Security product components in the crosshairs once again as U.S.-China trade war escalates

As recent negotiations between the U.S. and China failed to deliver a deal that would end the ongoing trade war between the countries, President Donald Trump took to Twitter last week to declare that his administration would be slapping a 10% percent tariff on the remaining $300 billion Chinese imports beginning Sept. 1. Also, as of Aug. 23, tariffs that were recently levied on a variety of other goods, including security product components, will increase to 25%.   

Gordon Chang, author of “The Coming Collapse of China,” stated yesterday: “We have no choice; our backs are against the wall because we have an innovation-based economy.  If we can’t commercialize our intellectual property (IP), we do not have an economy of the 21^st Century.  We’re not driving this, the Chinese are.  China has forced the U.S. into this trade friction by stealing $150-600 billion of U.S. intellectual property; the tariffs are a remedy for the intellectual property theft.”

 As a result of the tariff escalation to the 25% level and the introduction of new items at the 10% level, the following are potential outcomes:

• Security system goods from China should increase, and then become less costly long term for U.S. customers.
• Factories may be considering moves from China, resulting in lower vulnerability to retaliation and theft of intellectual property (IP).
• China has been suffering greatly with an economy carrying too much debt.  The tariffs have caused a great lack of confidence in the Chinese markets, resulting in volatility.
• As this economic conflict continues, it will become more apparent that the Chinese are driving the trade war, not the U.S., and EU, Middle East and Japan ally companies that have experienced IP theft may back U.S. sanctions.

Many of the Harmonized Tariff Schedule (HTS) codes impacted by the tariffs listed by the U.S. Trade Representative’s Office (USTR) also include electronic and PCB level components.

Impacted components and therefore their effected security product carry a 25% duty if final assembly was done in China. Tariff duties are paid by the importer and past down the supply chain to the end customer.

Here is a look at some of the products, in decreasing order from high to low impact that will be affected by this latest tariff action:

(Note: The official U.S. Trade Representative’s Office document are classified in 8-digit subheadings; thus, where possible, the Harmonized Tariff Schedule (HTS) eight digit number will be listed for reference purposes)

 High Impact

• 8471.70.30, 8471.70.40, 8471.70.60, 8471.70.90, 8473.30.20: HDDs and SSDs are referred to indirectly as part of Automatic Data Processing (ADP) systems. In short, the most popular storage devices used in DVRs and servers will carry an increased duty.
• 85299078: Mounted lenses for use in closed circuit television cameras, separately imported, w/ or w/o attached elec Connectors or motors.
• 8531.80.90: Electric sound or visual signaling apparatus, nesoi
• 8539.50.00: Light-emitting diode (LED) lamps

Medium Impact

• 85258010: Television cameras, gyrostabilized; 85258020: Television cameras, studio type, other than shoulder-carried or other portable cameras; these are primarily used in event surveillance and re-transmission.
• 85299009: Printed circuit assemblies for television cameras
• 85299046: Combinations of PCBs and ceramic substrates and subassemblies thereof for color TV, w/components listed in add US note 4, chap 85
• 85299063: Parts of printed circuit assemblies (including face plates and lock latches) for television cameras
• 85299068: Parts of printed circuit assemblies (including face plates and lock latches) for television apparatus other than television cameras

Most IP video camera manufacturers have several products in these categories.

• 8525.80.40: Digital still image video cameras
• 9006.40.40: Fixed focus instant print cameras
• 9006.40.90: Instant print cameras, other than fixed focus, valued over $10 each

Although primarily a consumer item, public safety and industry widely uses the above products in crime scene investigations and surveys.

The most significant news this period is the escalation of previous and new items related to the security industry to the 25% level. In fact, virtually all the PCB, sensor, electrical board-level, LCD display, and lighting components used in all electronic security systems are now escalated to the 25% level.

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