In a message to the Congress of the U.S., President George W. Bush stated his intention Monday to enter into an agreement with the European Union (E.U.), Japan, the Republic of Korea and Taiwan on tariff treatment for multi-chip ICs, consistent with section 2103(a)(1) of the Trade Act of 2002.

In his letter, the President stated that U.S.-based companies are the principal suppliers to the world of multi-chip ICs and that in 2004; global sales of finished multi-chip integrated circuits were estimated to be $4.2 billion, with U.S. semiconductor companies accounting for roughly half of those sales.

“The United States, the European Union, the Republic of Korea, and Taiwan will apply zero duties on these products as of an agreed date. The target date for entry into force of the Agreement is January 1, 2006,” the letter continued.

“Japan already applies zero duties on these products and expects to ratify the Agreement formally in 2006. Further, although all major producers of multi-chip integrated circuits will be parties to the Agreement, we will seek to build on this Agreement by joining together to work in the World Trade Organization to increase the number of countries granting duty-free treatment to these products,” the President concluded.

Earlier this month, representatives from the U.S., Korea, Japan, Chinese Taipei and the E.U. finalized the draft agreement on duty-free treatment of multi-chip package ICs during a Governments/Authorities Meeting on Semiconductors in Seoul, Korea.

Following the meeting, the representatives returned home to complete their respective approval processes.

According to the Semiconductor Industry Association (SIA), semiconductors are covered by the Information Technology Agreement (ITA) and thus are duty-free in much of the world. However, an evolution in the packaging of certain semiconductor devices allowed for the inclusion of more than one silicon chip inside each package.

This technological advance resulted in a classification of MCPs by customs authorities into a category that was no longer duty-free. As a result of the reclassification, the U.S., Korea, and European Union imposed duties on these semiconductor products. The U.S. has not imposed duties on any semiconductor devices since the mid-1980s. The U.S. and Korean duty on MCPs is 2.6 percent, and the E.U. duty ranges up to almost 4 percent. MCPs are found in a variety of products including cell phones and personal digital assistants.

According to the SIA, the worldwide market for MCPs grew from zero five years ago to $4.2 billion in 2004. The market is expected to nearly double to $7.92 billion by 2008, with a compounded annual growth rate of 25 percent, which significantly outpaces the growth rate in the rest of the industry.

By: DocMemory
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