USTR - United States to Join Japan, EU, Korea and Taiwan In Agreement to Cut Tariffs on Multi-Chip Packages
Office of the United States Trade Representative

 

United States to Join Japan, EU, Korea and Taiwan In Agreement to Cut Tariffs on Multi-Chip Packages
11/03/2005

 

Agreement provides a “shot in the arm” to multilateral negotiations
on manufactured goods

Washington – US Trade Representative Rob Portman today announced that the United States has negotiated an agreement with the European Union, Japan,  Korea, and Taiwan in applying zero tariffs on multi-chip integrated circuits (also known as “multi-chip packages” or “MCPs”).    MCPs are an evolutionary new semiconductor used wherever miniaturization is desirable – for example, in cell phones, digital cameras and Personal Digital Assistants (PDAs). 

U.S. headquartered companies account for over 50% of global MCP production, which was valued at over $4 billion in 2004.  Under the agreement, the United States will cut its 2.6% duty on MCPs, while Korea will cut its 8% bound* duty and the European Union will cut duties bound at rates as high as 4%.  Japan currently does not have duties on MCPs.

“Multi-chip packages were not even in existence in 1999, and are now a major high-tech input to many advanced electronics products,” said Portman. “Applying zero duties on MCP’s among our key semiconductor trading partners will boost sales and thereby enable this industry to grow even faster.  U.S. leadership to bring the MCP agreement to conclusion is reflective of the priority the United States attaches to moving the high-tech trade agenda forward. 

“This agreement is not only important for U.S. companies but for the ongoing WTO Doha Development Agenda negotiations. A key goal of the United States in the DDA negotiations is to eliminate tariffs on manufactured products in all sectors and this agreement will serve as a shot in the arm for these talks.”

The United States is a significant exporter of MCPs. In 2004, US companies accounted for almost half of the $213 billion world semiconductor market in terms of sales – more than any other country. Over three-quarters of U.S.-owned wafer capacity is in the United States, despite the fact that three-quarters of sales are outside the United States. The Administration consulted closely with the Congress over the course of the negotiations.    

On September 15, at their annual Government/Authorities Meeting on Semiconductors (GAMS), the United States, Japan, Korea, the European Union and Taiwan concluded a final draft text of an agreement to cut applied duties on MCPs. The parties are now working through domestic approval procedures, and the agreement is expected to take effect on January 1, 2006.

* A bound rate is the highest rate that a WTO Member can apply on a most-favored-nation basis.  In other words, when a WTO Member binds a tariff rate, that Member commits not to raise the rate above the bound rate.  However, a lower rate can be applied. 

A fact sheet on the agreement is available at www.ustr.gov

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