US-EU Droop Massive Civil Plane Tariffs And Take Goal At China In Framework Addressing Non-Market Practices – Worldwide Regulation

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

21 June 2021

Husch Blackwell LLP

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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 

Boeing–

Airbus 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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