He wants to charge a commission to Nvidia and AMD, and he doesn’t know if he can do it

In the middle of last April the US Department of Commerce imposed new restrictions to the export to China of the GPU for artificial intelligence (AI) H20 of Nvidia, which in practice caused this chip to stop reaching the Chinese clients of this company. After weeks of negotiations, and even, of several “face to face” Between Donald Trump and Jensen Huang, Nvidia has made the Department of Commerce allow him to re -give his Chinese clients its H20 chip.

However, this permission has not left for free: hereinafter will deliver to the US government 15% of income which will obtain in China for the sale of this and other GPU. AMD has run this same luck, so there is no doubt that this Trump administration strategy establishes an unpublished precedent by forcing some US companies to deliver to the State a percentage of their sales income in another country. Nvidia and AMD have accepted this condition, but it is perfectly possible that it does not prosper. The export clause favors them.

Not even the government is convinced that its strategy is legal

In the current scenario it is surprising that the US administration has reached this agreement with Nvidia and AMD without making sure before what is pursued is legal. But it is just what has happened. Karoline Leavitt, White House spokeswoman, has made this statement: “At 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.”

As we have just seen, the US government does not rule out charging a commission similar to that it wants to receive from Nvidia and AMD to other companies, but it still does not have the legality of this agreement yet. And it is normal that it does not have it closed. Article I, section 9 of the US Constitution Says the following: “No tax or tariff will be imposed on the articles exported from any state.” This is the export clause that I have mentioned a few lines above.

In practice, this article can cancel the collection of the commission of 15% to NVIDIA and AMD for three reasons. The first is that it is essentially an export tax, and, therefore, clearly violates this clause. In addition, the Export Control Reform Law 2018 specifically prohibits charging for export licenses. And finally, although it is not less important, this measure with all likelihood will be received as a tax by decree and without the approval of the Congress, which is the only power with the authority to impose taxes.

Nvidia and AMD, on the other hand, have in their favor a precedent that can exempt them from paying the commission that the Trump administration wants to charge. In 1998 The US Supreme Court annulled a tax of port maintenance with which the government intended to tax the value of the burden that passed through US ports, including exports. That scenario was not very different from the current one. We will see if the Department of Commerce finally manages to legally cement the commission of 15% to NVIDIA and AMD.

Image | Nvidia | Gage Skidmore

More information | CNBC

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