US Tariffs Affect Modems, Routers

US tariffs spared high-profile tech devices but hit modems and routers that make them work. Read more here!

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The US tariffs that affected around $200 billion worth of Chinese goods on Monday may have spared many high-profile consumer tech items such smart watches and speakers, but the less fancy home modems, routers, and internet gateways that make such devices work weren’t saved from the duties.

Consumer tech industry officials and the US Customs and Border Protection agency claim they anticipate billions of dollars’ worth of such products, which include those designed for use at home, will be subject to the 10 percent tariffs activated on Monday.

The move will essentially make a two-tiered tariff  structure for consumer internet, with many products, like Fitbit fitness trackers, Apple Inc’s watch, and Amazon.com Inc’s Echo smart speaker being favored over routers and internet gateways from Arris International, D-Link, Netgear, and others.

“We’re operating under the assumption that the tens of millions of devices that deliver high-speed internet into consumers’ homes will be impacted by these tariffs,” stated Jim Brennan, who is Arris’ senior vice president of supply chain quality and operations.

“It feels anti-consumer because our devices are what enables the core of consumer tech,” Brennan added.

The modems, routers, switching, and networking gear that keep the internet functioning were not included in a newly imposed US tariff code that was exempted from the most recent China tariffs, a spokesperson for the US Customs and Border Protection agency stated.

The agency has brought to distinction between consumer-use modems and routers and the commercial network equipment utilized by data centers and broadband internet providers.

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A huge chunk of new internet-connected devices had been bunched into a broad category in the US Harmonized Tariff Schedule, 85176200. “Machines for the reception, conversion, and transmission or regeneration of voice, images or other data, including switching and routing apparatus,” it said.

The encompassing category has made $23 billion in US imports from China and $47.6 billion from the world in the previous year. It was the biggest component of US President Donald Trump’s most recent tariffs aiming at Chinese products.

The US Trade Representative’s office had said that it was breaking out items like smart watches, fitness trackers, Bluetooth audio streaming devices and smart speakers into a new sub-category that would be spared, but it only disclosed a few details.

Based on a notice posted by the US International Trade Commission, computer modems would stay in a separate sub-category, while “switching and routing apparatus” would be put into a sub-category. None of these categories were given exemptions from the tariffs.

“Although we have not had occasion to issue rulings on the scope of a provision for ‘switching and routing apparatus,’ we agree that as a general matter, modems, routers, and networking equipment will be subject to the remedy,” a Customs and Border Protection spokesperson stated late on Friday, pertaining to the 10 percent tariff.

It wasn’t clear how much of the $23 billion in Chinese imports within the category could be saved from tariffs, but a review of industry data indicates the share could be small.

US Census Bureau data has not yet captured the volume of annual imports from China – or any country, for that matter – of the goods that will be spared.

But the Consumer Technology Association measures that the US market for fitness trackers, smart watches, smart speakers, and wireless earbuds and headphones was $8.2 billion in 2017, with predicted sales of $11.6 billion for 2019.

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