Last week, Apple asked the Office of the United States Trade Representative for tariff exemptions on 11 of its Chinese made products. In particular, the Big Tech firm wants the Trump administration to excuse it from paying import taxes on its Apple Watches, iPhone smart battery cases, iMacs, AirPods, and iPhone components. The company argued that its products merit tariff exclusion because they are not strategically relevant to the Chinese industry.
This year, the corporation has sent two other exemption requests to the Trade Representative. In September, the agency excused Apple from paying a 15 percent tariff on Mac Pro circuit boards and graphics cards. However, in October, the organization refused Apple’s request to import its Mac Pro power cords and processor cooling systems without paying the fees.
Why Apple is Asking for More Tariff Exemptions
Though still very popular, the iPhone no longer drives Apple’s business the way it once did. In the fiscal third quarter, the company derived less than 50 percent of its total revenue from its smartphone, a first since the device’s introduction. While the firm’s device sales improved in FQ4 2019, they fell by 10.2 percent year on year.
Conversely, Apple saw significant increases in its services and wearables revenue. In the period ending September 30, the firm’s Apple Music, App Store, iCloud, and Apple Pay segments earned $12.5 billion. That represents a 19 percent annual increase in sales. Moreover, it’s Wearables, Home, and Accessories divisions generated $6.52 billion in revenue, up 54 percent from FQ3 2018.
As such, the Cupertino, California-based corporation wants to maximize income on traditional and emerging electronics. Besides, Apple recently ramped up production on the iPhone 11 to meet increased demand. Accordingly, the firm will want accessories and replacement parts on hand to fulfill its growing number of device orders.
Meanwhile, the Trump administration plans to levy a new 15 percent tariff that will apply to Chinese made iPhones, iPads, and MacBooks in December. Consequently, Apple has an incentive to shore up its profitability heading into the holiday season.
Fitbit Also Wants Import Tax Exemption
Apple is not the only electronics maker to ask the Trade Representative for a tariff exclusion. The San Francisco-based health tracker company Fitbit requested that its wearables be exempted from the current Sino-made goods import tax.
The firm explained that it’s especially affected by the tariffs because its smart wrist-wearables are manufactured in the Chinese nation. Moreover, the company noted that Taiwanese and South Korean facilities are not viable alternatives. It argues that these plants are either owned by or contracted to rival businesses.
In October, Fitbit announced that it would shift its supply chain out of China to avoid import taxes starting in January. Meanwhile, the firm would like an exemption from the hardship of the Sino tariffs while it uproots its production process.
Fitbit also claimed that Washington’s duties could help Chinese brands like Huawei increase their share of the smart wearables market in the U.S. In turn, Fitbit argued, the Sino device maker could share American user data with Beijing.
Notably, Fitbit’s tariff exclusion request came one day before Google announced that it plans to acquire the company.