National Electrical Manufacture1'S Association 

The Honorable Robert E. Lighthizer 

United States Trade Representative 

600 17th Street NW 

Washington, DC 20508 

PUBLIC VERSION 

October 8, 2018 

The association of electrical equipment 

and medical imaging manufacturers 

www.nema.org 

Re: Addendum to Request for Exclusion of Particular Products from the 

Determination of Action Pursuant to Section 301 

Dear Ambassador Lighthizer: 

National Electrical Manufacturers Association ("NEMA" or the "Association") is writing 

on behalf of Smart Thermostat manufacturers pursuant to the Procedures to Consider Requests for 

Exclusion of Particular Products from the Determination of Action Pursuant to Section 301 as set 

forth in docket number USTR-2018-0025-0001. The information contained herein is an addendum 

to the product exclusion fonn, and is intended to address questions set forth in the Federal Register 

on July 11, 2018 (83 Fed. Reg. 32181). 

NEMA respectfully requests an exclusion from the Section 301 tariffs for Wi-Fi enabled 

Smart Thermostat devices that automatically adjust heating and cooling temperature settings for 

optimal perfonnance ("Smart Thermostats"). These products are classified in Harmonized Tariff 

Schedule of the United States ("HTSUS") subheading 9032.10.0030, as "Automatic regulating or 

controlling instruments and apparatus; parts and accessories thereof Thermostats: For air 

conditioning, refrigeration or heating systems: Designed for wall mounting." 

NEMA represents nearly 350 electrical equipment manufacturers that make safe, reliable, 

and efficient products and systems. As a leading industry group for companies that manufacture 

and sell residential and commercial controls, NEMA is uniquely positioned to request this product1300 17t h St N, S uite 900 - .\ rl ington, \ ' .\ 22209 - 703 .841 .3200 
October 8, 2018 

Page2 

PUBLIC VERSION 

specific exclusion. If granted, this product exclusion will benefit U.S. companies, U.S. consumers, 

and future generations as Smart Thermostats are crucial to energy conservation efforts. 

Consistent with USTR's Section 301 notice, NEMA requests confidential treatment for the 

information designated as business confidential in this submission. Such information consists of 

information that would not customarily be released to the public, including business or trade 

secrets regarding production costs and processes, data on sales, product characteristics, customers, 

destinations, and other product, sales, and cost-related business secrets. Business confidential 

information has been indicated herein by enclosing it in single brackets (" [ ]"). A public version 

of these comments is also being filed with all confidential information removed. 

I. Product Background 

Smart Thermostats are "Internet of Things" (loT) 1 devices that, in addition to being Wi-Fi 

enabled, have heightened technological capabilities that allow them to learn and adjust to users' 

temperature preferences. Smart Thermostats are used to moderate peak electrical demand and 

maintain system reliability of electric and gas utilities across the United States. These products 

also help consumers save money on their electric and gas bills by using smart technology that 

allows remote access via smartphone applications, provides better control during periods when 

people are not home, and optimizes heating and cooling when they are home. 

The Smart Thermostats included in this exclusion request all share common productspecific features of being Wi-Fi enabled, controlled locally and remotely through a smart device, 

and capable of automatically adjusting temperature based on learned preference patterns. There 

JoT broadly re fers to the network of devices that are embedded with electronics and software that enables them to connect 

and exchange data via the Internet. 

1300 17t h St N , Suite 900 - .\rlin gton , \' ,\ 22 209 - 7 03 .841 .3200 
October 8, 2018 

Page 3 

PUBLIC VERSION 

are, however, additional minor features that vary within this product category. In general, 

additional minor features fall into the category of convenience, control, and information. 

Convenience features may include, for example, a difference in sensors or geo-fencing 

technology that allows the system to more precisely determine the user's location to better adjust 

the required temperature. Additional control features may include apps that can be used on a 

variety of smart devices, as well as the ability to control additional systems such as security, fire 

protection, or lighting. The Smart Thermostats may also provide varying degrees of user 

information, which may better inform the user on the energy savings and efficiency experienced 

during given time intervals. 

NEMA has provided representative examples of the types of Smart Thermostats covered 

by this exclusion request as Exhibit 1 to this addendum. While these examples may differ slightly 

in the secondary features, they are all part of the same product-specific category in that they share 

the primary features of being Wi-Fi enabled, controlled locally or remotely through a smart device, 

and able to automatically adjust temperature based on learned preference patterns. 

II. Whether the particular product is avaiJable only from China? In addressing this 

factor, requestors should address specifically whether the particular product and/or 

comparable product is available from sources in the United States and/or in third 

countries. 

The vast majority of Smart Thermostat production occurs in China. Even in scenarios 

where subassemblies are manufactured in countries outside of China, most U.S. and third country 

manufacturers of Smart Thermostats assemble their products in China and have no alternative 

production locations. U.S. import data also reflects the limited alternative sourcing options. In 

2017, for example, more than 56 percent of all wall-mounted thermostats (9032. 10.0030) based 

1300 17th St N, Suite 900 - .\rlington. \'.\ 22209 - 703 .841 .3200 
October 8, 2018 

Page4 

PUBLIC VERSION 

on value were imported from China.2 The predominant sourcing from China is even more 

pronounced for Smart Thermostats. While the import data is not broken down by Smart Thermostat 

vs. ''Non-Smart" Thermostat, the unit value of the thermostats imported from China was more than 

double that of those imported from Mexico (the second-largest supplier by total value).3 This 

differential reflects the fact that Smart Thermostats are on average significantly more expensive 

than "Non-Smart" Thermostats, and that Smart Thermostats are disproportionately produced in 

China. 

According to the trade data, there is a significant drop-off in import volumes of thermostats 

after Mexico, which has 37 percent of the production capacity among the remaining countries that 

produce wall-mounted thermostats. Because the data is not divided into Smart Thermostats and 

"Non-Smart" Thermostats, it is unclear what level of production of Smart Thermostats is occurring 

in Mexico and other third country locations. What we understand from the Companies represented 

in this submission is that currently, Mexico and other third countries do not have the capacity and 

infrastructure to make Smart Thermostats available to them. This further illustrates the difficulty 

that U.S. thermostat companies would face if they tried to shift their production to those countries 

in an effort to ameliorate the impact of the additional duties on U.S. consumers, as the requisite 

production capacity does not currently exist. 

Given the lack of existing third-country sourcing options for most U.S. thermostat 

companies, it would be extremely disruptive to shift production outside of China. As the only other 

Based on International Trade Commission statistics. 

According to U.S. International Trade Commission statistics, the unit value of Chinese-produced thermostats was 

almost $40 in 2017, as compared to $ I 7.37 for Mexico. 

1300 17 t h St N, Su i t e 900 - :\ d in gton , \' ,\ 22209 - 703 .8 4 1.3200 
October 8, 2018 

Page 5 

PUBLIC VERSION 

major global producer, Mexico, cannot ramp up from meeting 37 percent to 93 percent of global 

demand quickly, particularly as global demand itself is rapidly expanding. Current manufacturing 

capacity is not sufficient, and it would take a significant amount of time to build additional 

capacity. In the interim, there would be no way to meet global demand. Since Smart Thermostats 

are a relatively new product, the imposition of tariffs on Smart Thermostats at this early stage in 

the product's market development could disrupt the industry's growth for years to come. 

A leading Smart Thermostat company reports that an attempt to move manufacturing 

operations would be significantly disruptive. While possible, the process could take upward of [ 

] months. Based on their projections, capital expenditures would not be recovered for 

[ ] months after the initial investment is made, [ 

] CuITently, no other country has the required conditions to take on this level of 

manufacturing at the necessary capacity. 

Another leading Smart Thermostat supplier - which has been producing its products in 

China for over 25 years without any intellectual property infringement or technology transfers -

believes requalifying all tooling and fixtures currently used in production in China would cause 

severe economic harm as the move would be akin to "starting over." To recreate the supply chain 

would take more than one year and would result in chaos as the transition would need to occur 

while production was ongoing. Finally, all products produced under a new supply chain would 

1300 17t h St N, Suite 900 - .\rlington, \ '.\ 22209 - 7 03 .84 1.3200 
October 8, 2018 

Page6 

PUBLIC VERSION 

have to be field tested, which can only occur seasonally. Depending on the timing of the change, 

this could stretch the supplier transition process well past one year. 

Finally, in the case of another Smart Thennostat supplier, the Company has undertaken a 

comprehensive analysis to understand the timing and costs associated with moving production 

outside of China. The Company has identified certain categories of costs associated with a move, 

which include 1) increased costs of production (e.g. , labor and material costs), moving costs (both 

in terms of manufacturing line and infrastructure investments, and costs associated with a new 

supply chain and freight. [ 

]. 

In short, the companies represented in this exclusion request do not currently have access 

to alternative suppliers outside of China. For some smaller companies, Smart Thermostats 

represent 100% of total gross sales. To transition production of Smart Thermostats back to the 

United States or to a third country is a process that would likely take in excess of one year and 

would cause severe economic harm and business disruption. However, if the imposition of tariffs 

on China will continue, NEMA requests that the subject Smart Thermostats be excluded from the 

1300 17t h St N, Suite 900 - .\ rl ington , \'.\ 222 09 - 703.84 1.3200 
October 8, 2018 

Page7 

PUBLIC VERSION 

Section 301 tariffs for a period of one year so that producers can begin moving the supply chain 

away from China. 

III. Whether the imposition of additional duties on the particular product would cause 

severe economic harm to the requestor or other U.S. interests? 

The addition of 25 percent tariffs on Smart Thermostats would cause significant harm to 

an industry that is still in early development. Thermostats are necessary for virtually every 

dwelling and business because they control the single largest operational system in most buildings 

- the regulation of heating and cooling. Consumers are facing impacts directly from this tarift: 

as the added expense will partially lead to price increases. Small and medium sized businesses that 

sell and install Smart Thermostats will also be impacted by price increases. A third, unique interest 

impacted by the Section 301 tariffs will be the U.S. power grid, and the utility companies that 

manage its operation. 

A. Additional duties on thermostats would have a negative impact on consumers 

Thermostats are a critical consumer product installed in most U.S. households. There are 

an estimated 120 million total thermostats installed in the United States today and consumers 

purchase approximately 17 million thermostats per year for residential use. By 2020, 40 million 

U.S. households are projected to have a Smart Thermostat.4 

In addition, thermostats control half of the energy usage in homes, totaling an average of 

$I, I 00 for each American family per year. 5 As such, thermostats are responsible for a significant 

Jeff St. John. I 00 Million US Homes Lack Smart Devices. but ./0 Million Will Have Smart Thermostats by 2020, 

Greentech Media (May 4. 2017), https://www.greentechmedia.com/articles/read/100-million-plus-us-homes-lacksmart-devices#gs.Fp I 4d51. 

Coldwell Banker Real Estate LLC. Coldwell Banker Real Estate and CNET Survey Finds Americans Ready for the 

Smart Home. Cision PR Newswire (Aug. 11. 20 I 5), https://www.11.rccnbuildcrmcdia.com/diygreen/saving-cncrgy- at1300 17 th St N, Suite 900 - .\ rl ington , \'.\ 22209 - 703 . 841. 3200 
October 8, 2018 

Page 8 

PUBLIC VERSION 

portion of household expenses for American families and play an increasingly important role in 

the stability and reliability of the U.S. electrical grid. 

In the case of Smart Thermostats, numerous studies show that they can help consumers 

save substantially on their energy costs: up to 12 percent on heating costs and 15 percent on cooling 

costs.6 To date, customers have already saved more than 20 billion kWh of electricity from Smart 

Thermostats, translating into more than $1 billion of financial savings to families. 

Furthermore, some U.S. thermostat companies offer ENERGY STAR® certified Smart 

Thermostats, further affirming the technology's energy savings potential and its levels of market 

penetration. ENERGY STAR® is a widely-recognized U.S. government-backed symbol for highefficiency products, which requires a product category to meet certain consumer adoption levels 

before a certification is developed.7 

The proposed additional duties would also create upward pressure on the prices of Smart 

Thermostats in a market that already faces price-sensitive shoppers.8 The thermostat market is 

competitive and characterized by low margins. Some consumers will be less able to afford Smart 

home-with-smart-thermostats, https://www.prncwswire.com/news-releases/coldwell-banker-real-estate-and-cnetsurvey-finds-americans-ready-for-the-smart-home-300 126529. html 

See, e.g .. Energy Trust of Oregon. "Smart Thermostat Pilot Evaluation; · at J-2 (March I, 2016). 

https://www.cncrgytrust.org/wp-content/uploads/2016/ I 2/Smart Thermostat Pilot Evaluation-Final wSR.pdf: see 

also Camdus Group. ··Indiana: Smart thermostat pilot studies ... https://cadmusgroup.com/case-studies/indiana-smartthermostat-pilot-studies/. 

ENERGY STAR. "How a Product Earns the ENERGY STAR Label." https://www.energvstar.gov/products/howproduct-earns-energy-star-label. 

According to research conducted by Parks Associates, price is the most important purchase driver for potential 

consumers of thermostats. See Parks Associates. QI 2018 Smart Thermostat Market Assessment: see also 

http://www.parksassociates.com/blog/article/ses20 I 8--Qr5, httu://www.uarksassociates.com/blog/articlc/pr--07182017. 

As AEE has previously noted. by putting upward pressure on prices, the proposed additional duties would undermine 

both the Smart Thermostat market itself and the incentive programs that utilities have been offering to encourage their 

adoption. 

1300 17t h St N, Suite 900 - .\rlington, \' ,\ 2220 9 - 70 3.8 41.3200 
lflErllll 

October 8, 2018 

Page9 

PUBLIC VERSION 

Thermostats and will miss the opportunity to lower their energy bills going forward.9 Others will 

encounter higher costs and may also face reduced supplies and delays in the launch of key products 

or features as companies are forced to move their production operations to countries with unknown 

capacity. 

Studies have shown that the high price of Smart Thermostats discourages consumers from 

purchasing the technology, notwithstanding the energy savings that result from their use. The 

average Manufacturer's Suggested Retail Price (MSRP) for a Smart Thermostat is $230. The 

imposition of the 25 percent additional duties will increase the MSRP to $287.50 - an increase 

of $57 .50. Utilities and other entities have responded to these consumer tendencies by launching 

rebate programs to encourage their adoption. 10 The imposition of 25 percent additional duties 

would run directly contrary to these efforts, undermining the ability of consumers to purchase 

Smart Thermostats and to benefit from the cost savings they would otherwise enjoy. 

In addition, consumers could be harmed in the twenty-six states that have Energy 

Efficiency Resource Standards (EERS), which are long-term binding energy savings targets for 

utilities or third-party administrators. 11 T his effective policy tool has allowed states to meet energy 

and electricity bill savings targets over the past two decades. The imposition of additional costs on 

9 Numerous studies show that they can save substantially on consumers' energy costs: up to 12 percent on heating costs 

and 15 percent on cooling costs. See Energy Trust of Oregon, "Smart Thermostat Pilot Evaluation" at 3--2 (March I. 

2016). https://www.eneravtrust.org/wp-- content/uploads/2016/ I 2/Smart Thermostat Pilot Evaluation-

-Final wSR.pdf. See also Camdus Group, ·'Indiana: Smart thermostat pilot studies: · https://cadmusgroup.com/case-

-studies/indiana--smart-- thermostat--pilot--studies/. 

10 See. e.g., Robert Channick. Smart Thermostats are Tough Sell, but ComEd Hopes Rebates Boost Interest, Chicago 

Tribune (July 25, 20 I 7) (noting that a $100 rebate doubled the percentage of potentially interested Smart Thermostat 

buyers). http://www. chicagotri bune. com/business/ct-smart-thermostat-comcd-rebatcs-0726-biz- 20170725-story. htm I. 

11 http://accee.org/sites/default/filcs/state-eers-0117.pdf' 

1300 17 th St N, Suite 900 - .\rlington, \',\ 22209 - 703 .841 .3 200 
• ...,, 

~- EIIJII!. -

a 

October 8, 2018 PUBLIC VERSION 

Page 10 

cost-effective efficiency programs would directly or indirectly increase the compliance cost of 

meeting the state energy savings requirement of an EERS. 

Moreover, in addition to energy savings, Smart Thermostats can also help address the 

pervasive challenge of energy poverty. U.S. thermostat companies have been partnering with 

energy companies, housing agencies, and non-profit organizations that are working to bring energy 

efficiency to everyone.

12 By driving up their cost and dis-incentivizing their use, the imposition of 

25 percent duties on Smart Thermostats would harm programs that aim to bring cost savings to the 

particularly vulnerable U.S. households that are struggling under the weight of high energy costs. 

Finally, it would not be practicable for consumers to avoid the tariffs by purchasing Smart 

Thennostats produced outside of China. Most U.S. and third country manufacturers of Smart 

Thermostats assemble their products in China and have no alternative production locations. Thus, 

consumers will be faced with the choice of paying significantly higher prices for Smart 

Thermostats or not purchasing them at all. 

B. Additional duties on Smart Thermostats would have a negative impact on 

retailers and small- and medium-sized businesses 

Thermostats are sold in over 30,000 retail locations across the United States. In 2015 alone, 

retailers sold more than 1.5 million Smart Thermostats throughout the country. 

13 Since then, the 

Smart Thermostat market has continued to expand. From January 2017 - January 2018, Smart 

12 

13 

See, e.g. , Nest Press Release, ·'The Power Project Brings Together Energy-Saving Technology and Solutions to 

Address America·s Energy Burden' ' (Apr. 19, 2018). https://nestpowemroject.withgoogle.com/. 

In 2015, 45 percent of the nearly four million Smart Thermostats sold in the US were sold by retail 

channels. Parks Associates, "Over 40% of Thermostats Sold in 2015 Will be Smart Thermostats" (July 15, 

2015), http://www.parksassociates.com/blog/article/pr07 I 5-smart-thermostats. 

1300 17 th St N, Suite 900 - ,\rli ngto n, \'.\ 22209 - 70 3. 841 .3200 
October 8, 2018 

Page 11 

PUBLIC VERSION 

Thermostat sales revenue in the U.S. increased by 22 percent, and the number of units sold 

increased by 27 percent. 14 

In summary, the imposition of 25 percent additional duties on thermostats would threaten 

to reverse this trend, hurting the retailers that sell them-from small and medium-sized businesses 

such as neighborhood hardware stores and home improvement centers to larger consumer 

electronic and big box stores- and their many millions of U.S. employees. 

Smart Thermostat companies also work with tens of thousands of professional installers 

across the United States to sell and install thermostats in consumers' homes. Many of these 

installers are family-owned small businesses working on new construction and multi-family 

renovations that rely on consistent consumer demand for Smart Thermostats to maintain their 

operations. 

C. Additional duties on Smart Thermostats would have a negative impact on energy 

utilities and the electric grid 

In addition to the benefits they bring to consumers, Smart Thermostats benefit energy 

utilities by enabling them to better control energy demand within their jurisdiction's grid. For 

example, they enable energy utilities to offer consumers valuable services such as load shifting 

during periods of peak electrical demand. 

Indeed, recognizing the important role that Smart Thermostats play in cost-efficient energy 

distribution, utilities have engaged in various initiatives to encourage consumers to install the 

devices in their homes. As of 2016, dozens of utilities across the United States offered Smart 

14 The NPD Group. ··Home Automation Report: Industry Overview.,. at 4 (March 2018). 

1300 17th St N, Suite 900 - 1\rlington, \'.\ 22209 - 703 .841.3200 
October 8, 2018 

Page 12 

PUBLIC VERSION 

Thermostat programs to their customers as a way to begin engaging them in smart grid offerings. 15 

Over half of U.S. households are eligible for some sort of rebate or incentive on Smart Thermostats 

from their utility. 

In summary, the imposition of 25 percent additional duties on Smart Thermostats would 

harm these initiatives. In doing so, the additional duties would also harm the electric and gas 

utilities that are undertaking the initiatives, as well as the U.S. grid itself, as they would reduce the 

deployment of an important distributed energy resource that is enabling utilities to meet their 

mandatory energy efficiency targets, improve grid stability, and offer consumers valuable services 

like thermostat-based demand response programs. The additional duties would also undermine the 

efforts and investments that these utilities have already undertaken to encourage increased use of 

Smart Thermostats across the United States. 

IV. Whether the particular product is strategically important or related to "Made in 

China 2025" or other Chinese industrial programs? 

Smart Thermostats are not covered by the Government of China's "Made in China 2025" 

strategy. Under the category of "Green Development," one of the goals of the initiative is to 

"improve the energy efficiency of energy-using products like electrical machines, boilers, and 

combustion engines, and accelerate the elimination of outdated mechanical and electrical 

products and technology." Based on the energy-related products comprising China's "Green 

Development" goals, it is clear that the energy-savings and environmental technology at issue are 

those that increase the efficiency of industrial manufacturing. The Smart Thermostats covered by 

15 See. e.g.. American Public Power Association, "'Managing Energy Demand for Smart Savings and Happy Customers'' 

(May I, 2016), https://www.publicpower.org/periodical/article/managing-energy-demand-smart- savings-and-happycustomers; U.S. Department of Energy, "Overview of Existing and Future Residential Use Cases for Connected 

Thermostats.'· at 11 (December 20 I 6). 

1300 17 th St N, Suite 900 - .\rlingt on, V.\ 22209 - 703.841 .3 200 
October 8, 2018 

Page 13 

PUBLIC VERSION 

this exclusion request do not include industrial controls for machinery or equipment; rather, the 

Smart Thermostats at issue are intended for use in residential and small-scale commercial 

applications (e.g., offices, retail/service-oriented businesses, and food/hospitality entities). 

China's "Made in China 2025" strategy also discusses integrating the internet into 

manufacturing and leveraging Io T technologies to improve industrial processes. Again, while the 

Sma11 Thermostats fall under the category of IoT devices, they are not used in any industrial or 

manufacturing operations. Smart Thermostats are consumer-based products that are residential 

and commercial in application, and are not included in any list of priorities for industrial 

development in China. Accordingly, Smart Thermostats are not an area of focus in China's "Made 

in China 2025" strategy. 

Further, NEMA's Smart Thermostat companies report that they have not been involved in 

any forced technology transfers, nor have they received any incentives from any Chinese 

governmental body to locate production in China. Likewise, members have not reported any 

cyber-security breaches involving Chinese operations that may jeopardize the security of their 

intellectual property. Our members have strict policies and controls in place that limit access to 

business proprietary information. Under these policies, the technology and know-how remain 

exclusively in the hands of the U.S. manufacturers and sellers that are seeking an exclusion from 

the Section 301 tariff. 

China has not targeted smart thermostats for any import barriers or tariffs. One reason for 

this may be that the use of wall-mounted thermostats in China is not as widespread as it is in the 

U.S. In addition, Chinese buildings operate on HVAC systems that are different from a design 

and functionality perspective than U.S. buildings. These factors contribute to the fact that Smart 

1300 17th St N, Suite 900 - ,\ rlin gton , \'.\ 22209 - 70 3.8 41.3200 
October 8, 2018 

Page 14 

PUBLIC VERSION 

Thermostats are not a strategic manufacturing opportunity in China. Consequently, Chinese 

entities have had very little success pursuing this market in the U.S. 

While Smart Thermostats are not integral to Chinese industrial development, NEMA 

members report that the technology is important to U.S. research and development efforts. The 

research and development activities that U.S. Smart Thermostat manufacturers engage in occur 

primarily in the United States, with final assembly of the thermostats taking place in China. 

Typically, the software used to operate these Smart Thermostats is fully developed in the 

United States and encrypted before transfer to China for loading onto the printed circuit board 

(PCB) during the manufacturing process. Additionally, the manufacturing process and fixtures are 

designed in the United States with limited input from the Chinese manufacturer. 

In China, the hardware components are assembled, the software is loaded onto the 

assembly, and the units are tested before being exported. The majority of the components are 

sourced from China to minimize transportation times, customs complexities and expense of multicountry sourcing. However, it is the know-how of the highly-skilled American workers that 

develop the software and conduct the R&D related to Smart Thermostats that is driving American 

leadership in this sector. 

NEMA supports a product-specific exclusion for Smart Thermostats because it recognizes 

that this technology is not part of China's "Made in China 2025" strategy. As such, this technology 

has not suffered under the policies the administration is trying to highlight. However, because of 

the importance of this emerging technology to U.S. research and development, NEMA believes a 

product-specific exclusion would be appropriate. 

1300 17th St N, Suire 900 - .\ rl ington, V,\ 22209 - 70 3 841 3200 
il'IA' I~ a 

October 8, 2018 

Page 15 

V. Proposed Smart Thermostat Exclusion Language 

PUBLIC VERSION 

NEMA respectfully submits the following exclusion language be added by Smart 

Thermostat manufacturers and sellers to the commercial invoice used to make entry into the United 

States. This language should facilitate U.S. Customs and Border Protection's administration of 

the requested product-specific exclusion. This language reads: 

Wi-Fi enabled Smart thermostat devices that automatically adjust heating and 

cooling temperature settings with remote control capability and sensor or detection 

technology for optimal performance. 

VI. Conclusion 

As described above, NEMA members report that relocating Chinese assembly operations 

to the United States or other countries is not practicable and feasible, as it would be extremely 

costly and would take an extended period to switch to alternative suppliers, to qualify new 

production processes, and to move engineering resources to support the change. 

Equally concerning is the impact of the 25 percent tariff on American consumers and small 

businesses. As the primary users of Smart Thermostats, U.S. consumers and small business 

owners will bear the additional expense of price increases resulting from the high tariff and the 

added costs of the concerned companies as they make unanticipated and costly adjustments to their 

supply chains. 

In addition, the economic and structural toll of the tariff will negatively alter the stability 

and reliability of the U.S. power grid. NEMA knows that price point is a significant indicator in 

the selection of thermostats. A move away from Smart Thermostats based on increased price will 

inevitably lead to less efficient use of energy, greater strain on the power grid, and increased 

challenges to managing power supply in our cities and towns. 

1300 17th St N, S uite 900 - .\rlington , \I.\ 22209 - 70 3.841.3200 
October 8, 2018 

Page 16 

PUBLIC VERSION 

Finally, it is clear that the Smart The1mostat technology, which is primarily utilized for 

residential and small commercial applications, is not at all relevant to China's "Made in China 

2025" program, which we understand was the key precipitating factor for the Section 301 

investigation. Smart Thermostat technology in no manner contributes to China's industrial and 

manufacturing aspirations. To the contrary, in terms of intellectual property rights, Chinese 

companies do not have a significant home market share in Smart Thermostat technology; rather, 

sales of these products primarily benefit U.S. companies and pricing accessibility benefits the U.S. 

consumer. 

For these reasons, NEMA respectfully requests a one-year exclusion from the Section 301 

tariff for Smart Thermostats. We would be pleased to provide additional information needed by 

USTR to facilitate its determination. 

Respectfully submitted, 

f1⁄2 C!. ~y-" 

Philip Squair 

Vice President, Government Relations 

cc: Craig Updyke, Director, Trade & Commercial Affairs, NEMA 

1300 17th St N, Suite 900 - .\ rl ing t o n , V.\ 22209 - 703. 841.3200 
Exhibit 1
61593992.1 

DOCUMENT(S) 

INCAPABLE OF PUBLIC 

SUMMARY