In mid-April, the US Department of Commerce imposed new \u00a0export restrictions\u00a0 on the NVIDIA H20 chip \u2014 a crucial component for AI\u00a0. Essentially, this move halted deliveries of this chip to Chinese clients, a significant blow to the company. Following weeks of negotiations, which notably included \u00a0multiple face-to-face discussions\u00a0 between Donald Trump and NVIDIA’s CEO Jensen Huang, an agreement was reached allowing NVIDIA to resume sales of its H20 chip in China.<\/p>\n
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However, this concession did not come without strings attached. NVIDIA is now required to pay the \u00a0US government 15%\u00a0 of the revenue earned in China from this chip and other GPU sales. Remarkably, AMD has found itself in a similar predicament. The Trump administration’s strategy has set a distinct precedent, effectively mandating that certain US companies share a portion of their foreign earnings with the government. While both NVIDIA and AMD have accepted these terms, it remains uncertain if this arrangement will withstand scrutiny in the long run, as the export clause appears to favor them more.<\/p>\n
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It is surprising that the \u00a0US administration\u00a0 has entered into this agreement with NVIDIA and AMD without thoroughly ensuring its legality. White House spokesperson Karoline Leavitt has expressed uncertainty regarding the agreement: \u201cAt this time this agreement remains with these two companies, but could expand in the future to other companies […] Legality and mechanics are still being resolved by the Department of Commerce.\u201d<\/p>\n
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The US government does not rule out a commission similar to that it wants to receive from NVIDIA and AMD to other companies<\/p>\n<\/p><\/div>\n<\/div>\n
As we just discussed, the US government is considering implementing a \u00a0similar commission\u00a0 on revenues for other companies as well. However, the legality of this agreement with NVIDIA and AMD remains unresolved. It is important to note that Article I, Section 9 of the \u00a0US Constitution\u00a0 states, \u201cNo tax or tariff will be imposed on articles exported from any state.\u201d This \u00a0export clause\u00a0 poses an obstacle to the proposed 15% commission on NVIDIA and AMD’s sales.<\/p>\n
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This article has significant implications. It can invalidate the proposed 15% fee for NVIDIA and AMD due to several reasons. Firstly, it can be classified as an \u00a0export tax\u00a0, which directly violates the constitutional clause. Additionally, the \u00a0Export Control Reform Law of 2018\u00a0 explicitly prohibits charging companies for export licenses. Finally, the measure is likely to be perceived as a tax enforced without Congressional approval, undermining any legitimacy it may hold.<\/p>\n
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Interestingly, both NVIDIA and AMD might lean on a historical precedent that could exempt them from paying the mandated commission. In \u00a01998\u00a0, the US Supreme Court ruled against a port maintenance tax that the government attempted to implement, which sought to tax the value of goods passing through US ports, including exports. This scenario bears similarities to the current situation we are examining. The coming weeks will determine whether the \u00a0Department of Commerce\u00a0 manages to solidify the legality of the proposed 15% commission on NVIDIA and AMD.<\/p>\n
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Image credits: Nvidia<\/a> | Gage Skidmore<\/a><\/p>\n