U.S. rejects Tesla bid for tariff exemption for Autopilot ‘brain’



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WASHINGTON (Reuters) – US trade officials UU They rejected Tesla Inc.'s offer to ease the duties of President Donald Trump's 25 percent on the "brain" of the Chinese-made autopilot of its Model 3 and other electric vehicles, one of the more than 1,000 rejected products linked to the from China. Industrial development plans.

FILE PHOTO: A Tesla Model 3 2018 electric vehicle is shown in this photograph taken in Cardiff, California, USA. UU., June 1, 2018. Photograph taken on June 1, 2018. REUTERS / Mike Blake

According to the documents presented by the office of the US Trade Representative. UU (USTR) and reviewed by Reuters, Tesla and other applications for products manufactured in China from aircraft parts to biotechnology instruments were rejected because they were considered "strategically important" to the "Made in China 2025 Program".

Tesla declined to comment.

The company has separate pending tariff exclusion requests for tariffs on the Chinese Model 3 Model Display and for the Model 3 Car Computer before the USTR.

Tesla said in a securities presentation on Monday: "Our costs to produce our vehicles in the United States have also been affected by import duties on certain components from China."

The denials illustrate a systematic approach by the Trump administration to thwart China's efforts to develop high-tech industries that, according to Washington, benefited from the theft and forcible transfer of US intellectual property. UU

Made in China 2025, a program aimed at increasing China's skills in 10 strategic industries dominated by the United States, is at the center of trade negotiations and the demands of the United States for radical changes in China's policies.

Those industries include new energy and autonomous vehicles, aerospace, semiconductors, biopharmaceuticals, robotics and artificial intelligence.

ECONOMIC DAMAGE

Tesla made its first request to exclude its Autopilot 3.0 electronic control unit in July 2018, which it called the "brain of the vehicle" when the automaker based in Palo Alto, California, warned that "the increase in tariffs in this particular part would cause economic damage to Tesla, through the increase in costs and impact on profitability. "

In a March 15 letter, USTR General Counsel Stephen Vaughn said the agency was denying Tesla's request because "it refers to a product strategically important or related to & # 39; Made in China 2025 or other Chinese industrial programs. " USTR issued a separate letter that also denied a request for the previous version 2.5 of the autopilot ECU.

It was not clear when the letter was published on a website of the United States government. At the same time other denials of exclusion were published, including for industrial robots imported by Kawasaki Robotics USA and composite panels manufactured by Hexcel Corp in China for use on several Boeing Co. aircraft.

Some less technological products cited in the 2025 denials included a wiring harness for a rear door imported by the Chinese joint venture of Lear Corp, Kyungshin-Lear Sales and Engineering LLC.

"The composition of the product material consists of insulated cable, connectors, terminals, tape and duct," said Kyungshin-Lear in his application.

USTR has received requests for tariff exclusion from China for almost 13,000 products and denied 5,311. Of the denials, 1,166, or more than a fifth, contained the same language as Tesla's request, citing links to Made in China 2025.

NO SOURCES OF THE UNITED STATES

Tesla told USTR that he could not find a manufacturer in the United States, adding that "choosing any other supplier would have delayed the program (Model 3) by 18 months with the configuration of the clean room, the validation of the line and the Staff training".

Tesla says he flashes the autopilot ECU with the latest firmware created in California when it is shipped from China by the Quanta Shanghai provider.

"For a product as important for consumer safety as for the essence of Tesla, we turned to industry experts who could achieve this quality and complexity in addition to the deadlines, which was not possible outside of China," wrote Tesla. "When it comes to identifying a supplier, we can not risk the lives of our customers due to a defect in a supplier."

The autopilot ECU, also used in the S and X models, includes two sets of printed circuit boards, which Tesla calls "the brain responsible for the functionality of the Tesla autopilot" and the main safety system for the vehicle.

Tesla has a pending pending tariff exclusion request filed in December for tariffs on the Chinese-made Model 3 display.

Other requests for exclusion also cited the lack of sources from the United States. Kawasaki said there are no industrial robots manufactured in the United States, and only produces robots in China and Japan.

In a previously uninformed request, Tesla also asked USTR to suspend the rates on the 17-inch (43 cm) touch-screen touch-screen control panel showing navigation, media, audio, climate control, screen energy and all the controls in the cabin.

Other automakers have looked for similar exemptions, but have not yet received answers.

At the end of July, General Motors Co requested an exemption at a rate of 25 percent in the United States for its Buick Envision sports car manufactured in China. Envision accounted for almost 15 percent of Buick's US sales. UU Last year.

GM has also sought exclusions for a dozen parts, including push-button ignition switches and transmission bearings.

FILE PHOTO: a Tesla model 3 vehicle navigates the morning rush hour using the car's autopilot function in Los Angeles, California, USA. UU., March 20, 2019. REUTERS / Mike Blake

Nissan Motor Co and Fiat Chrysler Automobiles NV also submitted part exclusion requests, while Uber Technologies Inc. requested the exclusion of rented electric bicycles through the Uber application.

Even if the United States and China reach a trade agreement in the coming weeks to resolve their disputes, companies may not see tariff relief for months or possibly years. People familiar with the talks say that some tariffs, especially those directed at the Made in China 2025 industries, could remain as part of a compliance mechanism.

Vice President Mike Pence said Friday that the way tariffs were eliminated would be part of that mechanism, aimed at ensuring that China meets its obligations in any agreement.

Report of David Shepardson and David Lawder; Edited by Meredith Mazzilli, David Gregorio and Sandra Maler

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