Customs Duty: Customs duty on electronic transmissions will hit semiconductor design locally: Industry bodies

The moratorium expires in February-March this year. WTO members had agreed against imposing customs duties on electronic transmissions since 1998 and the moratorium has been periodically extended at successive ministerial conferences, which is the highest decision-making body of the 164-member organisation.

Ashok Chandak, president, India Electronics & Semiconductor Association (IESA), told ET, that the industry body has submitted a representation to the Indian government to not impose customs duties on electronic transmissions. IESA has over 300 electronic companies as its members, including 100 semiconductor companies.

“It’s a concern. All our design activities utilise data. Our member semiconductor companies have their offices in Europe, US, and Japan and in other countries. The design data exchange keeps happening. How can one tax that data exchange? We have been opposing this,” he said.

During chip design, data exchange happens between multiple locations. “If this exchange of design data files is taxed, how will the value be defined? Today, there’s no customs duty. There is no commercial market price defined,” he said.

Chandak cited examples of companies like Qualcomm, Intel, NXP, Texas Instruments, and Analog Devices whose R&D and captive design centres are based in India.

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“It is in the interest of the industry and the government to allow data files’ exchange between countries. Even automotive companies like Bosch, Harman, and Continental have design teams here. There’s no precedence for how customs duties on electronic transmissions can be imposed. This will become a cause for litigation,” he said.John Neuffer, president, Semiconductor Industry Association, a trade association representing the US semiconductor industry, told ET, that 20% of the global semiconductor design force is in India.

“India is very strong in semiconductor design. Just about every chip company has an office here. There’s a heavy US footprint here, mostly design and some R&D. We need to ensure seamless cross border data flows. Exposing data flows to tariffs will have a chilling effect on the semiconductor ecosystem here,” he said.

Dutch chip designer NXP Semiconductors India manager Hitesh Garg, who is in the executive council of IESA and a member of the Semiconductor Industry Association (SIA), said 35% of the company’s workforce focusses on R&D and is based in India.

“We should avoid imposing customs duties on electronic transmissions. In the past 25 years, we have developed a fantastic semiconductor design ecosystem. Imposing tariffs may look beneficial in the short term but in the long run, it may not be good for the ecosystem growth. This will increase the cost, which is prohibitive for us even as a consumer,” Garg said.

The moratorium expires in February-March this year. WTO members had agreed against imposing customs duties on electronic transmissions since 1998 and the moratorium has been periodically extended at successive ministerial conferences, which is the highest decision-making body of the 164-member organisation.

Ashok Chandak, president, India Electronics & Semiconductor Association (IESA), told ET, that the industry body has submitted a representation to the Indian government to not impose customs duties on electronic transmissions. IESA has over 300 electronic companies as its members, including 100 semiconductor companies.

“It’s a concern. All our design activities utilise data. Our member semiconductor companies have their offices in Europe, US, and Japan and in other countries. The design data exchange keeps happening. How can one tax that data exchange? We have been opposing this,” he said.

During chip design, data exchange happens between multiple locations. “If this exchange of design data files is taxed, how will the value be defined? Today, there’s no customs duty. There is no commercial market price defined,” he said.

Chandak cited examples of companies like Qualcomm, Intel, NXP, Texas Instruments, and Analog Devices whose R&D and captive design centres are based in India.

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“It is in the interest of the industry and the government to allow data files’ exchange between countries. Even automotive companies like Bosch, Harman, and Continental have design teams here. There’s no precedence for how customs duties on electronic transmissions can be imposed. This will become a cause for litigation,” he said.John Neuffer, president, Semiconductor Industry Association, a trade association representing the US semiconductor industry, told ET, that 20% of the global semiconductor design force is in India.

“India is very strong in semiconductor design. Just about every chip company has an office here. There’s a heavy US footprint here, mostly design and some R&D. We need to ensure seamless cross border data flows. Exposing data flows to tariffs will have a chilling effect on the semiconductor ecosystem here,” he said.

Dutch chip designer NXP Semiconductors India manager Hitesh Garg, who is in the executive council of IESA and a member of the Semiconductor Industry Association (SIA), said 35% of the company’s workforce focusses on R&D and is based in India.

“We should avoid imposing customs duties on electronic transmissions. In the past 25 years, we have developed a fantastic semiconductor design ecosystem. Imposing tariffs may look beneficial in the short term but in the long run, it may not be good for the ecosystem growth. This will increase the cost, which is prohibitive for us even as a consumer,” Garg said.