US-EU Suspend Large Civil Aircraft Tariffs And Take Aim At China In Framework Addressing Non-Market Practices

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The United States and European Union (“EU”) announced a “cooperative framework” to address and potentially resolve their long-running dispute over large civil aircraft subsidies, also commonly known as the BoeingAirbus or Large Civil Aircraft disputes.  Originally initiated in 2004 when the U.S. filed a case at the World Trade Organization (“WTO”) against the EU alleging illegal subsidies to Airbus SE, the Large Civil Aircraft dispute is the longest running dispute at the WTO.  As part of the new understanding, the U.S. and EU will suspend their respective WTO-authorized tariff countermeasures, which affected a total value of $11.5 billion in trade.  The U.S.-EU’s announcement is a major step towards potentially resolving the 17-year transatlantic dispute over aircraft subsidies.

As previously reported, the initial duties occurred in October 2019 when the U.S. imposed 15 percent tariffs under Section 301 of the Trade Expansion Act of 1962 on imports of civil aircraft and aircraft parts (under the HTSUS codes 8802.40.0013, 8802.40.0015, 8802.40.0017, 8802.40.0019, and 8802.40.0021).  A rate of 25 percent was adopted by the U.S. for all other listed EU-origin imports, covering agricultural products, spirits, and luxury goods among other products.  The EU retaliated in November 2020 with tariffs on approximately $4 billion worth of U.S. imports, with matching rates of 15 percent for civil aircraft and aircraft parts and 25 percent for all other U.S.-origin imports, covering agricultural products and industrial and finished goods.

As part of the Understanding on a cooperative framework for Large Civil Aircraft, the US and EU expressed their intention to:

  • Establish a Working Group on Large Civil Aircraft led by each side’s respective Minister responsible for Trade, which will meet every 6 months or on request,
  • Provide financing to large civil aircraft producers only on market terms,
  • Provide R&D funding through an open and transparent process and make the results of fully government funded R&D widely available, to the extent permitted by law,
  • Not to provide R&D funding as well as specific support (such as specific tax breaks) to their own producers that would harm the other side,
  • Collaborate on addressing non-market practices of third parties that may harm their respective large civil aircraft industries,
  • Continue to suspend application of their countermeasures, for a period of 5 years, avoiding billions of euros in duties for importers on both sides of the Atlantic.

According to statements made by U.S. Trade Representative (“USTR”) Katherine Tai, the tariffs would remain suspended as long as the terms of the agreement are upheld and while they work on addressing issues including outstanding subsidies already paid.

The U.S.-EU cooperative framework also includes an “Annex on Cooperation on Non-Market Economies” to “more effectively address the challenge posed by non-market economies” in the civil aircraft sector.  These cooperative steps include coordinating and exploring information sharing regarding cybersecurity and other concerns, screening of inward and outward investments, and “joint analysis of non-market practices,” especially China’s, in the large civil aircraft sector.  USTR Tai described the agreement as “a model we can build on for other challenges” related to “the threat from China’s non-market practices.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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