Yesterday, the Trump Administration announced that it will grant export licenses to NVIDIA to ship its advanced H200 chip to China, with the government collecting 25% of sales. Similar licenses will be issued to AMD and Intel.
Reuters reports that a White House official has stated that tax will be collected as an import tax from Taiwain, where the chips are made, to the United States, where U.S. officials will conduct a security review before exporting them to China. The White House has not further clarified how this tax will be collected, including under what authority the President will impose the tariff. But based on what we know so far, the 25% tax is likely illegal.
1. 18 U.S.C. § 4815(c) bars the Bureau of Industry and Security (BIS) from charging any fee “in connection with the submission, processing, or consideration” of any export license application. If BIS grants these export licenses on the condition that 25% of the proceeds be paid to the government, BIS would be acting outside its statutory authority.
2. In addition, the 25% “fee” would be an unconstitutional tax. Under National Cable Television Association v. United States, 415 U.S. 336 (1974), the executive can’t charge fees in order to raise revenue because that infringes on Congress’s exclusive taxing authority. Trump’s statement that the 25% tax would “benefit American taxpayers” and the tax’s ad valorem structure confirm that the 25% tax is meant to raise revenue, and is therefore unconstitutional.
3. The Supreme Court has made clear that the Constitution’s Export Clause prohibits governments from taxing goods “by reason or because of their exportation or intended exportation,” United States v. Int’l Bus. Machines Corp., 517 U.S. 843, 847 (1996). It doesn’t matter if the tax is called a “tariff” or when it is technically levied, if the reason behind the tax is their eventual export to China – which Trump has made clear it is – then the 25% tax violates the Export Clause.
4. As noted, the White House has not clarified under what authority Trump is levying this tariff. If it’s under Section 232 of the Trade Expansion Act, Trump lacks the authority to impose the tariff until the Commerce Department conducts a formal investigation and issues a report with its findings on how importing H200s affects national security. There’s a Section 232 investigation on semiconductor imports pending right now, but that investigation is not yet complete. Also, it is unclear how the government will explain why tariffing imported H200s is necessary to national security when they are only being imported to then be exported to China.
5. Trump may also invoke IEEPA to support the 25% tax, but courts have significantly curbed his authority to unilaterally impose tariffs under the statute, with the issue currently before the Supreme Court. He has not articulated what national emergency justifies the 25% tariff.
LASST will continue to watch the Trump Administration’s policies and practices on export controls for AI chips.