Duties Cut on MCPs

The United States has negotiated an agreement with four high-tech trading
partners on applying zero duties on multi-chip-integrated circuits, also
known as multi-chip packages or MCPs.

MCPs are used in small computer products, such as cell phones, digital
cameras and personal digital assistants (PDAs).

In a deal signed late last week, the United States agreed to drop its
2.6 percent rate on MCPs; Korea said it would slash its 8 percent duty on
the chips; and the European Union agreed to get rid of its 4 percent tariff.
Japan doesn’t charge a tax on MCPs.

The countries are working through domestic approval procedures and have
targeted Jan. 1 as the date when zero duties on MCPs are scheduled to go
into effect.

“Multi-chip packages were not even in existence in 1999 and are now a major
high-tech input to many advanced electronics products,” United States Trade
Representative (USTR) Rob Portman said in a statement.

U.S.-based companies account for more than 50 percent of global MCP
production. Portman said the agreement will expand opportunities and boost
sales for U.S. firms and workers in the $4.2 billion global market, which
is expected to almost double by 2008.

“Applying zero duties on MCPs among our key semiconductor trading partners
will boost sales and thereby enable this industry to grow even faster,”
Portman said.

Steve Altman, president of Qualcomm, added, “This agreement is a major
advancement in liberalizing trade in MCPs, which have become the preferred
type of semiconductor in the wireless communications sector.”

George Scalise, president of the Semiconductor Industry Association, echoed Altman’s statement in a statement.

“MCPs are a new, fast-growing product — cutting tariffs to zero on this
product is vital to ensure continued growth.”

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