Cancelling Christmas?
How the FCC is Playing Chess with World Markets
Mike Violette
Director, American Certification Body

Consider the size of the global electronics market: the volume of this trade is in the neighborhood of $5 trillion[i]. US imports account for about $130B of this flow, much of which is regulated by the Federal Communications Commission.

Many of these devices are sold during the annual Christmas spending spree. If some important dialogue doesn’t advance between the US and our friends in China and soon, it seems Christmas might just be cancelled for some. Here’s why.

Playing Chess

The FCC, in Brief

FCC-regulated products include most every radio transmitter and receiver, laptops, tablets, printers, routers, computer peripheral devices, television…the list goes on: nearly every conceivable thing in your home or work (with maybe the exception of your fridge, stove, washing machine and a few others-unless they’re wireless). The purpose of the regulations is to protect the airwaves from interference.

In 2015, the FCC’s system issued "grants" for 19,538 different devices, everything from twenty-dollar toys to cellular base station systems worth many hundreds of thousands of dollars. Thirty percent of these devices were from Chinese companies[ii], nearly 6,000 devices and eighty-three percent of the growth of new devices compared with 2014.

FCC Rules: A Game-Changer

But things are about to change, for in the waning days of 2014 the FCC issued a Rulemaking that affects Chinese-based test labs (and manufacturers and supply chain people and retailers and, well, the electronics-buying public). This rule-making, known as Report and Order FCC-14-208, states, effectively, that as of July 13, 2016, China test labs may no longer test many electronics devices for the US market.

This will have a huge impact on commerce: radios, mobile phones, computers, tablets, laptops, printers, wearables, smart watches, displays, etc., may no longer be tested in the Middle Kingdom. These Rule changes also affect other “non-MRA Partner Economies,” including India, Mexico, Malaysia, Brazil, Russia, Indonesia and many other countries, but not to the extent that it will affect the China test laboratories and manufacturers. It’s a simple result of the size of the market of electronics coming from China.

What it means is that China manufacturers and labs will have to find alternatives if they cannot test in the PRC. They could subcontract this work, but this will affect test queues in Taiwan, Hong Kong, Singapore and elsewhere (economies that are US MRA partners). Hence, it will also ripple the supply chain for thousands of products, not to mention buyers, retailers, shipping and logistics and, ultimately consumers. The timing for all of this is interesting—and affects Christmas 2016—because, typically, manufacturers must be in a test lab by August to get the right certifications in time for manufacturing, packaging, shipping, distribution and stockings.

How Did This Happen?

To explain how this game of brinkmanship came to be, it is necessary to understand a framework of Agreements under the Asia-Pacific Economic Cooperation Telecommunications and Information Working Group (APEC TEL). A multi-lateral Mutual Recognition Arrangement (MRA) was signed back in 1998 and implemented with the US, over time and on a bilateral basis, by seven economies. A long-time holdout has been China. An MRA allows, in general, the acceptability of test data (and eventually Certification, with full implementation) between countries that sign onto the MRA. This is a market-access issue with powerful economic and political ramifications and there are many pawns in the games, test labs being just one.

US negotiators worked for several years to get China to the table to discuss the MRA under the APEC TEL framework, but with no progress. There are several reasons for the talks not getting purchase (protectionism, globalization and the hard-knuckled reality of China’s amazing but bruising economic transformation). Simply, China is not a monolithic entity that acts with a united will. There are many stakeholders and turf issues that this change brings and it creates some conundrums within, all overshadowed by a broader constant worry about keeping a lid on social well-being, all heated by internal and external economic and competitive pressures. In any case, to me, both sides missed opportunities to engage and critical cultural misunderstandings and structural confusion contributed to the current situation. Because of this lack of progress the FCC—likely in concert with other US Federal interests—“closed a loophole” of-sorts that currently allows the testing of products in non-MRA Countries. This is really the sunset of the FCC 2.948 Listing program for labs, which affects the international testing ecosystem (which includes some US labs). This change raised the visibility of this issue to the highest levels in China’s leadership structure and is a hot topic in the ongoing Joint Commission on Commerce and Trade dialogue.

It’s time to move the queen.

Several Ways for this to Play Out

There are several ways this could play out: China could sign the MRA and this all goes away (but this could take a long time). A “Petition for Reconsideration” has been submitted to the FCC that asks, in-part, for a delay of implementation. This could take the pressure off in the short term, but doesn’t solve the MRA issue.

If the MRA talks advance, but the deadline comes and goes, China labs will be forced to subcontract testing to labs in MRA-partner countries. This is where a big logjam is likely: there is simply not enough capacity to handle the workload. Testing queues will back up, buyers won’t have products to ship and Christmas might just be cancelled.

However, buried in the FCC Rulemaking is a provision that allows the FCC to enact “special procedures,” but the Rules don’t elucidate. If ship-dates slip, the economic pressures from the global electronics industry could put pressure on the FCC to enact these procedures. However, for some folks involved in the discussions, this would be like getting a lump of coal in their stocking.

Mike Violette
Director, American Certification Body


American Certification Body, Inc.


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