USTR to Review List of Additional Products Subject to Tariffs in Connection With Large Civil Aircraft Dispute With the EU

Faegre Drinker Biddle & Reath LLP

In response to an ongoing trade dispute between the United States and the European Union (EU), the Office of the U.S. Trade Representative (USTR) is considering adding additional products to the existing list of EU imported products currently subject to up to 100 percent special tariffs. USTR is also considering removing some products currently on the special tariff list. USTR is requesting public comments both on the addition and removal of products. Therefore, if your company is impacted by this, you may want to comment.

I. Background

The United States and the EU have been involved in dispute settlement proceedings before the World Trade Organization (WTO) since 2004, regarding subsidies for large civil aircraft. The United States accused the EU of providing numerous direct and indirect subsidies, including “launch aid,” to Airbus. The EU, in turn, accused the United States of providing numerous direct and indirect subsidies to Boeing. In 2006, the United States filed a case with the WTO, claiming that Airbus (jointly owned by Germany, France, Spain and the UK’s BAE Systems) received billions of dollars in subsidies that are illegal under the WTO Agreement on Subsidies and Countervailing Measures. In 2010, WTO ruled in favor of the United States regarding subsidies to Airbus. In 2016, the WTO issued a ruling that the EU governments not only failed to meet the deadline for compliance to remedy past subsidies, but had since provided additional illegal aid.

After the United States and the EU failed to reach agreement on a settlement, on October 3, 2019, the WTO approved U.S. duties on $7.5 billion of EU products imported into the United States.

II. Current Status

Certain products of current or former EU member states are currently subject to additional U.S. duties of 15 or 25 percent (Annex I duties). Those Annex I duties target products such as most Airbus jets, and various other products such as cheese, olives and certain whiskey. In April and July 2019, USTR had proposed additional duties of up to 100 percent on a second list of products (Annex II duties), but ultimately decided not to impose duties on those products. The Annex II duties would have applied to a wide variety of imported EU products, including additional aircraft and parts (including helicopters, airplane wings, fuselages), hams, various types of fish, crabs and other crustaceans, certain citrus fruit, olives and olive oils, pasta, fruit jams and purees, fruit and vegetable juices, wines, certain chemicals, handbags, certain textiles and carpets, sweaters, suits, bed linens, building stones, household ceramics and glassware, various ferroalloys, steel nails and tacks, copper products, table knives, motorcycles and parts, and clocks.

III. USTR Request for Comments

USTR is now considering an additional list of products of France, Germany, Spain and the United Kingdom that may be included on another list of products subject to additional duties of up to 100 percent (Annex III duties). The Annex III list contains 30 Harmonized Tariff Schedule subheadings, with an approximate value of $3.1 billion estimated import trade value based on calendar year 2018. The Annex III list includes various types of olives, decaffeinated coffee, malt, sugar confectionary, chocolate, bread and pastries, certain prepared or preserved potatoes, beer made from malt, gin, vodka, starch residues, certain pressing/stamping/punching tools, certain trucks, machinery for lifting/handling/loading, parts of hand tools, and electric instantaneous or storage water heaters and immersion heaters.

If USTR decides to modify the tariff actions in connection with the Large Civil Aircraft investigation, the final list of products subject to additional duties may be drawn from the list of products in Annexes I, II, or III. In other words, USTR could increase duties on Annex I products, or remove some items from the annex. USTR could also impose duties (up to 100 percent) on some or all of Annex II, and from some or all of Annex III.

USTR has requested written public comments on possible modification of the tariff actions. Regarding Annex I, USTR invites comments on whether specific products should remain on or be removed from the list, and if a product remains on the list, whether the current rate of additional duty should be increased to as a high as 100 percent. With respect to products listed in Annexes II and III, USTR invites comments on whether specific products of specific current or former EU member states should be included in the revised list of products subject to additional duties, and the rate of additional duty (up to 100) that should be imposed.

USTR will open an electronic docket on June 26 for the public to submit comments. The deadline for submitting comments is July 26, 2020. If the proposed potentially impacts your company, please let us know if you would like assistance with comments.

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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