The U.S. Trade Representative Approves Apple’s Request for Tariff Waiver on Apple Watch

Amidst the Coronavirus outbreak and other issues, there is finally good news for Apple. The company had requested for Apple Watch to be excluded from tariff duties imposed on Chinese imports. The request is finally approved by the U.S Trade Representative.

Last year Trump administration levied a tariff of 15% on Apple Watches. The same was reduced to 7.5% and came into effect February this year. Thanks to the approval, the company will not have to pay any import tariffs on Apple Watch.

Apple argued in its request last year that its product, as a consumer electronic device, should be exempted because “it is not strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.

Apple also claimed that it failed to find a supplier outside China who would be able to meet the demand for Apple Watches. The argument is seemingly watertight as Apple Watch is one of the most popular smartwatches in the market.

Our Take

This is not the first time Apple has requested the government for tariff exclusions. The merit of exclusion is typically judged on the basis of whether the component is exclusively available in China. Authorities also examine whether duties will “cause severe economic harm” to the U.S interests.

Contract factories that make components for various Apple products are concentrated in China, with 47.6% of factories located in the country. While some of the component makers do have their factories in Brazil and India, they are only meant to meet local demand. In other words, it is not easy for Apple to move production out of China.