The US has filed a complaint with the World Trade Organisation regarding China's policy of levying VAT on imports...
Semiconductors manufactured by US firms are subject to a 17% tax when sold in China, said US trade representative Robert Zoellick.
The 17% tax is not levied against products made by Chinese semiconductor suppliers. This unfairly favours Chinese companies and violates WTO guidelines, Zoellick said.
"The US believed that China's existing VAT rebate policy not only discriminates against US products, but also distorts international investment in the integrated circuit sector."
Representatives for Intel and Texas Instruments referred inquiries to the Semiconductor Industry Association (SIA).
The SIA "strongly supports" the action taken by the OTR, said SIA president George Scalise.
"We welcome competition from China, but competition must take place on a fair playing field, unencumbered by market barriers that distort investment while discriminating against foreign-made products," Scalise said.
US firms exported about $2bn worth of integrated circuits to China in 2003, the OTR said. China's tax policy cost the purchasers of those chips an additional $344m.
The total market for semiconductors in China comes in at around $19bn, making it the third-largest market in the world.
The US had attempted to settle the matter through negotiations, but those talks were unsuccessful.
A 60-day consultation period now begins as a result of the complaint and, failing those consultations, the US can request that a panel debate the matter.
Tom Krazit writes for IDG News Service