Zipline International Inc. 495 Pine Avenue, Half Moon Bay, CA USA
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Zipline International Inc. 495 Pine Avenue, Half Moon Bay, CA USA Marina Yang Director of Global Supply Chain Zipline International Inc. 495 Pine Avenue Half Moon Bay,, CA 94019 October 5th, 2018 The Honorable Robert E. Lighthizer United States Trade Representative Office of the United States Trade Representative 600 17th Street Northwest Washington, D.C. 20508 RE: Request for Exclusion of Zipline Parts from Tariffs Pursuant to Section 301 Dear Ambassador Lighthizer: Zipline International Inc. (“Zipline”) now submits this request for exclusion of certain specified Zipline parts Center wing (spar) from the imposition of 25-percent additional tariffs, pursuant to Section 301 of the Trade Act of 1974. I. INTRODUCTION Zipline International Inc. is a US company headquartered in California. Zipline designs and manufactures autonomous robotic aircraft (drones), which are used to provide healthcare delivery services around the world. Zipline has been named one of America’s most innovative companies by Fast Company magazine, and it has been covered positively by major publications such as the New York Times, CBS News, The Atlantic, The Washington Post, Time Magazine, National Geographic, and MIT Technology Review. Here is a small selection of the positive press the company has received over the last few years: New York Times - April 2016 The Atlantic - April 2016 Washington Post - October 2016 CBS Evening News - October 2016 WIRED article about Secretary Foxx's impression of Zipline - November 2016 World Bank video about Zipline - April 2017 National Geographic Chasing Genius profile video of ZIpline - June 2017 Zipline International Inc. 495 Pine Avenue, Half Moon Bay, CA USA MIT Technology Review cover article - June 2017 TEDMED - Engineering a new mission for drones 2017 WIRED - The World’s Fastest Drones Want to Save Lives in America, Too - April 2018 TIME - Zipline’s Drones are Saving lives - May 2018 Zipline does not sell its drones or related equipment; instead, Zipline and its wholly-owned subsidiaries use the equipment and aircraft manufactured in the US to provide delivery services to both domestic and international customers. Apart from our US manufactured hardware and software, our international projects also use US-based engineering support staff, who assist our international employees remotely via the Internet, from our California headquarters. Our first active deployment of our drone system is in Rwanda. In that country, we've flown autonomously over 300,000 km over the course of more than 9,000 flights to deliver 17,000 units of blood using our US manufactured aircraft. About a third of all deliveries are in life threatening situations -- hospitals throughout Rwanda rely on Zipline every day to help them save patients’ lives. This system will soon be deployed in Ghana, and Zipline is in the process of offering its services to numerous other countries in Africa. Zipline’s activities in Africa have drawn the praise of numerous public figures and improved the reputation of US drone technology internationally. We've been working hard to make major improvements to our system to scale up its global impact. We just introduced the world's fastest delivery drone and system capable of flying 80 km per hour, over a distance of 160 km round trip. And our engineers in California are currently working on yet another generation of our aircraft, which will carry more, fly farther, and be able to serve more customers. Our technology has put the US at the forefront of delivery drone innovation. Zipline has been selected by the US Federal Aviation Administration as one of 10 participants nationwide in the UAS Integration Pilot Program. As part of this project, Zipline is working closely with the North Carolina Department of Transportation and the FAA to enable Zipline to serve US hospitals in North Carolina. II. DESCRIPTION OF PARTS AT ISSUE HTS code: 8803.90.9060 Custom carbon fiber structural spar. Custom tooling, unidirectional prepreg compression molded carbon fiber structural spar (center). Unidirectional custom layup per ply schedule to meet strength requirements. Custom tooling, foam care expanded styrene acrylonitrile. Zipline International Inc. 495 Pine Avenue, Half Moon Bay, CA USA III. THE PRODUCTS ARE CUSTOM DESIGNED AND CANNOT BE SOURCED OUTSIDE OF CHINA IN A REASONABLE TIME FRAME The engineers at Zipline travelled to China to set up the customized tooling and trained the supplier on the manufacturing process used to fabricate the parts described above, which are the subject of this petition. Apart from this the custom tooling to manufacture this part is expensive and difficult to relocate from China to another country. Zipline sourced these products in China prior to the imposition of the new tariffs. Setting up this manufacturing in the US or in a third country now would not be practical without creating major delays in our service deployment schedule. IV. THE IMPOSITION OF ADDITIONAL DUTIES ON THE DESCRIBED PARTS WOULD CAUSE SEVERE ECONOMIC HARM TO ZIPLINE AND US INTERESTS Zipline is strategically important to the United States’ efforts to change the international perception of American drone technology, and to the competitiveness of the United States in the critical emergency sector of autonomous aerial logistics. Zipline drones are used for humanitarian missions and have been recognized for their humanitarian impact by World Bank President, Jim Kim (https://youtu.be/7ZNzysHBxCg), Bill & Melinda Gates Foundation Chairman, Bill Gates Zipline International Inc. 495 Pine Avenue, Half Moon Bay, CA USA (https://www.linkedin.com/feed/update/urn:li:activity:6440951809581338624), and Rwandan President, Paul Kagame (http://paulkagame.com/?p=12414). The items described here are critical, specially designed parts for our drone system. These parts are not readily available on the market and are fabricated to our specifications. As described above, sourcing these parts and assemblies from other countries is commercially impractical given the time and expense required to set up manufacturing of these parts and assemblies. Finding new suppliers for these parts and assemblies would result in much higher costs and significant delays to our product manufacturing which would result in delays to our projects in the USA and abroad. Since our drones are literally used for life-saving missions (we have responded to almost 3,000 emergency requests for blood since our launch) delays in our projects in the US and abroad may result in lives lost when emergency requests cannot be serviced due to lack of drones. Apart from this, delaying Zipline products threatens America’s innovation leadership in the critical field of autonomous aerial robotics. Zipline has the first commercial, country-scale deployed autonomous aerial delivery system in the world. Handicapping our manufacturing and research will allow foreign competitors to catch up or overtake us. Imposing tariffs on these parts will dramatically increase the cost of our drone system, and that will ultimately affect our ability to continue to operate successfully as an innovative American company. It bears repeating that Zipline designs and assembles all of its drones and ground equipment inside the US The failure of Zipline as a company will result in the loss of many high-paying US-based engineering, R&D, and manufacturing jobs. V. THE PARTS AT ISSUE ARE NOT STRATEGICALLY IMPORTANT TO CHINA OR THE MADE IN CHINA 2025 PROGRAM The parts at issue are not strategically important to China. Zipline’s “keystone” circuit board (the “brains”) of Zipline’s aircraft is manufactured for Zipline in the US by a US company; the parts that Zipline purchases from China are lower-sophistication components that cannot be used to create an autonomous aerial logistics system except in combination with Zipline’s US-manufactured circuits and software, which are strictly controlled by Zipline. Specifically, the components that are manufactured for Zipline in China are plastic, carbon fiber, and foam components that are made using fabrication techniques that are already standard in China (but rarer, more expensive, and slower in other countries). These components are manufactured to fit the specifications defined by Zipline designs, but the processes and the materials used in manufacturing the components are by no means high-tech or cutting-edge on their own merits. Thus, there is no risk of technology leakage to China from these manufacturing orders. Zipline International Inc. 495 Pine Avenue, Half Moon Bay, CA USA The only effect of applying tariffs to these parts will therefore be to raise Zipline’s cost of doing business relative to its international competitors, particularly Chinese competitors, thus endangering the US company’s competitive advantage in the market. VI. CONCLUSION AND REQUEST FOR RELIEF Zipline’s services are strategically important to the US from both a diplomatic and competitive perspective. Harming Zipline’s service deployments will damage the company’s ability to compete with international rivals as well as slow or halt its ability to improve the perception of US drone technology abroad. In addition to this, there is no demonstrated interest shown by the Chinese government with regards to the parts manufactured by Zipline in China. The company retains its high-tech intellectual property in the US and manufacturers its high-tech electronic components in the US. Therefore, the proposed tariff on these parts is unwarranted because such tariffs fail to achieve the administration’s objective “to obtain the elimination of China’s harmful acts, policies, and practices related to technology transfer, intellectual property, and innovation....” (See Procedures to Request Product Exclusions, 83 Fed. Reg. 32181 at 32,182.) In fact, as described above, the imposition of Section 301 tariffs threaten severe economic harm to Zipline (a US company) and the perception of the US drone industry abroad (by delaying and halting Zipline humanitarian missions abroad and in the US). We therefore request that the department remove the Zipline parts specifically described above from the proposed list of products subject to Section 301 tariffs.