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Musk’s Boring Co. Asks Trump Administration for Tariff Relief

Aug. 17, 2018
The company is seeking an exclusion for such parts as cutterheads, the front portion of the boring machine that directly mines the soil.

Elon Musk’s Boring Co. asked the Trump administration to exclude imports of certain Chinese parts for tunneling machinery from imposed tariffs, saying the duties would cause construction delays and economic harm to the company.

U.S. President Donald Trump slapped duties on $34 billion of Chinese goods in July in response to allegations of theft of intellectual property and other unfair trade practices, and the administration has said it will impose tariffs on a further $16 billion on Aug. 23. As China retaliates with duties on U.S. goods, the president has threatened to tax effectively all the $500 billion in products the U.S. imports from China in an escalating trade war.

Boring Co. asked the administration unsuccessfully in May to have components for tunneling machinery removed from the list of products targeted for tariffs. Now it’s seeking an exclusion for parts such as cutterheads, the front portion of the boring machine that directly mines the soil, the company said in a written request to officials. The letter, dated July 31 and published on a government website, hadn’t been previously reported. A Boring Co. spokesman declined to comment.

Despite turmoil at Tesla Inc., Musk’s tunneling startup is pressing on with several ambitious projects. Boring Co. won a bid to develop an underground transportation system in Chicago and is negotiating details with the city. It’s also planning a tunnel on the U.S. East Coast from Washington to Maryland and eventually New York. This week, the company published a proposal to build what it calls a Dugout Loop on the east side of Los Angeles to Dodger Stadium.

Boring Co. has said it won’t seek public funds for these projects, but higher taxes could pose a setback. The U.S. Office of Trade Representative is accepting requests through Oct. 9 for one-year exclusions from the tariffs on Chinese imports, which so far have been imposed at 25%. Submissions will be considered on a case-by-case basis, based on whether the particular product is available in the U.S. or another country and is strategically important to China. Officials will also consider whether the duty would “cause severe economic harm” to a U.S. business or national interests, according to the agency.

Although whole tunnel boring machines are available elsewhere, certain parts are “readily available” only from China, Boring Co. said in its exclusion request. Components such as cutterheads make up a small part of the cost of tunneling boring machines, which in turn represent a relatively small part of the overall cost of a tunnel, said Gary Brierley, president of Doctor Mole Inc. who consults on subterranean projects. A $100 million tunneling project might include $10 million for a boring machine, he said. “The big cost for a tunnel is labor.”

Boring Co. has said it’s working to develop and manufacture its own tunnel boring machines, but until then, it has been unable to purchase all the components it needs in the U.S. and must import them for use in “a small number” of tunnel boring machines.

Additional duties on components and the inability to obtain parts from China will result in a delay of one to two years on the proposed East Coast tunnel, Ashley Steinberg, regulatory counsel for the Boring Co., wrote in the letter. She also cited the prospect for job losses in tunnel-machine fabrication and tunnel construction. Increased taxes “will serve to lessen, not increase, U.S. reliance on Chinese manufacturing capacity,” she wrote.

By Mark Niquette and Sarah McBride

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