The White House has officially confirmed an unprecedented revenue-sharing agreement with semiconductor giants Nvidia and AMD, requiring both companies to surrender 15% of their China-based AI chip sales revenue to the U.S. government in exchange for export licenses. However, the deal's legal foundation remains uncertain, with the Department of Commerce still working to resolve constitutional and regulatory challenges that could derail the arrangement.
Revenue-Sharing Agreement Details:
- Companies involved: Nvidia and AMD initially, potential expansion to others
- Revenue percentage: 15% of China-based AI chip sales
- Exchange: Export licenses for AI chip sales to China
- Legal status: Still being developed by Department of Commerce
Constitutional Concerns Challenge Export Revenue Agreement
The revenue-sharing mechanism faces significant legal hurdles rooted in the U.S. Constitution's Export Clause. Article I, Section 9, explicitly states that No Tax or Duty shall be laid on Articles exported from any State, creating a potential constitutional barrier to the government's plan. This constitutional provision gained renewed relevance following a 1998 Supreme Court case where exporters successfully challenged a Harbor Maintenance Tax styled as a user fee, with the court ruling against the federal government's attempt to impose export-based charges.
Key Legal Obstacles:
- U.S. Constitution Article I, Section 9: Export Clause prohibits taxes on exported articles
- Export Controls Reform Act of 2018: 50 U.S.C. § 4815(c) prohibits fees for export license processing
- 1998 Supreme Court precedent: Ruled against Harbor Maintenance Tax on exports (0.125% cargo value fee)
Existing Federal Law May Prohibit License Fees
Beyond constitutional issues, current federal legislation appears to directly contradict the proposed arrangement. The Export Controls Reform Act of 2018, which provides the legal framework for controlling dual-use technology exports like advanced semiconductors, contains specific language prohibiting fees for export licenses. Under 50 U.S.C. § 4815(c), No fee may be charged in connection with the submission, processing, or consideration of any application for a license, raising questions about how the administration plans to implement the revenue-sharing requirement legally.
White House Acknowledges Implementation Challenges
White House spokesperson Karoline Leavitt acknowledged the complex legal landscape surrounding the deal during a recent press briefing. The legality of it, the mechanics of it, is still being ironed out by the Department of Commerce, Leavitt stated, emphasizing that detailed implementation plans remain under development. The spokesperson also indicated that the arrangement could potentially expand beyond Nvidia and AMD to include additional companies in the future, suggesting the administration views this as a template for broader export control policy.
Strategic Rationale Behind Controversial Agreement
The revenue-sharing deal represents the administration's attempt to balance competing priorities in U.S.-China technology relations. By allowing continued AI chip exports while extracting government revenue, the policy aims to maintain American companies' market presence in China while generating funds for federal coffers. The arrangement becomes particularly relevant given reports that Chinese companies like Huawei have developed comparable chip capabilities, potentially reducing the effectiveness of complete export bans while preserving market opportunities for U.S. manufacturers.
Comparison with Existing Export Fees:
- Arms exports: Fixed fees under Arms Export Control Act and International Traffic in Arms Regulation
- Semiconductor proposal: Percentage-based fees tied to sales volume
- Legal basis: Arms fees have specific statutory authorization, semiconductor fees lack clear legal foundation
Legal Challenges Expected Despite Government Determination
Despite the constitutional and statutory obstacles, the White House appears committed to pursuing the revenue-sharing model. Unlike existing arms export fees mandated under the Arms Export Control Act, which are fixed and structured, the proposed semiconductor arrangement would be percentage-based and tied to sales volume. Legal experts anticipate court challenges once the Department of Commerce finalizes implementation details, with potential opposition from state attorneys general citing executive overreach concerns. The ultimate success of this unprecedented export control mechanism will likely depend on how effectively the administration can navigate the complex legal framework governing international trade and constitutional limitations on export taxation.