Strategic Emerging 

Industries Development Plan (12th Five-year SEI Plan)

60 subsequently recommended specific 

fiscal and taxation policy support and set a target for SEIs to account for 8% of China’s economy 

by 2015 and 15% by 2020. The 12th Five-year SEI Plan also aims to foster a group of Chinese 

enterprises – including state-owned enterprises – into “backbone enterprises” that can become 

 

57 IDAR Opinions § 5. 

58 E.g., 12th Five-year Development Plan for the Integrated Circuit Industry (Ministry of Industry and Information 

Technology, published Feb. 24, 2012) § 3(1), ¶ 3: “Maintain innovation drivers. Combine implementation of 

national science and technology major special projects and megaprojects, using innovation in technologies, modes, 

mechanisms, and systems as the impetus to make breakthroughs in a group of shared core technologies. Strengthen 

introduce, digest, absorb, and re-innovate, to stride down the path of open-type innovation and internationalized 

development.” (emphasis added).

59 State Council Decision on Accelerating the Development of Strategic Emerging Industries (State Council, Guo Fa 

[2010], No. 32, issued Oct. 10, 2010).

60 Notice on Issuing the 12th Five-year National Strategic Emerging Industries Development Plan (State Council, 

Guo Fa [2012] No. 28, issued July 9, 2012).
I. Overview

14

market leaders domestically and compete globally.61 The Chinese government later reaffirmed 

and refined this strategy in its 13th Five-year Strategic Emerging Industries Development Plan.

62

Notably, support for the IDAR strategy was reiterated in the CCP’s 2013 Third Plenum 

Decision63 (Third Plenum Decision) released in connection with the Third Plenary Session of 

the 18th National Congress of the CCP. IDAR’s inclusion in the Third Plenum Decision is 

significant because the document was widely seen as setting forth the priorities of President 

Xi Jinping’s new administration with respect to China’s future economic development path.64 

By reaffirming that China should “establish and perfect a mechanism to encourage original 

innovation, integrated innovation, and introduce, absorb, digest, and re-innovate,”65 the Third 

Plenum Decision signaled the CCP’s continued high-level support for the IDAR approach to 

technology innovation.

In 2015, the State Council released the Made in China 2025 Notice,

66 which is China’s ten-year 

plan for targeting ten strategic advanced technology manufacturing industries for promotion and 

development: (1) advanced information technology; (2) robotics and automated machine tools; 

(3) aircraft and aircraft components; (4) maritime vessels and marine engineering equipment; (5) 

advanced rail equipment; (6) new energy vehicles; (7) electrical generation and transmission 

equipment; (8) agricultural machinery and equipment; (9) new materials; and (10) 

pharmaceuticals and advanced medical devices.

67

 

While the Made in China 2025 Notice references market-oriented principles, it closely resembles 

China’s other state-led, technology-related plans, such as the MLP, issued a decade earlier, in 

that it:

 Reaffirms the Chinese government’s central role in economic planning;68

 

61 For example, the 12th Five-year National Economic and Social Development Plan Outline (adopted by the NPC 

on Mar. 14, 2011) calls for the cultivation of a group of backbone enterprises within strategic emerging industries. 

Ch. 10, §2 “Fostering the Development of Strategic Emerging Industries”. The 12th Five-year SEI Plan further 

specifies that backbone enterprises are to have “relatively strong indigenous innovation capacity and a technological 

leadership effects.” § 2(3), “Guiding Thoughts, Fundamental Principles, and Development Targets”. At the sectoral 

level, the Guidelines for the Development and Promotion of the Integrated Circuit Industry (State Council, issued 

June 24, 2014) laud the fact that China has established “a group of backbone enterprises with significant 

international competitiveness.” § 1, ¶ 1. The Guiding Opinion on Promoting International Industrial Capacity and 

Equipment Manufacturing Cooperation (State Council, Guo Fa [2015] No. 30, issued May 13, 2015) provides that a 

“main target” of the policy is to “establish a group of backbone enterprises that possess international 

competitiveness and the ability to open up markets.” § 2(6).

62 Notice on Issuing the 13th Five-year National Strategic Emerging Industries Development Plan (State Council, 

Guo Fa [2016] No. 67, issued Nov. 29, 2016).

63 CCP Central Committee Decision on Several Major Issues for Comprehensively Deepening Reform (CCP Central 

Committee, issued Nov. 12, 2013) [hereinafter “Third Plenum Decision”).

64 Third Plenums have historically been used to announce major economic reforms, such as the adoption of reform 

and opening during the Third Plenary Session of the 11th National Congress of the CCP in 1978, and the 

endorsement of the socialist market economy following the 14th National Congress of the CCP in 1993.

65 Third Plenum Decision § 13.

66 Decision on Issuing “China Manufacturing 2025” (State Council, Guo Fa [2015] No. 28, issued May 8, 2015).

67 Made in China 2025 Notice § 3(6). 

68 Made in China 2025 Notice § 2(2).
I. Overview

15

 Calls on all facets of society to mobilize behind the plan;69

 Seeks technological breakthroughs in key areas for economic and security purposes;

 Promotes further civil-military integration and the two-way transfer and conversion of 

military and civilian technologies;70

 Leverages state resources,

71 policy support,72 and regulatory systems;73

 Continues to promote import substitution and rely on indigenous products to meet 

growing demand in China;

74

 Reaffirms the leading role of backbone enterprises in technology development;75 and

 Promotes Chinese enterprises to become dominant in the domestic market and 

internationally competitive in key industries.76

The Made in China 2025 Notice expressly calls for China to achieve 40% “self-sufficiency” by 

2020, and 70% “self-sufficiency” by 2025, in core components and critical materials in a wide 

range of industries, including aerospace equipment and telecommunications equipment.77 The

“Made in China 2025” Key Area Technology Roadmap (Made in China Roadmap) sets explicit 

market share targets that are to be filled by Chinese producers both domestically and globally in 

dozens of high-tech industries.

78

 

69 Made in China 2025 Notice § 1(3).

70 Made in China 2025 Notice § 3(1).

71 Made in China 2025 Notice § 4.

72 Made in China 2025 Notice § 1(3).

73 See generally Made in China 2025 Notice. This is particularly the case in quality standard regulations as described 

in §§ 2(1) and 3(4).

74 Made in China 2025 Notice § 1(2) describes the growing demand for new equipment, consumption, and safety, 

while § 1(3) calls for China to “rely more on Chinese equipment and Chinese brands.”

75 Made in China 2025 Notice § 3(1).

76 Made in China 2025 Notice § 1(3).

77 Made in China 2025 Notice, Box 3.

78 Made in China 2025 Key Area Technology Roadmap, (National Strategic Advisory Committee on Building a 

Powerful Manufacturing Nation, issued Oct. 10, 2015); see also U.S. CHAMBER, MADE IN CHINA 2025: GLOBAL 

AMBITIONS BUILT ON LOCAL PROTECTIONS 8 (2017). The Made in China Roadmap was released by the National 

Strategic Advisory Committee on Building a Powerful Manufacturing Nation (also known as the “National 

Manufacturing Strategy Advisory Committee”) which was established pursuant to the Made in China 2025 Notice

with responsibility to provide advice and assessments on China’s major manufacturing policies. In August 2015, 

Vice Premier Ma Kai, who leads the Strong Manufacturing Country Leading Small Group, spoke at the 

Committee’s first meeting and lauded its establishment as a way to “strongly promote Made in China 2025.” 

National Strategic Advisory Committee on Building a Powerful Manufacturing Nation Established; Chaired by Ma 

Kai [Chinese], XINHUA (Aug. 26, 2015), available at http://www.xinhuanet.com/info/2015-08/26/c_134556815 htm

(last visited Mar. 16, 2018). See also Notice on the Establishment of the Strong Manufacturing Country Leading 

Small Group, (General Office of the State Council, Guo Ban Fa [2015] No. 48, published June 24, 2015) (last 

visited March 16, 2018); and National Strategic Advisory Committee on Building a Powerful Manufacturing Nation 

Established, STATE INTELLECTUAL PROPERTY OFFICE OF THE P.R.C. (Aug. 26, 2015), available at 

http://www.sipo.gov.cn/yw/2015/201508/t20150826_1165829.html (last visited Dec. 21, 2017).
I. Overview

16

For example, indigenous new energy vehicles are to achieve an 80% domestic market share79

with foreign sales accounting for 10% of total sales by 2025.80 Similarly, domestically produced 

energy equipment is to achieve 90% domestic market share, with exports accounting for 30% of 

production, by 2020,81 and renewable energy equipment with indigenous IP is to achieve 80% 

domestic market share by 2025.82 In comparison to previous plans, Made in China 2025

expands its focus to capturing global market share, not just dominance in the China market, and 

is part of a “broader strategy to use state resources to alter and create comparative advantage in 

these sectors on a global scale.”83

The Made in China 2025 Notice sets forth clear principles, tasks, and tools to implement this 

strategy, including government intervention and substantial government, financial and other 

support to the targeted Chinese industries.84 Domestic dominance and global competitiveness 

are to be achieved by upgrading the entire research, development, and production chain, with 

emphasis on localizing the output of components and finished products.85 Foreign technology 

acquisition through various means remains a prime focus under Made in China 2025 because 

China is still catching up in many of the areas prioritized for development, and as U.S. 

companies are front-runners in many of these areas.86

China’s Ministry of Industry and Information Technology (MIIT) has explained that Made in 

China 2025 is part of a three-step strategy for China to become a world leader in advanced 

manufacturing. Under the first step, by 2025, China should “approach the level of 

manufacturing powers Germany and Japan during the period when they realized 

industrialization.” In the second step, China should “enter the front ranks of second tier 

manufacturing powers” by 2035. In the final step, China should “enter the first tier of global 

manufacturing powers” by 2045, at which point China will have “innovation-driving 

capabilities,” “clear competitive advantages,” and “world-leading technology systems and 

industrial systems.”87 

In recent years, China also issued policies specific to advanced technologies in which U.S. firms 

are market leaders. Information and communications technologies have been a focal point, with 

more and more strategies emanating from the National Informatization Development Strategy

(2006-2020), such as the National Integrated Circuit Industry Development Outline, the Internet 

 

79 Made in China 2025 Key Area Technology Roadmap § 6.2.2.

80 Made in China 2025 Key Area Technology Roadmap § 6.2.2.

81 Made in China 2025 Key Area Technology Roadmap § 7.1.2.

82 Made in China 2025 Key Area Technology Roadmap § 7.1.2.

83 U.S. CHAMBER, MADE IN CHINA 2025: GLOBAL AMBITIONS BUILT ON LOCAL PROTECTIONS 6 (2017).

84 See AM. CHAMBER OF COMMERCE IN SHANGHAI, Submission, Section 301 Hearing 2 (Sept. 28, 2017); NAT’L.

ASS’N OF MANUFACTURERS [hereinafter “NAM”], Submission, Section 301 Hearing 3 (Sept. 28, 2017); WILEY REIN

LLP, Submission, Section 301 Hearing 3-4 (Sept. 28, 2017); BJÖRN CONRAD, ET AL., MERCATOR INST. FOR CHINA 

STUDIES [hereinafter “MERICS”], MADE IN CHINA 2025 7, 11 (2016); and U.S. CHAMBER OF COMMERCE, MADE IN 

CHINA 2025: GLOBAL AMBITIONS BUILT ON LOCAL PROTECTIONS 7, 15, 18 (2017).

85 IGCC REPORT at 121.

86 IGCC REPORT at 121.

87 Made in China 2025 Explanation 6: The Manufacturing Power ‘Three-Step’ Strategy, MINISTRY OF INDUSTRY 

AND INFORMATION TECHNOLOGY (May 19, 2015), 

http://www.miit.gov.cn/n1146295/n1146562/n1146655/c3780688/content.html; see also IGCC REPORT at 47-48. 
I. Overview

17

Plus Plan, the “Broadband China” strategy and corresponding implementation plan, and the 

designation of next-generation information technology as a “strategic emerging industry.”

88

In addition, China recently announced that it will pursue an “innovation-driven” development 

strategy

89 and that it has made breakthroughs in higher-end innovation a top priority.90

 At the 

19th National Congress of the CCP, held in October 2017, President Xi Jinping’s remarks 

specifically referenced the goal of building China into a “powerful nation [or power] in science 

and technology, quality, aerospace, the Internet, and transportation” and called for “accelerating 

the construction of [China as] a manufacturing power” by “accelerating the development of 

advanced manufacturing industry” and “promoting the deep integration of the Internet, big data, 

and artificial intelligence with the real economy.”91 

Like the MLP a decade ago, newer plans such as the Made in China 2025 Notice and the various 

plans focused on information and communications technologies call for a wide array of Chinese 

government intervention and financial and other support designed to transform China into a 

world leader in technology. While these policies and practices are not necessarily new, their 

actual and potential effects on foreign companies and their technologies have become much 

more serious. As James Lewis of CSIS explained in his submission to USTR:

What is new is that unfair trade, security and industrial policies, tolerable in a smaller 

developing economy, are now combined with China’s immense, government-directed 

investment and regulatory policies to put foreign firms at a disadvantage...China now has 

the wealth, commercial sophistication and technical expertise to make its pursuit of 

technological leadership work. The fundamental issue for the U.S. and other western 

nations, and the IT sector is how to respond to a managed economy with a well-financed 

strategy to create a domestic industry intended to displace foreign suppliers.92

As detailed in Sections II through VI of this report, a key part of China’s technology drive 

involves the acquisition of foreign technologies through acts, policies, and practices by the 

Chinese government that are unreasonable or discriminatory and burden or restrict U.S. 

commerce. These acts, policies, and practices work collectively as part of a multi-faceted 

strategy to advance China’s industrial policy objectives. They are applied across a broad range 

of sectors, overlap in their use of policy tools (e.g., the issuance of planning documents and 

guidance catalogues), and are implemented through a diverse set of state and state-backed actors, 

including state-owned enterprises.

 Section II describes the Chinese government’s use of foreign ownership restrictions, such 

as joint venture (JV) requirements and foreign equity limitations, other foreign 

 

88 IGCC REPORT at 44. 

89 IGCC REPORT at 41 (“This innovation-driven development strategy (IDDS) was officially promulgated by the 

Chinese authorities in May 2016 and provides a ‘top-level design and systemic plan’ for China’s innovation over 

next 30 years.”).

90 IGCC REPORT at xiii-xiv. 

91 Xi Jinping, Speech at the 19th CPC National Congress: Secure a Decisive Victory in Building a Moderately 

Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a 

New Era (Oct. 18, 2017), available in Chinese at http://www.gatj.gov.cn/html/6/wjjh/17/10/3257-6 html.

92 James Lewis, CSIS, Submission, Section 301 Hearing 1 (Sept. 27, 2017).
I. Overview

18

investment restrictions, and the administrative licensing and approvals process to require 

or pressure the transfer of technology from U.S. companies to Chinese entities. 

 Section III describes how U.S. companies seeking to license technologies to Chinese 

entities must do so on non-market-based terms that favor Chinese recipients.

 Section IV describes how the Chinese government directs and unfairly facilitates the 

systematic investment in, and acquisition of, U.S. companies and assets by Chinese 

entities, to obtain cutting-edge technologies and intellectual property and generate largescale technology transfer in industries deemed important by state industrial plans. 

 Section V describes how the Chinese government has conducted or supported cyber 

intrusions into U.S. commercial networks targeting confidential business information 

held by U.S. firms. Through these cyber intrusions, China’s government has gained 

unauthorized access to a wide range of confidential business information, including trade 

secrets, technical data, negotiating positions, and sensitive and proprietary internal 

communications.

 Section VI describes other acts, policies, and practices of by the Chinese government to 

acquire foreign technologies, including measures purportedly related to national security 

or cybersecurity, inadequate intellectual property protection, the Antimonopoly Law of the 

People’s Republic of China, the Standardization Law of the People’s Republic of China, 

and talent acquisition.
IV. Outbound Investment

129

2016.770 This achievement is attributed to “focusing on the 18th National Congress of the 

CCP[...] internal governance, foreign relations, and national defense, and governance of the 

Party, the nation, and the military.”771

e) Industrial Machinery and Robotics

Government Policies

Developing advanced industrial machinery, including robotics with industrial applications, is an 

important policy goal of the Chinese government. Chinese authorities hope to increase 

productivity772 at a time of increasing labor costs in China,773 and are attempting to acquire 

advanced technology so that China can join the ranks of high-tech manufacturing economies by 

2025.774 By supporting acquisitions in machinery and robotics, Chinese authorities hope to gain 

access to advanced technology, and they see this technology as vital to meeting Made in China 

2025 policy objectives with respect to the production of large aircraft,775 auto manufacturing,776

agricultural machinery,777 and medical technology.778

Several state planning documents underscore the importance of obtaining technology for 

advanced industrial machinery – for instance, the Robotics Five-year Plan, the Industry 

Technology Innovation Capacity Development Plan (2016-2020)779 (Industry Five-year Plans), 

and the recently released Next-Generation Artificial Intelligence Development Plan780 (AI Plan). 

As these documents make clear, a key strategy for the “transformation and upgrading” of these 

sectors is a combination of government support781 and the use of mergers and acquisitions to 

gain access to foreign technology.782 Authorities have made frequent use of this approach, 

 

770 BGI High-Throughput Gene Sequencer Debut "to Forge Ahead for Five-years" Large-Scale Achievements 

Exhibition [Chinese], BGI (Oct. 11, 2017), http://www.genomics.cn/news/show_news?nid=105368 (last visited 

Nov. 1, 2017).

771 BGI High-Throughput Gene Sequencer Debut "to Forge Ahead for Five-years" Large-Scale Achievements 

Exhibition [Chinese], BGI (Oct. 11, 2017), http://www.genomics.cn/news/show_news?nid=105368 (last visited 

Nov. 1, 2017).

772 Made in China 2025 Notice § 2(3); State Council Notice on Issuing the Next-Generation of Artificial Intelligence 

Development Plan § 3(2) (State Council, Guo Fa [2017] No. 35, issued Aug. 20, 2017).

773 Made in China 2025 Notice, Section 1(2); Notice on Issuing Robotics Industry Development Plan (2016-2020) §

1, ¶ 4 (MIIT, NDRC, MoF, Gong Xin Bu Lian Gui [2016] No. 109, issued Mar. 21, 2016).

774 Made in China 2025 Notice § 1(3), § 2(1).

775 Made in China 2025 Notice § 1(3). See also Zhejiang Wanfeng Technology Development Co. Ltd./Paslin Co.

776 Made in China 2025 Notice § 3(6)2. 

777 Made in China 2025 Notice § 3(6)8.

778 Made in China 2025 Notice § 3(6)2, § 3(6)10.

779 Ministry of Industry and Information Technology Notice on Issuing the Industry Technology Innovation Capacity 

Development Plan (2016-2020) (MIIT, Gong Xin Bu Gui [2016] No. 344, issued Oct. 31, 2016).

780 State Council Notice on Issuing the Next-Generation of Artificial Intelligence Development Plan § 3(2) (State 

Council, Guo Fa [2017] No. 35, issued Aug. 20, 2017).

781 Industry Five-year Plan § 5(3); AI Plan § 4(1); Robotics Five-year Plan § 4(3). 

782 Industry Five-year Plan § 5(5); AI Plan § 4(3). The Robotics Five-year Plan § 4(6) also suggests government 

support for “international cooperation.”; State Council Guiding Opinion on Promoting International Capacity and

Equipment Cooperation § 46(35) (State Council, Guo Fa [2015] No. 30, issued May 13, 2015), also, § 4 of the same 

plan is wholly dedicated to improving “Going Out” capacity, and § 6 is dedicated to “Expanding Policy Support 

Intensity.”
IV. Outbound Investment

130

supporting transactions through grants, state-led policy bank debt financing, and financing 

through state-sponsored investment funds.

Chinese Investments in the U.S. Industrial Machinery and Robotics Sector

Zhejiang Wanfeng Technology Development Co. Ltd./Paslin Co.

The acquisition activities of Zhejiang Wanfeng Technology Development Co. (Wanfeng) 

illustrate the approach outlined above. In 2016, Wanfeng wholly acquired Paslin Co. (Paslin), a 

developer and manufacturer of “complex automated assembly and welding systems,”783 for $302 

million.784 Paslin Co. produces advanced manufacturing robots used primarily in the assembly 

of automobiles.785

To support the acquisition, Shaoxing City provided CNY 300 million ($45 million) to the 

Wanfeng Acquisition Fund, which was able to raise a total of CNY 1 billion ($151 million) from 

Wanfeng and other public and private companies,786 significantly reducing Wanfeng’s own 

capital contribution to the acquisition. In an interview with a Chinese financial daily, Wanfeng 

Director Zhao Yahong attributed the Paslin acquisition to financial assistance from the Wanfeng 

Acquisition Fund.787 Wanfeng is also a recipient of government assistance, including a total of 

CNY 73 million ($11 million) in government grants from a combination of dozens of central and 

local governments.788

Although a private company, Wanfeng cultivates close ties to government authorities. The 

company is part of a family conglomerate, and run by Chen Ailian,

789

 a well-connected CCP 

member who served as a representative from Zhejiang Province at the 12th National People’s 

Congress (NPC) in 2016,790 where she proposed that the government establish a new China 

High-Tech Development Bank policy bank to provide “low-interest medium- and long-term 

loans” and “financial assistance” to enterprises in the high-tech manufacturing industry.791 She 

is also currently a member of the Standing Committee of Shaoxing City’s 8th People’s 

 

783 Our Company, PASLIN, http://www.paslin.com/our-company/ (last visited Oct. 23, 2017).

784 Liang Zhen, Zhejiang Wanfeng Acquires US Robotics Maker Paslin, CHINA DAILY, Apr. 20, 2016.

785 Milestones + History, PASLIN, http://www.paslin.com/milestones-history/ (last visited Oct. 23, 2017).

786 Announcement on the 2016 Zhejiang Shaoxing Transformation and Upgrading Industry Fund Investment into 

Wan Feng Commercial Industry Merger and Acquisition Fund Project [Chinese] (Shaoxing City Financial Bureau, 

issued Feb. 26, 2016).

787 Xu Ning, Foreign Mergers and Acquisitions Adhere to the Industrial Chain and Value Chain High-End 

Extensions [Chinese], JINRONG SHIBAO Aug. 28, 2017, available at http://www.whjr.gov.cn/sinfo-2-36686-0.html 

(last visited Oct. 23, 2017).

788 WANFENG AUTO WHEEL CO. LTD., 2016 ANNUAL REPORT 163-173 [Chinese] (Apr. 11, 2017), available at

www.szse.com. 

789 WANFENG AUTO WHEEL CO. LTD., 2016 ANNUAL REPORT 61-2 [Chinese] (Apr. 11, 2017), available at

www.szse.com. Wanfeng is owned jointly by Chen Ailian’s husband, Wu Liangding, and her son, Wu Jie. Wu 

Liangding is the owner of Rifa Group, and Wu Jie is the President of Rifa Group, another large investment 

company.

790 Representative List, ‘92 Zhejiang Representatives Group’ [Chinese], NPC, 

http://www.npc.gov.cn/delegate/dbmd.action?id=b2 (last visited Oct. 28, 2017).

791 NPC Representative Chen Ailian: Establish the China High-Tech Development Bank [Chinese], 2016 CCP and 

CPPCC Plenary Session Opinions, available at http://zt.ccln.gov.cn/2016lh/tian/39017.shtml (last visited Oct. 23, 

2017).
IV. Outbound Investment

131

Congress,792 the same municipal government which, a year earlier, had chosen her company to 

lead a joint private-public partnership (PPP) investment fund, the Wanfeng Commercial Industry 

Merger and Acquisition Fund (Wanfeng Acquisition Fund).793 

By acquiring Paslin, Wanfeng not only gained access to advanced robotics technology, but also 

supported the objective of the municipal government of Shaoxing City, Zhejiang Province, to 

build a new aircraft manufacturing hub in its jurisdiction. This acquisition was supported by 

substantial government funding. Shaoxing City began issuing policy directives as early as 2012 

in support of developing the city as a center for developing aircraft and aerospace equipment 

manufacturing. For instance, the Shaoxing City Development Strategic Emerging Industry Key 

Field Guiding Catalogue (2013-2015) identified GA manufacturing as a key “emerging 

information industry” and aerospace equipment as an “advanced equipment manufacturing 

industry,” and targeted both for investment and government support.794 Likewise, in 2016, the 

Shaoxing City “13th Five-year” Industry Development Plan stated that developing the city as an 

aviation hub was an important way of developing an “urban industrial development zone”795 in 

Shaoxing, and that such programs should be supported by government measures including 

establishing “industrial funds” and other “preferential policies.”796

Shaoxing City found a willing partner in Wanfeng, which began construction of the Wanfeng 

Aviation Special Village in 2016.797 Consistent with government policies, this site was designed 

to become a hub for aircraft and aerospace equipment manufacturing. The site was visited by 

representatives from the NDRC Planning Division in October 2016, and held up as an example 

of Zhejiang Province’s efforts in “promoting transformation and upgrading of traditional 

manufacturing.”798

Government authorities viewed Wanfeng’s acquisition of Paslin as pivotal to developing the 

aviation hub. According to the Zhejiang Province Financial Office, government support for the 

acquisition is part of “activating a strategic industry,” and plays a role in a larger Shaoxing CityWanfeng joint strategy to develop the Wanfeng Jingyuan High-End Equipment Park through a 

jointly administered fund valued at CNY 1 billion.

799

 Concurrent with financing the Paslin 

 

792 Shaoxing Municipality 8th People’s Congress Standing Committee Member List [Chinese], SHAOXING 

MUNICIPALITY, available at http://sxrd.sx.gov.cn/art/2017/4/17/art_14842_1115531.html (last visited Oct. 28, 

2017).

793 Announcement on the 2016 Zhejiang Shaoxing Transformation and Upgrading Industry Fund Investment into 

Wan Feng Commercial Industry Merger and Acquisition Fund Project [Chinese] (Shaoxing City Financial Bureau, 

issued Feb. 26, 2016).

794 Shaoxing City Government Office Forwards Economic and Information Commission Notice on Shaoxing City 

Development Strategic Emerging Industry Key Fields Guiding Catalogue (2013-2015) (Shaoxing City Government 

Office, Shao Zheng Ban Fa [2012] No. 166, issued Dec. 14, 2012).

795 Shaoxing City “13th Five-year” Industry Development Plan § 4(2), ¶ 8 (Shi Jing Xin Wei, posted June 30, 2016). 

796 Shaoxing City “13th Five-year” Industry Development Plan § 6(2).

797 Development Process [Chinese], WANFENG AUTO HOLDING GROUP, http://www.wfjt.com/develop.php (last 

visited Oct. 30, 2017).

798 National Development and Reform commission Research Team Visits Wanfeng Auto [Chinese], WANFENG AUTO 

HOLDING GROUP, http://www.wfjt.com/news-detail.php?id=971 (last visited Oct. 30, 2017).

799 Zhejiang Shaoxing, Three Ones’ Highly Effectively Deploying Government Industry Funds ‘Energy Storage’ 

Effectiveness [Chinese], ZHEJIANG PROVINCE FINANCIAL OFFICE (May 10, 2017),

http://m mof.gov.cn/czxw/201705/t20170509_2596548 htm (last visited Oct. 23, 2017).
IV. Outbound Investment

132

acquisition, the fund forged plans to establish “three major functional zones for intelligent

equipment, robotics, and R&D” inside the Wanfeng Jingyuan High-End Equipment Park, 

designed to form the “core of the Wanfeng Aviation Village.”

800

This transaction exemplifies China’s IDAR approach to transferring foreign technology. Within 

one year of acquiring Paslin, Wanfeng has already invested CNY 800 million ($118 million) in 

developing high-end robotics manufacturing capacity – based on technology acquired from 

Paslin – in Shaoxing City.801 The use of Paslin’s robotic manufacturing technology is described 

in a Shaoxing City government report as an “important force in Shaoxing’s, even Zhejiang’s, 

future aviation manufacturing industry.”802 As Chen Ailian stated, “by going through overseas 

mergers and acquisitions, we can absorb advanced technology, obtain brand value and sales 

channels, enter the high-end market, and greatly enhance Shaoxing enterprises’ position in global 

market competition.”803 In its Report on Development of China’s Outward Investment and 

Economic Cooperation 2016, MOF explained that, through the Paslin acquisition, Wanfeng 

successfully “obtained key technology for the field of robotics.”804

Northern Heavy Industries Group Co. Ltd./Robbins Co.

Northern Heavy Industries Group (NHI), an SOE owned by China’s central government, 

acquired the Robbins Company (Robbins) through a “three-phase merger,” beginning in 2016. 805 

NHI first invested heavily in Robbins, then increased its stake to 61 percent, and intends to 

acquire a 100 percent stake in the future. 806 Through this transaction, NHI gained access to 

Robbins’ manufacturing capacity with respect to “advanced, underground construction 

machinery.”807 As an SOE, NHI pursues state policy goals, including “the four upgrades 

(technological upgrades, market upgrades, management upgrades, and talent upgrades), and 

major equipment and high-end sets [of products],” which the company describes as “the major 

striking direction.”808 China Exim was the only bank that financed NHI’s acquisition of 

 

800 Zhejiang Shaoxing, Three Ones’ Highly Effectively Deploying Government Industry Funds ‘Energy Storage’ 

Effectiveness [Chinese], ZHEJIANG PROVINCE FINANCIAL OFFICE (May 10, 2017),

http://m mof.gov.cn/czxw/201705/t20170509_2596548 htm (last visited Oct. 23, 2017).

801 Zhejiang Zhaoxing, Three Ones’ Highly Effectively Deploying Government Industry Funds ‘Energy Storage’ 

Effectiveness [Chinese], ZHEJIANG PROVINCE FINANCIAL OFFICE (May 10, 2017),

http://m mof.gov.cn/czxw/201705/t20170509_2596548 htm (last visited Oct. 23, 2017).

802 Zhejiang Zhaoxing, Three Ones’ Highly Effectively Deploying Government Industry Funds ‘Energy Storage’ 

Effectiveness [Chinese], ZHEJIANG PROVINCE FINANCIAL OFFICE (May 10, 

2017),http://m.mof.gov.cn/czxw/201705/t20170509_2596548 htm (last visited Oct. 23, 2017).

803 Wang Dandong, Our City Introduces Encouraging Privately Operated Enterprise Going Out Three Year Action 

Plan for 12 Industry Leaders to Enter the List of Cultivated Multinational Companies [Chinese], SHAOXING DAILY,

July 25, 2017, available at http://www.sx.gov.cn/art/2017/7/25/art_126_1144927.html (last visited Oct. 23, 2017).

804 MOFCOM, Report on Development of China’s Outward Investment and Economic Cooperation 2016 148 (Dec. 

2016). 

805 About Us, THE ROBBINS COMPANY, http://www.therobbinscompany.com/about/ (last visited Oct. 20, 2017). This 

is NHI’s second significant acquisition in the high-tech tunnel boring machinery field, following on the acquisition 

of NFM Technologies of France. In a similar “three-stage merger” pattern, NHI first acquired 70 percent of NFM 

Technologies in 2007, and increased its ownership stake to 100 percent in 2011. History, NFM TECHNOLOGIES, 

http://www.nfm-technologies.com/-History-.html (last visited Nov. 1, 2017).

806 About Us, THE ROBBINS COMPANY, http://www.therobbinscompany.com/about/ (last visited Oct. 20, 2017). 

807 About Us, THE ROBBINS COMPANY, http://www.therobbinscompany.com/about/ (last visited Oct. 20, 2017). 

808 Group Introduction [Chinese], NHI, http://www.china-sz.com/jituanjianjie/ (last visited Oct. 20, 2017). 
IV. Outbound Investment

133

Robbins,809 and China Exim identified the acquisition as an “important project”810 and an 

“international industrial capacity cooperation” project.811 As such, the transaction qualified for 

China Exim’s “Two Preferential” loan programs, which generally provide financing on belowmarket terms.812

 

Midea Group Co., Ltd./Kuka AG (2017)

In 2017 the Midea Group Co., Ltd. (Midea) bought €3.7 billion ($4.2 billion) worth of shares to 

expand its original 13.51 percent share in Kuka AG (Kuka) to 94.55 percent.

813

 Kuka AG is 

based in Germany, but has substantial assets in the United States.814 Midea explained that the 

transaction would promote “transformation and upgrading,”815 noting that by “taking KUKA as a 

platform, we will continue the layout of industrial robots, commercial robots, service robots and 

artificial intelligence, and actively develop key components in the field of industrial 

automation.”816

Although Midea is privately owned,817 the acquisition relied on financing from a consortium of 

banks headed by Chinese state-led policy banks. In particular, China Exim provided €770 

 

809 Exim Bank Liaoning Branch Actively Promotes Supply-side Reform Deploys the Role of Policy-type Finance 

Functions to Support Liaoning Equipment Manufacturing Industry Transformation and Upgrading [Chinese], THE 

EXPORT IMPORT BANK OF CHINA, http://english.eximbank.gov.cn/tm/nineteen/list_1198_30375.html, (last visited 

Oct.20, 2017).

810 EXPORT-IMPORT BANK OF CHINA, ANNUAL REPORT2016, 57. The two preferential programs are the 

Concessional Loan and Preferential Export Buyer’s Credit programs.

811 First Half Year Liaoning Province Equipment Manufacturing Foreign Investment Grows Three Fold [Chinese], 

Policy Office of the NDRC Old Industrial Base Revitalization Division (July 28, 2017), 

http://dbzxs.ndrc.gov.cn/zttp/dwkf/201707/t20170728_855981 html (last visited Oct. 28, 2017);

Exim Bank Liaoning Branch Actively Promotes Supply-side Reform Deploys the Role of Policy-type Finance 

Functions to Support Liaoning Equipment Manufacturing Industry Transformation and Upgrading [Chinese], THE 

EXPORT IMPORT BANK OF CHINA, http://english.eximbank.gov.cn/tm/nineteen/list_1198_30375.html (last visited 

Oct. 20, 2017).

812 EXPORT-IMPORT BANK OF CHINA, ANNUAL REPORT2016, 37. The two preferential programs are the 

Concessional Loan and Preferential Export Buyer’s Credit programs. These loans generally have a subsidized 

interest rate of 2-3 percent and a term of 15-20 years. See THE EXPORT IMPORT BANK OF CHINA, TWO 

PREFERENTIAL” LOAN BUSINESS INTRODUCTION [Chinese], slide 5 (2013).

813 MIDEA GROUP CO., LTD 2016 ANNUAL REPORT 77 (Mar. 31, 2017), available at www.szse.cn. 

814 About Kuka, KUKA, https://www.kuka.com/en-us/about-kuka/. The company’s U.S. locations comprise: KUKA 

Assembly and Test Corporation (Saginaw, MI); KUKA College USA - Shelby Township (Shelby Township, MI); 

KUKA ROBOTICS CORPORATION (Shelby Township, MI); KUKA Systems North America LLC (Sterling 

Heights, MI); KUKA Toledo Production Operations LLC (Toledo, OH); Reis Robotics USA Inc. d/b/a KUKA 

Industries (Carpentersville, IL); Swisslog Healthcare – Chicago Office (Schaumburg, IL); Swisslog Healthcare –

Dallas Office (Farmers Branch, TX); Swisslog Healthcare – North America Headquarters (Denver, CO); Swisslog 

Healthcare – North Carolina (Kannapolis, NC); Swisslog Healthcare – Philadelphia Office (Bensalem, PA); 

Swisslog Healthcare – Seattle Office (Kirkland, WA); Swisslog Logistics – Americas Regional Headquarters 

(Newport News, VA); Swisslog Logistics – Midwest Office (Mason, OH); Swisslog Logistics – West Coast Office 

(Salida, CA).

815 MIDEA GROUP CO., LTD 2016 ANNUAL REPORT 44 (Mar. 31, 2017), available at www.szse.cn.

816 MIDEA GROUP CO., LTD 2016 ANNUAL REPORT 44 (Mar. 31, 2017), available at www.szse.cn.

817 Midea Group is 34.75 percent owned by Midea Holding Co., Ltd., the parent, which is 94.55 percent owned by 

He Xiangjian (individual), who also owns 1.2 percent of Midea Group directly. Other shareholders hold less than 3 

percent of shares each. MIDEA GROUP CO., LTD 2016 ANNUAL REPORT 83, 86 (Mar. 31, 2017), available at

www.szse.cn.
IV. Outbound Investment

134

million ($870 million) in loans,818 and in a press release, linked this loan to the “One Belt One 

Road” and to promoting “international industrial capacity and equipment manufacturing 

cooperation” strategies, both of which are part of the “Going Out” strategy. China Exim states 

that the acquisition will “assist in optimizing the domestic robotics industry layout, promote the 

process of multi-industry production automation, and enhance China’s intelligent manufacturing

technology level.”

819

 

f) Renewable Energy

Government Policies

In the early 2000s, Chinese companies attempted significant oil and shale investments in the 

United States to improve China’s energy security820 and gain access to advanced technology.821 

After the major oil SOE China National Offshore Oil Corp. (CNOOC), one of China’s major 

state-owned oil companies, failed in its bid to acquire Unicol in 2005,822 it signed a series of 

shale gas “drill and carry”823 agreements with foreign companies in 2010.824 CNOOC’s attempts 

to invest in such drill and carry deals in the United States fell off after CNOOC acquired 

Canada’s Nexen in 2013 for $15 billion.825 Nexen is a company with advanced shale gas 

technology,826 of the kind targeted by Chinese development plans.827

Beginning in 2014, Chinese outbound investments in the U.S. energy sector declined 

significantly, especially in oil and gas. This decline appears to reflect a significant drop in 

 

818 Export-Import Bank of China Guangdong Branch Participates in Signing Ceremony for Bank Conglomerate for 

Financing Acquisition of Midea’s KUKA [Chinese], XINHUA NEWS, Aug. 21, 2017, available at

http://www.gd.xinhuanet.com/newscenter/2017-08/21/c_1121516160 htm.

819 Export-Import Bank of China Guangdong Branch Participates in Signing Ceremony for Bank Conglomerate for 

Financing Acquisition of Midea’s KUKA [Chinese], XINHUA NEWS, Aug. 21, 2017, available at

http://www.gd.xinhuanet.com/newscenter/2017-08/21/c_1121516160 htm.

820 For instance, in the 12th Five-year Energy Development Plan, Part 2, Chapter 2, one of the “basic principles” is 

to “improve energy security and the level of [energy] guarantee,” see State Council Notice on Issuing the 12th Fiveyear Energy Development Plan (State Council, Guo Fa [2013] No. 2, issued Jan. 1, 2013).

821 The Notice on Issuing the Shale Gas Development Plan (2011-2015) (NDRC, MoF, MLR, NEA, Fa Gai Neng 

Yuan [2012] No. 612, issued Mar. 23, 2012), at § 2(2)1(1), specifically calls for employing the IDAR methodology 

to gain and re-innovate advanced technology.

822 David Barboza, Andrew Ross Sorkin, Chinese Company Drops Bid to Buy U.S. Oil Concern, THE NEW YORK 

TIMES, Aug. 3, 2005, available at http://www.nytimes.com/2005/08/03/business/worldbusiness/chinese-companydrops-bid-to-buy-us-oil-concern html.

823 Drill and carry agreements are transactions in which one company invests in another company by covering the 

costs of ongoing or future development/drilling. This lowers the capital expenditure of the target company, and 

gives the investing company a share of the resulting asset once it is in operation. 

824 CNOOC entered into two drill and carry agreements with the Chesapeake Energy Corporation in 2010. See

Chesapeake Energy Corporation, 2010 Form 10-K 3, 113 (Mar. 1, 2011), on file with the SEC; see also Jenny 

Mandel, Will U.S. Shale Technology Make the Leap Across the Pacific?, E&E NEWS, July 17, 2012, 

https://www.eenews.net/stories/1059967354.

825 Press release, Nexen Company, Nexen Announces Completion of Acquisition by CNOOC Limited (Feb. 25, 

2013); Euan Rocha, CNOOC Closes $15.1 Billion Acquisition of Canada’s Nexen, REUTERS, Feb. 25, 2013.

826Operations - Shale Gas / Oil, NEXEN COMPANY, available at

http://www.nexencnoocltd.com/en/Operations/ShaleGasOil.aspx (last visited Dec. 27, 2017).

827 See, e.g., State Council Notice on Issuing the 12th Five-year Energy Development Plan (2011-2015) (State 

Council, Guo Fa [2013] No. 2, Jan. 1, 2013).