The Workshop is another important step to improve transparency and mutual understanding of the different support programmes of GAMS Members

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19th Government/Authorities Meeting on Semiconductors Chairman's Summary

Chiba, Japan, October 18, 2018

1. The Government/Authorities Meeting on Semiconductors (GAMS) took place on October 18, 2018 in Chiba, Japan, chaired by Japan and attended by all Members.

2. Based on the report of the World Semiconductor Council (WSC) meeting and its recommendations, GAMS discussed a wide range of issues impacting the global semiconductor industry including the importance of free and open markets, worldwide customs, transducers, and MCPs, ITA implementation, policies related to encryption, regional support programmes, effective protection of intellectual property rights, fighting the proliferation of semiconductor counterfeiting, cooperative approaches in protecting the global environment, conflict minerals, growth initiatives and other issues of interest to the worldwide semiconductor industry.

3. GAMS congratulates Japan as Chair for hosting a successful 2018 GAMS Workshop on Regional Support Programs held on October 16, 2018, and appreciates the contributions of GAMS representatives, regional support programs specialists, and industry experts to advance the exploration of this important topic. The Workshop is another important step to improve transparency and mutual understanding of the different support programmes of GAMS Members. This is essential to maximize the opportunities for collaboration and to avoid harmful trade distortions. GAMS underscores that these programmes should be guided by the principles of openness, transparency, inclusiveness, non-discrimination, and respect WTO rules. GAMS also recognizes that government action should be guided by market-based principles, and that competitiveness of companies and their products, not the intervention of governments and authorities, should be the principal driver of innovation, industrial success, and international trade. GAMS advocates transparency among governments and authorities and calls on GAMS Members to implement the relevant WTO notification commitments.

4. GAMS reaffirms the Regional Support Guidelines and Best Practices agreed in the Busan GAMS meeting in 2017 and supports their full implementation. In this regard, GAMS welcomes the WSC's self-assessment work with a view to enhancing mutual understanding and cooperation, and invites the WSC’s further work on the self-assessment surveys of respective regional support programs to deepen the information exchange including after JSTC and WSC meetings. GAMS acknowledges the usefulness of inter-sessional work to further increase transparency. GAMS notes that more work needs to be done to complete the information provided in certain self-assessment with high quality information by WSC and GAMS members. GAMS agrees to increase transparency through regular information sharing, analysis

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and assessment and to continue the review exercise by deepening the information exchange.

GAMS welcomed the first exchange of information starting with 5 programmes, and invites WSC to further develop information exchanges to move forward step by step to full implementation. To support these processes, GAMS agrees to intensify inter-sessional work, including after JSTC and WSC meetings. GAMS agrees to continue discussing related issues with a bearing on government support (such as investment, anti-monopoly rules, or IP issues) during regular inter-sessional work based on the WSC input, and to organize a follow-up Workshop in 2019.

5. GAMS congratulates Japan as Chair for hosting a successful 2018 GAMS Small Roundtable on WSC Encryption Principles held on October 17, 2018, and appreciates the contributions of GAMS representatives and industry experts to advance the exploration of this important topic.

With rapid technology development, such as IoT, medical devices, cloud computing, big data, connected cars, and connected homes, information technology is present in all areas of our daily life. GAMS emphasizes the need to review the global regulatory environment for products with encryption, based on the WSC Encryption Principles which emphasize market access, transparency, adoption of voluntary, consensus-based international standards, and non- discriminatory and open procedures and rules. GAMS furthermore reiterates the importance of the WSC Encryption Principles and encourages other governments to take them into account in order to avoid a negative impact on the industry's competitiveness and prevent unnecessary restrictions to trade, while making use of international consensus-based global security standards which can ensure the worldwide availability of the most robust and trusted security solutions and support the widespread diffusion of emerging technologies containing encryption.

6. GAMS underscores the importance of meaningful stakeholder participation whenever regulations, administrative procedures, or certification requirements on the importation or use of commercial encryption are created or revised. Also, GAMS agrees that consensus-based international standards adopted through open procedures are the optimal way to achieve rigorously scrutinized and broadly studied cryptographic technology and facilitate trade in line with the WSC principles.

7. GAMS welcomes the WSC's self-assessment work on latest developments in their regions with a view to enhancing mutual understanding and cooperation, and invites the WSC's further work on the self-assessment surveys of existing and draft regulatory practices in relation to the WSC Encryption Principles to deepen the information exchange including after JSTC and WSC meetings. GAMS acknowledge the usefulness of inter-sessional work to further increase transparency. GAMS notes that more work needs to be done to complete the information provided in certain self-assessment with high quality information by WSC and GAMS members. GAMS agrees to increase transparency through regular information sharing, analysis

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and assessment and to continue the review exercise by deepening the information exchange.

To support this process, GAMS agrees to intensify inter-sessional work, including after JSTC and WSC meetings. GAMS welcomes the WSC’s outreach work on the WSC Encryption Principles. GAMS also agrees to discuss related issues with a bearing on encryption (such as access to standardization bodies) based on the WSC input, and to organize an Encryption Workshop in 2019. GAMS welcomes efforts for enhanced WTO notification and underscores the need to fully respect such WTO obligations.

8. GAMS welcomes the continued implementation of the Information Technology Agreement (ITA) Expansion by all its Members. The GAMS call on all ITA-1 members to follow their example and adopt the ITA-expansion without delay. The GAMS also call on all Members to implement the ITA-expansion, in accordance with their WTO obligations. GAMS recall the Busan understanding regarding tariffs on products upon changes to the Harmonized System Nomenclature, and calls for all necessary clarification in writing by the relevant Members in this respect. GAMS agrees to jointly ask the WTO Secretariat to provide guidance on how the tariff levels should have been adjusted as a result of the changes in the HS nomenclature.

9. GAMS agreed to continue to collaborate in the ITA processes on non-tariff barriers and product coverage. GAMS also invites industry at future meetings to provide regular updates on advances in semiconductor technology with a view to maintaining duty-free treatment on future generations of semiconductors as technology evolves.

10. GAMS welcomes the significant progress made in the WCO for the incorporation of semiconductor-based transducers in HS 2022, and urges GAMS Members to support the WSC definition of semiconductor-based transducers. GAMS also agrees to accelerate work and support the clarification of the classification of products falling under the definition of MCPs based on the proposal submitted to the WCO HS 2022 review.

11. GAMS welcomes the WSC recommendations encouraging enhanced cooperation with customs authorities in order to strengthen the Authorized Economic Operator (AEO) programmes and enhance tangible trade facilitation and benefits. GAMS acknowledges the importance of the global harmonization of the different supply chain security programmes, and welcomes the acceleration of future work for their further alignment and mutual recognition.

GAMS takes note of the ongoing WSC work on articulating best practices with respect to AEO/Trusted Traders programs from GAMS regions and encourages the WSC to hold a separate discussion with customs authorities from GAMS regions on that basis.

12. GAMS agrees that the misappropriation of trade secrets is an important problem. GAMS notes that the WSC’s “Core Elements for Trade Secret Protection Legislation” includes a

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number of useful recommendations for national trade secret protection legislation, and any related pending legislation or legislative reforms or amendments. GAMS continues to encourage the WSC to collect incidents of trade secret misappropriation and report to GAMS.

GAMS will also exchange published legal texts in order to enhance transparency, and hold regular exchanges of information to enhance mutual understanding.

13. GAMS emphasizes the importance of exploiting all avenues to improve patent quality. In this respect, GAMS welcomes the continuation and deepening of cooperation amongst Patent Offices through IP5 (US, EU, Japan, Korea and China) and other channels, and supports the cooperation between the WSC and WIPO on patent quality. GAMS commends the WSC's work aimed at improving patent quality and encourages the WSC to hold a separate discussion with Patent Offices from GAMS regions on the basis of the ''WSC Recommendations to Patent Offices for Improving Patent Quality''.

14. GAMS acknowledges the impact and complexity of abusive patent litigation, notes a number of recommended best practices put forward by the WSC engages to closely monitor developments among GAMS members including continued exchanges with and input from the WSC, and stresses that it is of the utmost importance to maintain/develop high quality patents, not least as this is the most efficient way to limit a proliferation of downstream litigations.

15. GAMS reconfirms its commitment to fighting semiconductor counterfeiting, a global issue of increasing sophistication that impacts consumer health and safety. GAMS welcomes the WSC’s continued commitment to work with GAMS Members on anti-counterfeiting work activities, as well as additional initiatives such as those undertaken within the WSC’s Anti- Counterfeiting Task Force. GAMS reaffirms its commitment to work with their customs and law enforcement authorities agencies to intensify the implementation of semiconductor anti- counterfeiting enforcement measures, including information-sharing activities. GAMS also noted the WSC’s recommendation to continue to implement appropriate measures (including at domestic, bilateral and multilateral levels) in coordination with industry to stop counterfeits at the borders and appropriately prosecute those who make and distribute counterfeits, and invites reports at the next GAMS meeting. GAMS encourages the WSC to develop additional ideas for collaboration with customs administrations, making full use of the possibilities for follow up actions in cases of possible infringement irrespective of the value of transactions.

16. With respect to environment, safety and health issues, GAMS welcomes WSC’s commitment to transition away from the use of PFOA and PFOA related substances. GAMS appreciates the ongoing work by the industry to reduce emissions of potent and persistent greenhouse gases and urges the WSC to provide transparent and objective reporting to stakeholders in particular by making independently verified data publicly available on the WSC

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website.

17. Recognizing the importance of addressing the issue of conflict minerals (tin, tantalum, tungsten, and gold) and acknowledging the substantial effort already made by industry, GAMS commends the work of governments and authorities who have established mandatory due diligence schemes for key operators in the minerals supply chain, based on OECD guidance, and encourages the establishment of additional measures promoting transparency and reporting throughout the supply chain. GAMS also notes that the WSC has updated its conflict-free supply chain policy to cover all conflict-affected and high-risk areas.

18. GAMS agrees to work together to maintain the effectiveness of existing WTO disciplines, as well as to reform the WTO to help it meet new challenges.

19. GAMS also discussed additional topics of the WSC interest, including regulatory restrictions on certain chemicals and the WSC growth initiatives.

20. GAMS appreciates the WSC's comprehensive work and further suggests that it streamlines the topics for discussion at GAMS in future years to better prioritize work and ensure that key issues are effectively addressed. This is without prejudice to the continuation of comprehensive work in the WSC.

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