Proposal for a Council Decision on the adoption of the Agreement on Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs)
Date: 2005-10-28
Institutions: European Commission
Subjects: World Trade Organisation, electronic component, exemption from customs duties, international agreement

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.10.2005 
COM(2005) 538 final 

2005/0216 (ACC) 
2005/0217 (ACC) 

Proposal for a 

COUNCIL DECISION 

on the adoption of the Agreement on Duty-Free Treatment of Multi-Chip Integrated 
Circuits (MCPs) 

Proposal for a 

COUNCIL DECISION 

on the acceptance of the Agreement on Duty-Free Treatment of Multi-Chip Integrated 
Circuits (MCPs) 

(presented by the Commission) 

EN 

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EXPLANATORY MEMORANDUM 

Multi-chip integrated circuits, or “multi-chip packages” (MCPs) are a relatively new category 
of assembled semiconductors that did not exist at the time the tariff-cutting mechanism of the 
ITA  (the  WTO  Agreement  on  Information  Technologies)  was  concluded  in  1996.  If  MCPs 
had  existed  at  the  time  the  ITA  was  negotiated,  it  is  most  likely  that  they  would  have  been 
incorporated into the ITA at zero duty. 

In 2004, the major producers of semiconductors based in the EU and elsewhere requested that 
their respective home jurisdictions, which are grouped together in the Government/Authorities 
Meeting  on  Semiconductors  (GAMS),  grant  MCPs  the  same  treatment  as  other  products 
covered by the ITA. The EU, Japan, Korea, the United States and Chinese Taipei as the five 
GAMS  members  endorsed  this  initiative  at  the  2004  GAMS  meeting.  The  GAMS  members 
were able to successfully conclude negotiations on an Agreement on Duty-Free Treatment of 
Multi-Chip Integrated Circuits (the “Agreement”) on 15 September 2005 in Seoul. 

The Council had adopted negotiating directives for this Agreement in spring 2005.  

In substance, the draft Agreement envisages that all GAMS members reduce to zero the rate 
of  all  customs  duties  and  charges  applied  to  MCPs,  as  defined  in  the  2007  Harmonised 
System (HS) of the World Customs Organisation.  

The draft Agreement would only reduce applied duties and charges on MCPs, whilst leaving 
the bound rates unchanged. Importantly, the draft Agreement expressly authorises the Parties, 
when negotiating a multilateral tariff reduction agreement under the auspices of the WTO, to 
claim credit as part of their overall balance of concessions when also binding tariffs on MCPs 
at zero level. 

The  agreement  is  expected  to  enter  into  force  between  four  GAMS  members  on  1  January 
2006, assuming that domestic ratification procedures can be completed swiftly. Japan already 
applies  in  practice  zero-level  duties  and  charges  on  MCPs  and  is  therefore  effectively  in 
compliance with the terms of the Agreement. Due to the length of the ratification procedure in 
Japan, she is expected to join the Agreement in the course of 2006. 

For the ratification process, the GAMS members have agreed on a two-step procedure. In a 
first step, the Agreement would be adopted - subject to later acceptance - by all five GAMS 
members.  Then,  once  all  instruments  of  adoption  have  been  received  by  the  designated 
depositary,  the  agreement  would  be  open  to  acceptance.  The  corresponding  Commission 
proposals for two Council decisions are contained hereinafter. 

It  is  envisaged  that  the  Agreement  can  at  a  later  stage  be  extended  to  other  jurisdictions 
manufacturing MCPs, such as China, Hong-Kong, India, Malaysia, and Singapore.  

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2005/0216 (ACC) 

Proposal for a 

COUNCIL DECISION 

on the adoption of the Agreement on Duty-Free Treatment of Multi-Chip Integrated 
Circuits (MCPs) 

(text with relevance to the EEA) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
133 in conjunction with the first sentence of the first subparagraph of Article 300 (2) thereof, 

Having regard to the proposal from the Commission1, 

Whereas: 

(1) 

(2) 

The Commission has negotiated on behalf of the Community an Agreement on Duty-
Free Treatment of Multi-Chip Integrated Circuits (MCPs) (the “Agreement”). 

In  a  declaration  signed  on  15  September  2005,  the  prospective  Parties  to  this 
Agreement recorded the finalisation of negotiations on the text of the agreement. 

(3) 

Subject to a possible acceptance at a later date, the Agreement should be adopted. 

(4) 

By  adopting  this  decision,  the  Council  shall  also  be  considered  as  depositing  an 
instrument of adoption with the depositary designated by the Agreement, which is the 
Secretary-General of the Council of the European Union, 

HAS DECIDED AS FOLLOWS:  

Subject  to  a  possible  acceptance  at  a  later  date,  the  Agreement  on  Duty-Free  Treatment  of 
Multi-Chip Integrated Circuits (MCPs) is hereby adopted on behalf of the Community. 

Sole Article 

1 

OJ C , , p. . 

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The text of the Agreement is attached to this Decision. 

Done at Brussels,  

For the Council 
The President 

EN 

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Note: Only the English version is authentic 

ANNEX 

Agreement on Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs) 

Recalling  that  there  exists  a  shared  view  on  the  duty-free  treatment  of  MCPs  among  the 
Members of the Government/Authorities Meeting on Semiconductors (GAMS), which are the 
European  Community  represented  in  GAMS  through  the  European  Commission;  Japan;  the 
Republic  of  Korea;  the  United  States  of  America;  and  the  Separate  Customs  Territory  of 
Taiwan, Penghu, Kinmen and Matsu, those GAMS Members have agreed as follows: 

(1) 

For purposes of this Agreement: 

(a)  multi-chip  integrated  circuits  (MCPs)  means  multi-chip  integrated  circuits 
consisting  of  two  or  more  interconnected  monolithic  integrated  circuits 
combined to all intents and purposes indivisibly, whether or not on one or more 
insulating substrates, with or without lead frames, but with no other active or 
passive circuit elements;  

(b)  Harmonized  System  means  the  Harmonized  Commodity  Description  and 
Coding  System  set  out  in  the  Annex  to  the  International  Convention  on  the 
Harmonized Commodity Description and Coding System, as may be amended, 
and as adopted and implemented by the Parties in their respective internal laws 
and regulations;  

(c)  Party  means  a  GAMS  Member  or  any  Member  of  the  World  Trade 
Organization  (WTO)  that  has  deposited  its  instrument  of  acceptance  with  the 
depositary; and 

(d) 

terms  used  in  this  Agreement  that  are  also  used  in  the  Marrakech  Agreement 
Establishing  the  World  Trade  Organization  (the  WTO  Agreement)  shall  have 
the same meaning as in the WTO Agreement. 

This  Agreement  shall  apply  to  all  MCPs,  regardless  of  where  such  products  are 
classified in the Harmonized System. 

Each  Party  shall,  on  a  most-favored-nation  basis,  reduce  to  zero  the  rate  of  all 
customs duties and other duties and charges, as such duties and charges are described 
in Article II:1(b) of the General Agreement on Tariffs and Trade 1994 (GATT 1994), 
that it applies to MCPs, in accordance with the following procedures: 

(a)  Each Party shall apply duties and charges on MCPs at a rate of zero until all the 
Parties  agree  that  a  sufficient  level  of  global  trade  in  MCPs  is  covered  in  a 
multilateral tariff reduction agreement under the auspices of the WTO.  

(b)  At that time, or, if that time is before 31 December 2006, on 1 January 2007, 

each Party shall bind all duties and charges on MCPs at a rate of zero.  

(2) 

(3) 

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(c)  All the Parties agree to cooperate with other Members of the WTO to achieve 
90  percent  coverage  of  global  trade  in  MCPs  in  such  a  tariff  reduction 
agreement.  

(4) 

(a)  Each Party shall, at the time of its acceptance of this Agreement, provide to the 
depositary a list of the headings in its tariff schedule that include MCPs. If a Party 
subsequently  classifies  an  MCP  in  a  heading  not  included  on  its  original  list,  that 
Party shall promptly provide a modified list to the depositary. 

(b)  Any Party may at any time request modifications to a list of another Party that 
it  finds  to  be  incomplete,  in  which  case  the  requested  Party  shall  consult  and 
work with the requesting Party in good faith to complete  all modifications as 
necessary. The modified list shall be provided to the depositary. 

(c)  The depositary  shall  transmit  the provided  list,  including  its modifications, to 

all Parties. 

Notwithstanding  the  autonomous  liberalization  of  applied  duties  and  charges  on 
MCPs under this Agreement, each Party shall be permitted to take into account the 
binding of tariffs on MCPs at zero level as part of its overall balance of concessions 
in a multilateral tariff reduction agreement under the auspices of the WTO. 

Without prejudice to paragraph 3, nothing in this Agreement shall be interpreted as 
affecting a Party’s rights and obligations under the WTO Agreement. 

(a)  After  the  depositary  receives  four  instruments  of  acceptance  from  GAMS 
Members, those Parties shall agree on a date of entry into force of the Agreement. 

(b)  This Agreement shall be open for acceptance by any Member of the WTO. An 
acceptance  following  the  entry  into  force  of  this  Agreement  shall  enter  into 
force on the date such acceptance is received by the depositary. The depositary 
shall inform all Parties upon receipt of an acceptance. 

(c) 

If the Parties agree to amend this Agreement, subparagraphs (a) and (b) shall 
apply mutatis mutandis to such amendment. 

When all the Parties bind all duties and charges on MCPs at a rate of zero pursuant to 
paragraph 3 subparagraphs (a) to (c), this Agreement shall terminate. 

The original of this Agreement in the English language as well as the instruments of 
acceptance  shall  be  deposited  with  the  Secretary-General  of  the  Council  of  the 
European Union. 

(5) 

(6) 

(7) 

(8) 

(9) 

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2005/0217 (ACC) 

Proposal for a 

COUNCIL DECISION 

on the acceptance of the Agreement on Duty-Free Treatment of Multi-Chip Integrated 
Circuits (MCPs) 

(text with relevance to the EEA) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
133 in conjunction with the first sentence of the first subparagraph of Article 300 (2) thereof, 

Having regard to the proposal from the Commission2, 

Whereas: 

(1)  With  Decision  of  …  the  Council  adopted3 subject to a possible acceptance at a later 
date,  on  behalf  of  the  Community  the  Agreement  on  Duty-Free  Treatment  of  Multi-
Chip Integrated Circuits (MCPs) (the “Agreement”). 

(2) 

(3) 

In the meantime, a total of four prospective Parties to the Agreement have, subject to a 
possible  acceptance  at  a  later  stage,  adopted  the  Agreement.  This  is  the  minimum 
number of Parties required for this Agreement to take effect.  

The four prospective Parties to the Agreement have agreed that it shall enter into effect 
between them on 1 January 2006 [to be confirmed]. 

(4) 

The Agreement should now be accepted on behalf of the Community. 

(5) 

By  adopting  this  decision,  the  Council  shall  also  be  considered  as  depositing  an 
instrument  of  acceptance  with  the  depositary  designated  by  the  Agreement,  which  is 
the Secretary-General of the Council of the European Union, 

HAS DECIDED AS FOLLOWS:  

The Agreement on Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs) is hereby 
accepted on behalf of the Community. 

Sole Article 

2 
3 

OJ C […],[…], p. […]. 
OJ L […], […], p. […]. 

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The  text  of  the  Agreement  as  authenticated  by  the  Secretary-General  of  the  Council  is 
attached to this Decision. 

Done at Brussels,  

For the Council 
The President 

EN 

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Note: only the English version is authentic 

ANNEX 

Agreement on Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs) 

Recalling  that  there  exists  a  shared  view  on  the  duty-free  treatment  of  MCPs  among  the 
Members of the Government/Authorities Meeting on Semiconductors (GAMS), which are the 
European  Community  represented  in  GAMS  through  the  European  Commission;  Japan;  the 
Republic  of  Korea;  the  United  States  of  America;  and  the  Separate  Customs  Territory  of 
Taiwan, Penghu, Kinmen and Matsu, those GAMS Members have agreed as follows: 

(1) 

For purposes of this Agreement: 

(a)  multi-chip  integrated  circuits  (MCPs)  means  multi-chip  integrated  circuits 
consisting  of  two  or  more  interconnected  monolithic  integrated  circuits 
combined to all intents and purposes indivisibly, whether or not on one or more 
insulating substrates, with or without lead frames, but with no other active or 
passive circuit elements;  

(b)  Harmonized  System  means  the  Harmonized  Commodity  Description  and 
Coding  System  set  out  in  the  Annex  to  the  International  Convention  on  the 
Harmonized Commodity Description and Coding System, as may be amended, 
and as adopted and implemented by the Parties in their respective internal laws 
and regulations;  

(c)  Party  means  a  GAMS  Member  or  any  Member  of  the  World  Trade 
Organization  (WTO)  that  has  deposited  its  instrument  of  acceptance  with  the 
depositary; and 

(d) 

terms  used  in  this  Agreement  that  are  also  used  in  the  Marrakech  Agreement 
Establishing  the  World  Trade  Organization  (the  WTO  Agreement)  shall  have 
the same meaning as in the WTO Agreement. 

This  Agreement  shall  apply  to  all  MCPs,  regardless  of  where  such  products  are 
classified in the Harmonized System. 

Each  Party  shall,  on  a  most-favored-nation  basis,  reduce  to  zero  the  rate  of  all 
customs duties and other duties and charges, as such duties and charges are described 
in Article II:1(b) of the General Agreement on Tariffs and Trade 1994 (GATT 1994), 
that it applies to MCPs, in accordance with the following procedures:  

(a)  Each Party shall apply duties and charges on MCPs at a rate of zero until all the 
Parties  agree  that  a  sufficient  level  of  global  trade  in  MCPs  is  covered  in  a 
multilateral tariff reduction agreement under the auspices of the WTO.  

(b)  At that time, or, if that time is before 31 December 2006, on 1 January 2007, 

each Party shall bind all duties and charges on MCPs at a rate of zero.  

(2) 

(3) 

EN 

9 

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(c)  All the Parties agree to cooperate with other Members of the WTO to achieve 
90  percent  coverage  of  global  trade  in  MCPs  in  such  a  tariff  reduction 
agreement.  

(4) 

(a)  Each Party shall, at the time of its acceptance of this Agreement, provide to the 
depositary a list of the headings in its tariff schedule that include MCPs. If a Party 
subsequently  classifies  an  MCP  in  a  heading  not  included  on  its  original  list,  that 
Party shall promptly provide a modified list to the depositary. 

(b)  Any Party may at any time request modifications to a list of another Party that 
it  finds  to  be  incomplete,  in  which  case  the  requested  Party  shall  consult  and 
work with the requesting Party in good faith to complete all  modifications as 
necessary. The modified list shall be provided to the depositary. 

(c)  The depositary  shall  transmit the provided  list,  including  its modifications, to 

all Parties. 

Notwithstanding  the  autonomous  liberalization  of  applied  duties  and  charges  on 
MCPs under this Agreement, each Party shall be permitted to take into account the 
binding of tariffs on MCPs at zero level as part of its overall balance of concessions 
in a multilateral tariff reduction agreement under the auspices of the WTO. 

Without prejudice to paragraph 3, nothing in this Agreement shall be interpreted as 
affecting a Party’s rights and obligations under the WTO Agreement. 

(a)  After  the  depositary  receives  four  instruments  of  acceptance  from  GAMS 
Members, those Parties shall agree on a date of entry into force of the Agreement. 

(b)  This Agreement shall be open for acceptance by any Member of the WTO. An 
acceptance  following  the  entry  into  force  of  this  Agreement  shall  enter  into 
force on the date such acceptance is received by the depositary. The depositary 
shall inform all Parties upon receipt of an acceptance. 

(c) 

If the Parties agree to amend this Agreement, subparagraphs (a) and (b) shall 
apply mutatis mutandis to such amendment. 

When all the Parties bind all duties and charges on MCPs at a rate of zero pursuant to 
paragraph 3 subparagraphs (a) to (c), this Agreement shall terminate. 

The original of this Agreement in the English language as well as the instruments of 
acceptance  shall  be  deposited  with  the  Secretary-General  of  the  Council  of  the 
European Union. 

(5) 

(6) 

(7) 

(8) 

(9) 

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