PUBLIC VERSION 

October 5, 2018 

The Honorable Robert E. Lighthizer 

U.S. Trade Representative 

Office of the U.S. Trade Representative 

600 17th Street, NW 

Washington, D.C. 20508 

Re: Docket Number USTR-2018-0005: Comments on Request for Exclusion from Section 301 

Product of Concern: Hard disk drives ("HDDs") 

HTSUS item number: 8471.70.40.65 

Toshiba America Electronic Components, Inc. (TAEC") hereby submits the following comments in 

response to the Office of the U.S. Trade Representative ("USTR") proposed determination of action 

pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual 

Property, and Innovation. TAEC hereby respectfully requests that the Product of Concern listed above 

be excluded from the final list of products subject to tariffs resulting from the Special 301 proceedings. 

Summary of Comments 

TAEC is a United States based seller of HDDs and requires an exclusion for HDDs that are sourced from 

an established fabrication plant in China. The maturity of the HDD technology and the geographic 

supply chains do not allow for a swift transition to an alternate country for purposes of manufacturing 

HDDs. As a result, if the tariffs apply to HDDs, TAECs supply to U.S. computer and server 

manufacturers, retailers and consumers will be dramatically impacted, as the proposed tariffs will make 

importation into the U.S. cost prohibitive due to the competitive marketplace for the commoditized 

HDD products. TAECs U.S. computer and server manufacturer customers will be negatively impacted, 

because they rely on the low cost HDDs to be incorporated into their final products and sold globally, in 

competition with other China private and state owned computer companies against whom Section 301 

was intended to target. Moreover, the tariffs will increase the cost of HDDs to U.S. retailers and 

ultimately U.S. consumers. 

Who is TAEC? 

TAEC is incorporated in California and is a wholly owned subsidiary of Toshiba America, Inc. ("TAI"), also 

a United States company with its headquarters in New York. As of June 2018, TAEC has 231 U.S. based 

employees and TAI has approximately 6,606 North American employees under its respective subsidiary 

companies. 

What is TAEC's primary business? 

TAEC derives a substantial portion of its revenue through sales of HDDs to major U.S. computer and 

server manufacturer customers such as [REDACTED]. TAEC also specializes in providing high quality 

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custom parts, including sensors, automotive devices, systems on chip (SoCs), microcomputers and other 

discrete parts for support of computing devices. 

What are HDDs? 

HDDs are devices that are used ubiquitously for storage of multiple forms of data for business or 

personal applications in servers, computers, gaming consoles, smartphones and tablets for industrial, 

technological and all other businesses around the world. HDD technology was invented by IBM in San 

Jose, California in the 1950s.1 The technology involves the storage of data on an encapsulated rotating 

disk coated with magnetic media. The data is accessed by a mechanical arm that moves over the disk 

and then reads from, or writes to, portions of the disk. Production of HDDs is highly concentrated 

among a small number of companies, including TAECs affiliated company, Toshiba Corporation. 

Although the concentrated companies that manufacture HDDs are not Chinese companies, they each 

have fabrication plants that are well established in China for the mass production of HDDs. 

Why Should HDDs be Excluded? 

The USTR has included HDDs under tariff line 8471.70.40.65. TAEC requests that the USTR exclude this 

tariff at the ten-digit level for three reasons. First, the increased costs will have a disparate impact on 

the U.S. market and economy. Second, the HDD competitive marketplace is a mature market and 

therefore transitioning the sourcing of HDDs to another country outside of China would be an undue 

burden. Third, tariffs on HDDs that are sourced from China do not accomplish the intended goals of 

impacting Chinese private and state-owned companies that are alleged to benefit from unfair trade 

practices. 

1. Negative impact on US Market and Economy 

The proposed tariffs on HDDs will have a disproportionate impact on the US market and economy. Due 

to the competitive marketplace for HDDs, if the tariffs are implemented, sales of HDDs into the U.S. will 

no longer be a viable option for HDD manufacturers unless the costs associated with the tariffs are 

passed on to customers including U.S. retailers, major computer and server manufacturers and 

subsequently to U.S. consumers. 

TAEC sales of HDDs into the U.S. market totaled approximately $[REDACTED] during the past fiscal year. 

It is anticipated that sales into the U.S. of these HDDs to U.S. customers will significantly impact TAECs 

sales in the United States. TAEC projects that [REDACTED] % of its U.S. HDD business will be affected by 

the proposed Section 301 duties. Ultimately, U.S. retailers and U.S. computer and server manufacturers 

that purchase HDDs from TAEC will be required to pass along the additional costs to U.S. consumers 

Additionally, it is likely that the increase in cost of HDDs will increase the U.S. trade deficit. As TAEC 

supplies large quantities of its HDDs to U.S. computer and server manufacturers, those U.S. companies 

will face increased costs to acquire the HDDs subject to the additional duties and then have no 

alternative other than to pay the increased cost or reduce production of their product. U.S. computer 

and server manufacturers rely on the low price of the highly commoditized HDDs in order to keep their 

competitive edge against outside foreign computer and server manufacturers. Any additional material 

1 See IBM 20thCentury Disk Storage Chronology, https://www03.ibm.com/ibm/history/exhibits/storage/storagechrono20.html. 

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cost will ultimately lead to less competitive products produced by the U.S. computer and server 

manufacturers. 

2. Transitioning the Mature HDD Market Away from China is an Undue Burden 

HDDs are simply not available from any other countries at lower costs. Because the market is mature 

and supply chains are well established, the transition of fabrication of the HDDs outside of China is not 

an option. There is no willingness to begin production for HDDs at new plants outside of China due to 

the age of the technology. As a result, TAEC and other HDD manufacturers have relied on the long 

standing relationships with local Chinese HDD fabrication plants and have pledged significant research 

and development resources into establishing such plants in China. In order to source the HDDs from 

outside of China, significant capital outlays would be required to create new fabrication plants. Due to 

the competitive marketplace for HDDs, relocating HDD manufacturing facilities outside of China would 

be an undue burden. 

3. China HDD Fabrication Plants are not the Intended Target of the Special 301 Proceedings 

Imposition of tariffs on highly commoditized HDDs sourced from China does not achieve the 

Administration's stated goals with respect to targeting Chinese companies (whether private or state 

owned enterprises) from engaging in unfair trade practices identified in the Special 301 investigation.' 

TAEC sources its affected HDDs from [REDACTED] fabrication plant in China. [REDACTED] is a Tokyo, 

Japan based company.' Given the commoditized nature of HDDs and the age of the technology, the 

China based HDD manufacturing plants are not at the forefront of China's information communication 

technology ambitions and are not in the business of cutting-edge 'research-and-development-intensive', 

high technology goods'.4Nonetheless, HDD fabrication plants in China play a significant role in 

supporting U.S. computer and server manufacturers efforts to stay competitive in the global market 

and to produce their own cutting edge products to keep up with China-based server and computer 

manufacturers. The imposition of tariffs on HDDs may have the counter effect of increasing costs to U.S. 

computer and server manufacturers, thereby allowing Chinese companies' to take advantage of 

increased global sales of computer products incorporating similar China sourced HDDs as those Chinese 

companies will not be required to pass along additional costs to their global customers. 

2See Presidential Memorandum for the USTR(Aug. 14, 2017), https://www.whitehouse.gov/presidentialactions/presidential-memorandum-united-states-trade-representative/. 

3See JREDACTEDÌ. 

4Presidential Memorandum,at Section 1. 

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Conclusion 

Based on the foregoing reasons, TAEC respectfully requests that the USTR exclude HDDs classified under 

8471.70.4065, from the final list of products that will be subject to the proposed tariffs or duties. 

Sincerely, 

Akihiko Oma 

President 

Toshiba America Electronic Components, inc. 

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BCI COMPANY CERTIFICATION 

I, Akihiko Oma, President for Toshiba America Electronic Components, Inc., certify that I prepared or 

otherwise supervised the preparation of the attached submission and hereby certify that disclosure of 

the information bracketed in the business confidential version of the submission, and redacted from the 

public version, would endanger trade secrets or profitability, and that the information would not 

customarily be released to the public. 

Signature: 

Date: October 5, 2018 

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