Proposal for a Council Regulation concerning the implementation of the Agreement on Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs) by amending Annex I to Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff
Date: 2006-02-15
Institutions: European Commission
Subjects: Combined Nomenclature, EU industrial policy, common customs tariff, competitiveness, electronic component, tariff agreement, tariff nomenclature, tariff preference, third country

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.2.2006 
COM(2006) 61 final 

2006/0017 (ACC) 

Proposal for a 

COUNCIL REGULATION 

concerning the implementation of the Agreement on Duty-Free Treatment of Multi-
Chip Integrated Circuits (MCPs) by amending Annex I to Regulation (EEC) No 2658/87 
on the tariff and statistical nomenclature and on the Common Customs Tariff 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

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 likely 
that they would have been incorporated into the ITA at zero duty. 

The  five  Members  of  the  Government  /  Authorities  Meeting  on  Semiconductors 
(GAMS),  which  are  the  European  Community  represented  by  the  European 
Commission,  Japan,  Korea,  the  United  States  and  Chinese  Taipei,  negotiated  an 
Agreement  on  Duty-Free  Treatment  of  Multi-Chip  Integrated  Circuits  (MCPs) 
(hereinafter referred to as the "MCP Agreement"). 

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•  General context 

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On  behalf  of  the  European  Community,  the  Council  concluded  the  MCP  Agreement 
with Council Decision 2005/964/EC of 21 December 2005. 

•  Existing provisions in the area of the proposal 

The present proposal for a Council Regulation would implement the conclusion of the 
MCP Agreement by amending Annex I to Council Regulation (EEC) No 2658/87 on 
the tariff and statistical nomenclature and on the Common Customs Tariff. 

•  Consistency with the other policies and objectives of the Union 

The proposal would support the competitiveness of the relevant European industry. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

The  relevant  European  industry  considers  the  MCP  Agreement  as  a  key  initiative  to 
support the competitiveness of the European semiconductor industry. 

•  Collection and use of expertise 

This proposal merely seeks to implement an international agreement concluded by the 
Community. 

•  Impact assessment 

This proposal does not require an impact assessment. 

No other regulatory approaches are conceivable. 

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3)  LEGAL ELEMENTS OF THE PROPOSAL 

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•  Summary of the proposed action 

The proposed Regulation would reduce to zero the rate of all customs duties and other 
duties and charges applied to MCPs. 

The date for entry into force of the MCP Agreement is still to be agreed with the other 
four  Parties  having  ratified  it.  It  is  anticipated  that  the  MCP  Agreement  would  enter 
into force on 1 April 2006. 

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•  Legal basis 

The  proposed  Regulation  is  based  on  Article  133  of  the  Treaty  establishing  the 
European Community. 

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•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

The  proposed  regulation  is  limited  to  what  is  strictly  necessary  to  implement  the 
international agreement concluded by the Community. 

The proposed regulation does not create any additional adminstrative burden. 

•  Choice of instruments 

Proposed instruments: regulation. 

Other means would not be adequate for the following reason(s). 

A regulation is the only possible means to amend the existing legal provisions. 

4)  BUDGETARY IMPLICATION 

In  budgetary  terms,  duty-free  treatment  of  MCPs  is  estimated  to  entail  less  customs 
revenue for the EU budget in the order of € 7.9 m/year. 

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2006/0017 (ACC) 

Proposal for a 

COUNCIL REGULATION 

concerning the implementation of the Agreement on Duty-Free Treatment of Multi-
Chip Integrated Circuits (MCPs) by amending Annex I to Regulation (EEC) No 2658/87 
on the tariff and statistical nomenclature and on the Common Customs Tariff 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
133 thereof, 

Having regard to the proposal from the Commission1, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

Council Regulation (EEC) No 2658/872 established a goods nomenclature, hereinafter 
referred to as the “Combined Nomenclature”, and set out the conventional duty rates 
of the Common Customs Tariff. 

By its Decision 2005/964/EC3, the Council has concluded, on behalf of the European 
Community, the Agreement on Duty-Free Treatment of Multi-Chip Integrated Circuits 
(MCPs) (hereinafter referred to as “the Agreement”). 

The  Agreement  reduces  to  zero  the  rate  of  all  customs  duties  and  other  duties  and 
charges applied to MCPs. 

The  Secretary  General  of  the  Council  of  the  European  Union  as  the  depository 
designated  by  the  Agreement  has  received  instruments  of  acceptance  from  four 
Parties. Pursuant to Article 7(a) of the Agreement, these four Parties have agreed that 
the Agreement shall enter into force on [1 April 2006]. 

(5) 

The  Agreement  should  now  be  implemented  by  amending  Annex  I  to  Council 
Regulation (EEC) No 2658/87. 

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3 

OJ C xx, xx.xx.xxxx, p.xx. 
OJ L 256, 7.9.1987, p.1, as amended. 
OJ L 349, 31.12.2005, p.24. 

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HAS ADOPTED THIS REGULATION: 

Article 1 

In  Annex  I,  Part  One,  Section  II  “Special  Provisions”  of  Regulation  (EEC)  No  2658/87,  a 
letter G “Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs)” as contained in the 
Annex to this regulation is added. 

Article 2 

This Regulation shall enter into force the day following its publication in the Official Journal 
of the European Union. 

It shall apply from [1 April 2006]. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

For the Council 
The President 

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ANNEX 

G. Duty-Free Treatment of Multi-Chip Integrated Circuits (MCPs) 

(1) 

(2) 

(3) 

Relief  from  customs  duty  is  provided  for  multi-chip  integrated  circuits  (MCPs) 
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. 

Goods  eligible  to  this  relief  of  customs  duty  are  covered  by  the  following  headings: 
8418, 8422, 8450, 8466, 8473, 8517, 8518, 8522, 8523, 8525, 8528, 8529, 8530, 8531, 
8535, 8536, 8537, 8538, 8543, 8548, 8708, 9009, 9026, 9031, 9504. 

Upon  presentation  to  the  Member  State's  customs  authorities  of  the  customs 
declaration for release into free circulation of MCPs, the declarant shall indicate in box 
44 of the Single Administrative Document (“SAD”) the reference number C500. 

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LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS HAVING A 
BUDGETARY IMPACT EXCLUSIVELY LIMITED TO THE REVENUE SIDE 

1. 

NAME OF THE PROPOSAL: 

Proposal  for  a  Council  Regulation  Implementing  the  Agreement  on  Duty-Free 
Treatment of Multi-Chip Integrated Circuits (MCPs) 

2. 

BUDGET LINES: 

Chapter and Article: Chapter 12 - Article 120 

Amount budgeted for the year concerned: 12 905 400 000 Euro 

3. 

FINANCIAL IMPACT  

(cid:133) 

Proposal has no financial implications 

Proposal has no financial impact on expenditure but has a financial impact on 

x 
revenue – the effect is as follows: 

(€ million to one decimal place) 

Budget line 

Revenue4 

12 month period, 
starting 01/04/2006

2006 

Article 1 

Impact on own resources 

-7.9 M€ 

-5.9 M€ 

Article … 

Impact on own resources 

4 

Regarding  traditional  own  resources  (agricultural  duties,  sugar  levies,  customs  duties)  the  amounts 
indicated must be net amounts, i.e. gross amounts after deduction of 25 % of collection costs. 

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Situation following action 

2007 

2008 

2009 

2010 

2011 

Article 1  

-7.9 M€*  

-7.9 M€* 

-7.9 M€* 

-7.9 M€* 

-7.9 M€* 

Article … 

4. 

ANTI-FRAUD MEASURES 

N.A. 

5. 

OTHER REMARKS  

The volume of customs currently levied in the EU on MCPs is estimated on the basis 
of data provided by the relevant European industry association.  

* Please note that there is likelihood that duties and other charges on MCPs will be 
eliminated  in  any  event  either  as  a  result  of  the  Doha  Round  of  trade  talks,  or  of 
another agreement which may be concluded under the auspices of the WTO. 

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