The Information Technology Agreement: Advice and Information on the Proposed Expansion

148 Pages·2013·17.23 MB·English

United States International Trade Commission
The Information
Technology
Agreement

Advice and Information on
the Proposed Expansion:
Part 2
Investigation No. 332-536
USITC Publication 4382
February 2013
U.S. International Trade Commission
COMMISSIONERS

Irving A. Williamson, Chairman
Daniel R. Pearson
Shara L. Aranoff
Dean A. Pinkert
David S. Johanson
Meredith M. Broadbent
Robert B. Koopman
Director, Office of Operations
Karen Laney
Director, Office of Industries
Address all communications to
Secretary to the Commission
United States International Trade Commission
Washington, DC 20436
U.S. International Trade Commission
Washington, DC 20436
www.usitc.gov
The Information Technology Agreement

Advice and Information on the Proposed
Expansion: Part 2
Investigation No. 332-536
Publication 4382 February 2013
Project Leader
Shannon Gaffney
[email protected]

Deputy Project Leaders
Heidi Colby-Oizumi Jenna Leary
[email protected] [email protected]

Office of Industries
Ray Cantrell, Heidi Colby-Oizumi, Andy David, Dennis Fravel, Shannon Gaffney, Alberto Goetzl,
Vincent Honnold, John Kitzmiller, Jenna Leary, Kathryn Lundquist, Deborah McNay, Philip Stone,
Karen Taylor, Mihir Torsekar, Karl Tsuji, and Linda White

Office of Economics
Yasnanhia Cabral and Michael Ferrantino

Office of Tariff Affairs and Trade Agreements
Scott Baker

Office of the General Counsel
William Gearhart

Content Reviewers
Joanne Guth and Deborah McNay

Editorial Reviewer
Peg Hausman

Administrative Support
Phyllis Boone, Trina Chambers, Monica Reed, and Wanda Tolson

Help Desk and Customer Service Division

Under the direction of:
Michael Anderson, Chief
Advanced Technology and Machinery Division
CONTENTS

Page
Acronyms
............................................................................................................................ iii

Executive Summary
................................................................................................ v

Chapter 1: Introduction
..................................................................................... 1-1

Organization of the report ................................................................................................. 1-1
Scope and approach .......................................................................................................... 1-2

Chapter 2: Product Information
............................................................. 2-1

Introduction ....................................................................................................................... 2-1

Chapter 3: Potential Benefits of Expanding ITA
Product Coverage
.............................................................................................. 3-1

Overview of the benefits of ITA expansion ...................................................................... 3-1
Market access benefits to U.S. industry ....................................................................... 3-2
Benefits to U.S. industry from lower-cost imports ...................................................... 3-4
Supply chain benefits in the ITA ................................................................................. 3-5
Market access opportunities: Key selected subsectors ...................................................... 3-6
Multi-component integrated circuits (MCOs) .............................................................. 3-7
Medical devices ........................................................................................................... 3-11
Relay and industrial control equipment ....................................................................... 3-14
Optical media ............................................................................................................... 3-17
Loudspeakers and headsets .......................................................................................... 3-20
Bibliography ...................................................................................................................... Biblio-1
Appendices

A. Request letter ........................................................................................................................... A-1
B. Federal Register notice ............................................................................................................ B-1
C. Calendar of public hearing ....................................................................................................... C-1
D. Positions of interested parties ................................................................................................... D-1
E. List of ITA participants ............................................................................................................ E-1
Boxes

3.1. MCOs definition .................................................................................................................... 3-8
i
CONTENTS—Continued

Page
Tables

ES.1 Selected subsectors: U.S. exports, major U.S. export markets, and tariffs, 2011 ................. vi
2.1 List of products for proposed expansion of Attachment A, by HS subheading .................... 2-3
2.2 List of products for proposed expansion of Attachment B, wherever classified ................... 2-69
3.1 U.S. exports to leading markets, estimated duties, and average ad valorem equivalent
tariff rates on proposed ITA expansion products by trading partner, 2011 ...................... 3-2
3.2 U.S. imports from leading markets, calculated duties, and average ad valorem equivalent
tariff rates on proposed ITA expansion products by trading partner, 2011 ...................... 3-4
3.3 U.S. exports, estimated duties, and average ad valorem equivalent tariff rates on
selected subsectors composed of proposed products for ITA expansion, 2011 ................ 3-6
3.4 U.S. exports of medical devices, major U.S. markets, and corresponding MFN
tariff rates, 2011 ................................................................................................................ 3-13
3.5 U.S. exports of certain relay and industrial control equipment, major U.S. markets,
and corresponding MFN tariff rates, 2011 ........................................................................ 3-17
3.6 U.S. exports of entertainment software on optical media, major U.S. markets, and
corresponding MFN tariff rates, 2011 .............................................................................. 3-19
3.7 U.S. exports of loudspeakers and headsets, major U.S. markets, and corresponding
MFN tariff rates, 2011 ...................................................................................................... 3-22

ii
Acronyms

AC Alternating current
CD Compact disc
CEA Consumer Electronics Association
CERA Consumer Electronics Retailers Association
CT Computed tomography
DCP Digital cinema packs
DVD Digital versatile disc
ESA Entertainment Software Association
EU European Union
FTA Free trade agreement
GAMS Government/Authorities Meeting on Semiconductors
GE General Electric
HDMI High-definition multimedia interface
HS Harmonized System
HTS Harmonized Tariff Schedule
ITA Information Technology Agreement
ITI Information Technology Industry Council
ICT Information and communications technology
IT Information technology
kVA Kilovolt-amps
LCD Liquid crystal display
LED Light-emitting diode
MCCs Motor control centers
MCOs Multi-component integrated circuits
MCPs Multi-chip integrated circuits (Multi-chip packages)
MEMS Micro-electro-mechanical systems
MFN Most favored nation
MRI Magnetic resonance imaging
NAICS North American Industrial Classification System
NAFTA North American Free Trade Agreement
NEMA National Electrical Manufacturers Association

iii
Acronyms—Continued

NESOI Not elsewhere specified or included
OECD Organisation for Economic Co-operation and Development
PCA Printed circuit assembly
PCB Printed circuit board
PDA Personal digital assistant
PLCs Programmable logic controllers
PoP Package-on-package
POSA Point of sale activation
RILA Retail Industry Leaders Association
R&D Research and development
SIA Semiconductor Industry Association
SiC Silicon carbide
SiP System-in-package
SoC System-on-a-chip
WTO World Trade Organization
USB Universal serial bus

iv
Executive Summary

Signatories to the Information Technology Agreement (ITA), a plurilateral accord that
provides for the elimination of tariffs on specific information and communications
technology products, meet periodically to review developments relating to ITA
implementation matters, including whether the agreement should be expanded to cover
additional products. According to the World Trade Organization (WTO), ITA
participants represent over 96 percent of global trade in information technology products.
At the May 15, 2012, meeting of the WTO ITA Committee, ITA participants agreed to
expand product coverage and subsequently generated a consolidated draft product list for
consideration by participating countries. Negotiations are ongoing, and a series of
meetings are planned for June 2013 to finalize a revised product list.

Following the WTO ITA Committee meeting, the United States Trade Representative
(USTR) asked the U.S. International Trade Commission (Commission or USITC) to
provide advice and information on the draft list of products for ITA expansion, to be
delivered in two reports. The USITC’s first report, which was delivered to the USTR on
October 24, 2012, indicated the uses of each of the products on the list for both
information and communications technology (ICT) and non-ICT purposes. It also
identified the products that U.S. industry and other interested parties view as import-
sensitive. In this second report, the USITC identifies: (1) tariffs in major markets;
(2) major producing countries; (3) leading U.S. export markets; and (4) leading sources
of U.S. imports for each product on the list. The report also examines the benefits of ITA
expansion to U.S. industry, and provides an overview of selected key subsectors,
including information on increased market access and export opportunities for products
in these subsectors.

Main Findings

The proposed product expansion list includes 439 product descriptions, which cover
130 product codes of the international Harmonized System (HS). The most frequently
occurring major U.S. export markets for products on the list were the European Union
(EU), Canada, Mexico, China, and Japan. These same countries were also the most
common major suppliers of U.S. imports of the products on the list. All of these
countries, except Mexico, are ITA members. Products on the list faced tariffs of between
zero and 35 percent in their respective major export markets. Further details on tariffs,
U.S. bilateral trade, and major markets are provided in chapter 2.

The elimination of tariffs on ICT goods through the original ITA is widely credited with
increasing global trade flows, promoting increased business and manufacturing
efficiency, and enhancing overall competitiveness. These benefits flow to many sectors
through increased productivity fueled by the adoption and integration of many ICT
products. Expanding the ITA would likely increase these benefits by extending duty-free
treatment to additional ICT products and innovations. Eliminating tariffs benefits
producers and exporters by increasing market access opportunities and revenues. Higher
revenues make U.S. companies more likely to invest in research and development (R&D)
to create new products and increase hiring. Additionally, lower-cost imports benefit
v
retailers and consumers, as well as firms downstream in the supply chain, diffusing
technology throughout the economy.

Based on the value of U.S. exports, the level of tariffs, and information submitted by U.S.
industry and interested parties to the investigation, Commission staff selected five
subsectors to illustrate the potential for increased market access opportunities for U.S.
firms as a result of ITA expansion (table ES.1). Extending ITA product coverage to
include these subsectors would likely increase U.S. export opportunities to ITA member
countries that are already leading destinations for such exports, especially in cases where
the importing country imposes moderate to high tariffs on these goods. Opportunities to
increase exports also exist in other ITA markets with relatively high tariffs, where current
U.S. exports are limited but growing.

TABLE ES.1 Selected subsectors: U.S. exports, major U.S. export markets, and tariffs, 2011
U.S. exports
Subsector name (billion $) Major U.S. export markets and tariffs (percent)
Medical devices 17.8 EU (Germany, Netherlands) - 0–2.1
Japan - 0
China - 2–7
Canada - 0
Relay and industrial control equipment 6.6 Mexico - 0–15
Canada - 0–2
EU (Germany, UK) - 0–3.2
China - 0–10
Optical media 2.7 Canada - 0–6
Mexico - 0–10
EU (Germany, Netherlands) - 0–3.5
Japan - 0
Loudspeakers and headsets 1.4 EU (Germany, UK) - 0–4.5
Mexico - 0–15
Canada - 0–6.5
Japan - 0
Multi-component integrated circuits (a) (a)
(MCOs)
Source: Compiled by USITC.

aMCOs can be classified under a wide range of HS subheadings, depending upon the end product that such MCOs
are used in. As a result, any list of HS codes would be speculative and would likely result in an overstatement of U.S.
export data. For a more detailed discussion of MCOs, refer to chapter 3.

vi