October 8, 2018

The Honorable Robert Lighthizer

United States Trade Representative

Office of the United States Trade Representative

600 17th ST. NW

Washington, D.C. 20508

Re: USTR-2018-0025 – 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 FR 32181).

Dear Ambassador Lighthizer:

This letter is being submitted in support of the American Furukawa, Inc., (“AFI” or “the Company”) application for exclusion from the Section 301 tariffs of AFI’s Lead Battery Status Detection Sensor (“Detection Sensor”), falling under tariff code 9030.33.3800 of the Harmonized Tariff Schedule of the United States (“HTSUS”). AFI imports these Detection Sensors as an electrical auto component for light vehicles. This letter is intended to address the requirements stipulated in Part B of the Federal Register Notice detailing the process for requesting a product exclusion from the Section 301 tariffs.  (83 Fed. Reg. 133 (July 11, 2018)).

This document and the form associated, and the information is public.

This exclusion request is in reference to HTSUS code 9030.33.3800, which provides for

oscilloscopes, spectrum analyzers and other instruments and apparatus for measuring or checking electrical quantities, excluding meters of heading 9028; instruments and apparatus for measuring or detecting alpha, beta, gamma, X-ray, cosmic or other ionizing radiations; parts and accessories thereof; Other, without a recording device:; Other; 

Products under this HTSUS code are currently subject to additional 25% tariffs as of July 6, 2018 in accordance with the Section 301 tariff for products included on List 1.

As discussed below, subjecting AFI’s Detection Sensor to the tariffs would cause severe economic harm to a U.S. company that is a supplier of these crucial parts to several automotive industry original equipment manufacturers (“OEMs”).

I. AFI’s Background

AFI is a part of Furukawa Electric Group and is a supplier of world-class products for customers in the automotive, electronics, infrastructure and medical industries. AFI is headquartered in Plymouth, Michigan and employs eighty-seven employees throughout the United States in a variety of roles.

II. Product Background	Comment by Author: This letter or the form MUST list the annualquantity and value of the Chinese-originproduct that the requestor purchased ineach of the last three years. If precise annualquantity and value information is notavailable, need to provide an estimateand explain the basis for the estimation.	Comment by Author: The absence of a detailed product background does not meet the minimum requirements of the USTR notice. AFI must provide some amount of background information of what this product is. We’ve seen 2-3 paragraphs typically, but there needs to be at least a sentence or two.From the USTR notice:Physical characteristics (e.g., dimensions, material composition, or other characteristics) that distinguish it from other products within the covered 8-digit subheading. USTR will not consider requests that identify the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademarks or tradenames. USTR will not consider requests that identify the product using criteria that cannot be made available to the public.	Comment by Author: This letter MUST list the annualquantity and value of the Chinese-originproduct that the requestor purchased ineach of the last three years. If precise annualquantity and value information is notavailable, need to provide an estimateand explain the basis for the estimation.

The Detection Sensor was developed by Furukawa Electric, Co. (Japan) and is an electrical auto component for light vehicles. Manufacturing and sales started in 2017. 

Year 2017 sales value in, U$736,218.60 Dlls., sales quantity: 99,489 pieces.

Year 2016 & year 2015, no sales in the United States.

The product is Lead Battery Status Detection Sensor (Length 2.36 inches, Width 1.98 inches, Height 1.61 inches, Weight 0.147 pounds). 

This product consists of polybutylene, terephthalate, case & cover, copper terminals & shunt resistance, and steel terminal holder & nut & screw. And glass epoxy printed circuit board is installed inside. 

Lead battery status detection sensors are attached to lead batteries, as its primary functions is to monitor battery charging / discharging current, voltage and temperature with high precision and provide battery information that is important for vehicle power source management. By doing so, they contribute to improved fuel efficiency and reduction of CO2 emissions through the prevention of battery rundown, charging control and idling stops. It is constructed out of unique detection algorithms based on a wealth of knowledge and experience of the lead batteries used in automobiles to realize highly precise battery status detection.

Please refer to below images, see how this product is attached to the battery of a vehicle.

III. China’s role as a supplier of Detection Sensors:

Currently, there are no other sourcing options outside of China that make financial sense and would not disrupt the supply to the U.S. market of this critical component. This is a product recently developed by Furukawa Electric, Co. (Japan) and allocated for manufacture to its affiliate Furukawa Electric Shenzhen, Co. Ltd. (China). 

We have examined the effort required to supply this product from outside of China, but there are significant challenges to resourcing.  As of today, it is impossible to obtain any quantities of the Detection Sensor from outside China; there is no other Furukawa company manufacturing this product. The Detection Sensor is only available from China in the quality and quantity suitable for the U.S market. 

Based on our assessments, there are no domestic sources capable of producing the products in a manner that meets our required specifications, quantity demands, and safety standards.

In order to remain competitive, we also continuously explore whether suitable Detection Sensors are available from foreign suppliers located outside of China. Our assessments have indicated that foreign manufacturers located outside of China may exist; however, the complexity of the product and the time required to establish a new production facility make this kind of foreign sourcing impossible in the short term and significantly more expensive in the long term. Identifying new suppliers who could provide the necessary parts in the volume and quality required would further increase lead times and costs. In order to avoid additional expenses, we would anticipate needing to make significant and costly changes to our company’s logistics and procurement channels. 

In addition to the complexity of the Detection Sensor itself, we must also ensure that any new manufacturing location would have a workforce that is sufficiently trained and has adequate resources and infrastructure. Based on our previous experiences, we estimate that setting up a new production facility outside of China would require several years to establish and a significant amount of capital. 

In sum, the Detection Sensors cannot be produced domestically due to a lack of available quality and quantity. 

IV. Imposition of the Duties on Lead Battery Status Detection Sensor would Cause Severe Economic Harm to American Furukawa, Inc. and U.S. Interests

The imposition of additional tariffs on this product would cause severe economic harm. Foreseen economic losses will amount to $700,000.00 USD per year. 

Absorbing the cost would significantly decrease our operating profits and may likely require us to reduce our current staffing levels in the United States. Alternatively, passing the cost of the tariff on to the customer would result in a significant loss of market share as customers move to our foreign competitors, including companies based in China. Similarly, a significant loss of customer orders would likely result in a reduction to our U.S. workforce. Therefore, this outcome of raising prices would result in harm to both U.S. businesses and consumers, as well as AFI.

V. Lead Battery Status Detection Sensor is not Strategically Important to the “Made in China 2025” Industrial Program

AFI does not believe that Detection Sensors are related to the “Made in China 2025” program or other Chinese industrial programs, which are intended to “transform China into an advanced manufacturing leader.”[footnoteRef:2]   [2:  Made in China 2025: Global Ambitions Built on Local Protections, The U.S. Chamber of Commerce, 2017, 6. ] 

Furukawa Electric, Co. was not forced to enter into joint ventures with Chinese firms under terms that require the sharing of sensitive intellectual property and/or advanced technological know-how. The Detection Sensor is not manufactured by a Chinese state-backed company, and investment does not come from funds backed by the government of China.

VI. Conclusion

The Detection Sensor is unrelated to the “Made in China 2025” initiative. It is manufactured in a Furukawa affiliate company. It is a recently designed product which is only manufactured in China with equipment shared to satisfy China’s market demand as well as North America’s market demand.

The tariffs will cause severe economic harm to AFI, likely resulting in a reduction to our U.S. workforce. Passing costs of the tariffs on to customers will also cause harm to businesses and individual consumers in the United States.

The possibility for relocating the China manufacturing site is not feasible in the near term since equipment is shared to manufacture the Detection Sensor for China and North America. Splitting operations is not financially possible as of today.

As such, AFI respectfully asks for exclusion of Detection Sensors under HTSUS code 9030.33.3800. 

I, Katsumasa Sekiguchi, certify that the information provided is complete and correct to the best of my knowledge.

Sincerely,

Katsumasa Sekiguchi, President                 

ksekiguchi@americanfurukawa.com

Mobile:           	734-589-7558

Office Desk:    	734-446-2221

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