Made in China 2025

U.S. Government Imposes Tariffs on $200 Billion of Goods and China Retaliates on $60 Billion of GoodsEarlier this week, the U.S. Trade Representative (USTR) released a 10 percent tariff on $200 billion in imports from China, including more than 90 tariff lines central to the semiconductor industry.The 10 percent tariff will take effect on September 24, 2018, and rise to 25 percent on January 1. These tariff lines will cost SEMI’s 400 U.S. members tens of millions of dollars annually in additional duties. However, counting the products included in the previous rounds of tariffs, the total estimated impact exceeds $700 million annually. China has already announced that it will respond with tariffs on $60 billion worth of U.S. goods. In his notice, President Trump said the U.S. will impose tariffs on $267 billion worth of goods if China retaliates. The U.S. government removed 279 total tariff lines, including three lines that impact our industry: silicon carbide, tungsten, and network hubs used in the manufacturing process.As we’ve noted, intellectual property is critical to the semiconductor industry, and SEMI strongly supports efforts to better protect valuable IP. However, we believe that these tariffs will ultimately do nothing to address the concerns with China’s trade practices. This sledgehammer approach will introduce significant uncertainty, impose greater costs, and potentially lead to a trade war. This undue harm will ultimately undercut our companies’ ability to sell overseas, which will only stifle innovation and curb U.S. technological leadership.Product Exclusion Process – List 2USTR formally published the details for the product exclusion process for products subject to the List 2 China 301 tariffs (the $16 billion tariff list). If your company’s products are subject to tariffs, you can request an exclusion.In evaluating product exclusion requests, the USTR will consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the product is strategically important or related to Chinese industrial programs (such as “Made in China 2025”).The request period ends on December 18, 2018, and approved exclusions will be effective for one year, applying retroactively to August 23, 2018. Because exclusions will be made on a product basis, a particular exclusion will apply to all imports of the product, regardless of whether the importer filed a request.More information, including the process for submitting the product exclusion request and details what information should be included in your submission can be found here. Please let me know if your company plans on filing an exclusion. SEMI has prepared a document that includes guidelines for your exclusion filing, an explainer on how to submit, and links to official government info. SEMI is glad to assist your companies file exclusion requests for your products. SEMI will continue tracking ongoing trade developments. Any SEMI members with questions should contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

Two months after opposing $34 billion in U.S. trade tariffs on behalf of the U.S. semiconductor manufacturing industry, Jonathan Davis, global vice president of industry advocacy at SEMI, this week spoke out against an additional $16 billion in duties on Chinese goods. Testifying before the same U.S. interagency panel mulling the tariffs, Davis called for the removal of 29 tariff lines covering items critical to semiconductor manufacturing including machines and spare parts used to make, wafers, flat panel displays and masks.In his testimony to the panel, Davis stressed that while SEMI supports stronger protections against the theft of valuable intellectual property (IP), tariffs do little to address U.S. concerns over IP loss. Over the past month, SEMI has also submitted written comments and opposed the tariffs in public testimony. The panel includes representatives from the U.S. Trade Representative (USTR), Departments of Treasury, Commerce, State and Defense, and the Council of Economic Advisers.Also testifying, Joe Pon, corporate vice president at Applied Materials, explained that the proposed tariffs will harm small and midsized companies and other U.S. business interests. Describing the tariffs as a tax on exports of high-value U.S. goods, Pon said the duties give non-U.S. firms an unfair competitive advantage.In a parallel push to Davis’s testimony, SEMI, with more than 10 representatives from six member companies, met with 16 congressional offices this week to underscore the damage the tariffs would wreak on the U.S. semiconductor industry. The fallout would include higher operating costs, fewer exports and slower innovation. The tariffs would also curb industry growth and put thousands of high-paying, high-skill jobs at risk. SEMI pressed congressional leaders to reject the tariffs and support a push for congress to re-assert itself on trade policy.Tariffs to Cost U.S. SEMI Members More than $500 MillionSEMI estimates that the second list of proposed tariffs, covering about $16 billion in Chinese goods, will cost its 400 U.S. members more than $500 million annually in additional duties.The tariffs on $34 billion in Chinese goods, which took effect July 6, impact products such as test and inspection equipment as well as spare parts that enter the U.S. from China. That round of tariffs will cost SEMI member companies and estimated tens of millions of dollars annually. SEMI Public Policy Team Asks Members to Review Tariff ListLooking ahead, SEMI encourages members to review the newly released $200 billion tariff list, determine any impact to their businesses and share their findings with SEMI’s public policy team.The U.S. Trade Representative (USTR) has published the exclusion process for products subject to the China 301 tariffs. If your company’s products are subject to tariffs, you can request an exclusion.In evaluating product exclusion requests, the USTR will consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the product is strategically important or related to Chinese industrial programs (such as “Made in China 2025”).The deadline for submitting product exclusion requests to USTR is October 9, 2018. Approved exclusions will be effective for one year upon approval and retroactive to July 6, 2018.More information including the process for submitting the product exclusion request can be found here.Any SEMI members with questions should contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

The U.S. Trade Representative (USTR), based on findings from its Section 301 investigation into China's trade practices, today announced a 25 percent tariff on $34 billion in Chinese goods including many products in the semiconductor supply chain.Products such as test and inspection equipment and spare parts that enter the U.S. from China will be subject to this tariff, which enters into force on July 6, 2018. About 80 percent of the semiconductor products originally proposed remain on the final list of tariffs.USTR also has proposed tariffs on more than $16 billion worth of goods including chemicals as well as machines and spare parts that are used to manufacture semiconductor devices, wafers, flat panel displays, and masks, all of which would squarely strike the semiconductor industry. This new proposed list includes products identified by the U.S. government that have particularly benefited from Chinese industrial policies such as “Made in China 2025.” SEMI is set to voice its opposition to these tariffs with written comments and at an upcoming public hearing.Over the past month, SEMI has submitted written comments and offered testimony on the damaging impact that tariffs would have on the U.S. semiconductor industry. While SEMI strongly supports efforts to better protect valuable intellectual property, we believe that these tariffs will do nothing to address U.S. concerns over China’s trade practices. Instead, the tariffs will harm companies in the semiconductor supply chain by increasing business costs, introducing uncertainty and stifling innovation.SEMI will continue to engage with lawmakers as the $34 billion in tariffs take effect and the proposed $16 billion in duties remain under consideration. We encourage members to review this list and determine the level, if any, of impact. If you have questions or concerns, please reach out to Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

Hope springs eternal. And it was with collective open arms that many U.S. businesses welcomed the recent talks between U.S. and Chinese officials to resolve their trade differences and downplay the specter of a full-blown trade war. Treasury Secretary Steven Mnuchin went so far to say that trade war with China was “on hold.”Hope and optimism soon fizzled. On May 29th, the White House released a statement contradicting Sec. Mnuchin, announcing that the Trump Administration would indeed move forward with a 25 percent tariff on $50 billion worth of goods imported from China. Besides focusing on goods that the U.S. has deemed are tied to “Made in China 2025” – the Chinese initiative to produce more advanced manufacturing goods domestically – the Administration also announced stiffer investment restrictions and enhanced export controls related to the acquisition of industrially significant technology. The final tariff list will be published by June 15th, and the proposed list of investment restrictions and export controls will be announced by June 30th.Tariffs and New Focus on Export ControlsAll of this comes as the White House and Capitol Hill have heated up their activity in recent months to curb commerce with China through tariffs and investment restrictions.The Section 301 investigation, a key component of this push, has zeroed in on China’s trade practices related to intellectual property violations. Following a months-long inquiry, the Office of the U.S. Trade Representative (USTR) determined in March 2018 that China’s forced transfer of technology and intellectual property has discriminated against U.S. firms. The finding prompted President Trump to respond with a number of remedial actions including a proposed 25 percent tariff on $50 billion worth of U.S. imports from China.More than 100 lines of the proposed tariff list directly impact the semiconductor supply chain, hitting fundamental components of the semiconductor manufacturing process. SEMI has fought back, strongly urging the removal of these tariff lines from the proposed tariff list. At a bare minimum, the tariffs against China will cost the U.S. tens of millions annually in additional taxes, create lost revenue as a result of reduced exports, threaten thousands of high-paying U.S. jobs, stifle innovation and curb U.S. technological leadership – all while not directly addressing U.S. concerns with China.These tariffs, plus the new focus on export controls, is particularly troubling for the semiconductor supply chain. The recent move comes on the heels of other trade actions, including tariffs on steel, aluminum, and solar cells that will not only limit trade and opportunities for U.S. economic growth, but also will introduce significant uncertainty for U.S. businesses. CFIUS Reform Moves Ahead, But Concerns RemainAt the same time, other government efforts that could encumber investment continue. Both the Senate Banking and House Financial Services Committees unanimously passed the Foreign Investment Risk Review Modernization Act (FIRRMA). The legislation aims to upgrade the Committee on Foreign Investment in the United States (CFIUS) – the interagency body that reviews inbound foreign investment for national security concerns. With such rare bipartisan agreement on a major bill, it is expected to be passed by both chambers and signed into law later this year.The current version of the bill is certainly an improvement on earlier drafts. The legislation no longer contains problematic language that would have given CFIUS the authority to review joint ventures between U.S. and foreign companies. The language would have, for the first time ever, expanded CFIUS’s jurisdiction to include outbound foreign investment. Given the semiconductor industry’s deep reliance on expansive global supply chains, this language was particularly concerning to our industry.However, broad concerns remain about how CFIUS functions. In recent months, CFIUS has been used seemingly to evaluate transactions based on economic security, rather than the Congressional intent of national security. Should this trend continued, we worry that this could curb otherwise acceptable investments, stifling innovation and limiting growth, especially in the semiconductor industry.SEMI Educates Lawmakers on Industry ImpactsWith tensions likely continue to rise and efforts to wall off commerce with China ongoing, SEMI is engaging with policymakers to educate them on how these restrictions will potentially undermine the long-term health of the semiconductor industry. SEMI will continue to meet with policymakers about the critical importance of trade and investment to the continued success of the semiconductor industry. If you are interested in more information on trade, or how to be involved in SEMI’s public policy program, please contact Jay Chittooran, Public Policy Manager, at [email protected].