Initiation of Investigation; Notice of Hearing and Request for Public Comments: Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice of initiation of investigation, hearing, and request for comments.

SUMMARY:

The United States Trade Representative (Trade Representative) is initiating an investigation to enforce U.S. rights in the World Trade Organization (WTO) dispute against the European Union (EU) and certain EU member States addressed to EU subsidies on large civil aircraft. The Trade Representative proposes determinations that the EU and certain member States have denied U.S. rights under the WTO Agreement and have failed to implement WTO Dispute Settlement Body recommendations. The Trade Representative proposes to take action in the form of additional duties on products of the EU or certain member States, to be drawn from the preliminary list annexed to this Notice. The interagency Section 301 Committee is seeking public comments and will hold a public hearing in connection with the proposed determinations.

DATES:

To be assured of consideration, the following schedule applies:

May 6, 2019: Due date for submission of requests to appear at the public hearing and summary of testimony.

May 15, 2019: The Section 301 Committee will convene a public hearing in the Main Hearing Room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436 beginning at 9:30 a.m.

May 28, 2019: Due date for submission of written comments, including post-hearing rebuttal comments.

ADDRESSES:

You should submit written comments through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments in sections E and F below. The docket number is USTR-2019-0003. For issues with on-line submissions, please contact the Office of the United States Trade Representative (USTR) Section 301 line at (202) 395-5725.

FOR FURTHER INFORMATION CONTACT:

For questions about this investigation or proposed determinations, contact Megan Grimball, Assistant General Counsel, at (202) 395-5725. For questions on customs classification of products identified in the Annex to this Notice, contact Traderemedy@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION

A. Dispute Settlement Proceedings

On October 6, 2004, the United States requested WTO dispute settlement consultations with the European Communities (now the EU), France, Germany, Spain, and the United Kingdom (certain member States) concerning certain subsidies granted by the EU and certain member States to the EU large civil aircraft domestic industry, on the basis that the subsidies appeared to be inconsistent with their obligations under the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

Further information on this dispute —EC and Certain member States—Measures Affecting Trade in Large Civil Aircraft (DS316), including the original panel and appellate reports and the compliance panel and appellate reports adopted by the DSB, is publicly available on the WTO website, including at the following page: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm.

On May 31, 2005, the United States requested the establishment of a dispute settlement panel. USTR provided notice of the establishment of the panel and invited comments from the public concerning the issues raised in the dispute. See 70 FR 35496.

In May 2011, a WTO panel report, as amended by an Appellate Body report, confirmed that EU and certain member State subsidies on the manufacture of large civil aircraft breached the EU's obligations under the SCM Agreement. The Dispute Settlement Body (DSB) adopted the reports on June 1, 2011, and recommended that the EU and certain member States bring the WTO-inconsistent measures into compliance with WTO rules. The EU and certain member States had until December 1, 2011, to bring the measures into compliance.

On December 1, 2011, the EU asserted that it had implemented the DSB recommendations. The United States did not agree, and requested authorization from the DSB to impose countermeasures commensurate with the adverse effects of the WTO-inconsistent measures. The EU referred the matter to arbitration to assess the proper level of any countermeasures.

In early 2012, the United States and the EU entered into a procedural agreement pursuant to which the arbitration would be suspended until after WTO compliance panel and any appellate proceedings determined whether the EU had implemented the DSB recommendations. On May 28, 2018, the DSB adopted compliance panel and Appellate Body reports confirming that launch aid to the Airbus A380 and A350 XWB aircraft continued to cause WTO-inconsistent adverse effects to U.S. interests.

At the request of the United States, and in accordance with the procedural agreement, on July 13, 2018, the WTO Arbitrator resumed its work in determining the level of countermeasures to be authorized as a result of the WTO inconsistencies. USTR anticipates that the WTO Arbitrator will issue its report regarding the level of countermeasures in the summer of 2019.

B. Initiation of Investigation

Section 302(b) of the Trade Act of 1974, as amended, authorizes the Trade Representative to initiate an investigation to determine whether conduct is actionable under section 301 of the Trade Act. Actionable conduct under section 301(a) includes, inter alia, the denial of rights of the United States under any trade agreement.

In order to enforce U.S. WTO rights in connection with the Large Civil Aircraft dispute, the Trade Representative is initiating a section 301 investigation of the subsidies provided by the EU and certain member States on the manufacture of large civil aircraft. Prior to initiation, USTR consulted with the interagency Section 301 Committee and the appropriate advisory committee.

Section 303 of the Trade Act calls for the Trade Representative to request consultations with the foreign country subject to the investigation. USTR requested consultations with the EU and certain member States upon the initiation of the dispute settlement proceedings in October 2004. USTR again requested consultations with the EU and certain member States in April 2012, upon initiation of the WTO compliance proceeding. Neither set of consultations resolved the dispute. USTR remains open to discussing these matters with the EU and certain member States.

C. Proposed Determinations

The Trade Representative proposes to determine, in accordance with the outcome of the WTO dispute settlement proceedings, that the EU and certain member States have breached their WTO obligations by providing subsidies on the manufacture of large civil aircraft and by failing to withdraw the subsidies or remove their adverse effects. In particular, under section 301(a), section 304(a)(1)(A), and section 306(b)(2), the Trade Representative proposes to determine that the EU and certain member States have denied U.S. rights under the WTO Agreement, and in particular, under Articles 5 and 6.3 of the SCM Agreement, and have failed to comply with the DSB recommendations to bring the WTO-inconsistent subsidies into compliance with WTO obligations.

Upon determining that U.S. rights under a trade agreement are being denied, section 301(a) provides that the Trade Representative shall take all appropriate and feasible action authorized under section 301(c), subject to the specific direction, if any, of the President regarding such action, and all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take to enforce such rights. Pursuant to sections 301(a), 301(c), 304(a)(1)(B), and 306(b)(2), the Trade Representative proposes that appropriate action would include the imposition of additional ad valorem duties of up to 100 percent on products of the EU or certain member States, to be drawn from the preliminary list of HTS numbers in the attached Annex. In accordance with section 306(b)(2) of the Trade Act, the Annex includes reciprocal goods of the affected industry. The final list of products subject to increased duties will take into account the report of the Arbitrator on the appropriate level of countermeasures to be authorized by the WTO.

The Annex to this Notice contains a list of 317 tariff subheadings and 9 Harmonized Tariff Schedule statistical reporting numbers being considered for additional duties. The value of the list is approximately $21 billion in terms of the estimated import trade value for calendar year 2018. The products listed in Section 1 of the Annex are being considered for additional duties if they are the product of Germany, France, the United Kingdom, or Spain. The products listed in Section 2 of the Annex are being considered for additional duties if they are the product of any of the 28 member States of the EU.

D. Request for Public Comments

In accordance with sections 304(b) and 306(c), USTR invites comments from interested persons with respect to the proposed determination and proposed action. USTR invites comments with respect to any aspect of the proposed action, including:

• The specific products to be subject to increased duties, including whether products listed in the Annex should be retained or removed, or whether products not currently on the list should be added.
• The level of the increase, if any, in the rate of duty.
• The appropriate aggregate level of trade to be covered by additional duties.
• Whether increased duties on particular products might have an adverse effect upon U.S. stakeholders, including small businesses and consumers.

E. Hearing Participation

The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436 beginning at 9:30 a.m. on May 15, 2019. You must submit requests to appear at the hearing by May 6, 2019. The request to appear must include a summary of testimony, and may be accompanied by the full script of testimony you expect to give. Remarks at the hearing may be no longer than five minutes to allow time for questions from the Section 301 Committee.

All submissions must be in English and sent electronically via www.regulations.gov. To submit a request to appear at the hearing via www.regulations.gov,, enter docket number USTR-2019-0003. In the “type comment” field, include the name, address, email address, and telephone number of the person presenting the testimony. Attach testimony, and a pre-hearing submission if provided, by using the “upload file” field. USTR strongly prefers submissions in Adobe Acrobat (.pdf). The file name should include the name of the person who will be presenting the testimony. In addition, please submit a request to appear by email to 301aircraft@ustr.eop.gov. In the subject line of the email, please include the name of the person who will be presenting the testimony, followed by “Request to Appear”. Please also include the name, address, email address, and telephone number of the person who will be presenting testimony in the body of the email message.

F. Procedures for Written Submissions

All submissions must be in English and sent electronically via www.regulations.gov. To submit comments via www.regulations.gov,, enter docket number USTR-2019-0003 on the home page and click “search.” The site will provide a search results page listing all documents associated with this docket. Find a reference to this Notice and click on the link entitled “comment now!” For further information on using the www.regulations.gov website, please consult the resources provided on the website by clicking on “how to use regulations.gov” on the bottom of the home page. We will not accept hand-delivered submissions.

The www.regulations.gov website allows users to submit comments by filling in a “type comment” field or by attaching a document using an “upload file” field. USTR prefers that you submit comments in an attached document. If you attach a document, it is sufficient to type “see attached” in the “type comment” field. USTR strongly prefers submissions in Adobe Acrobat (.pdf). If you use an application other than Adobe Acrobat (or Word (.doc)), please indicate the name of the application in the “type comment” field.

File names should reflect the name of the person or entity submitting the comments. Please do not attach separate cover letters to electronic submissions; rather, include any information that might appear in a cover letter in the comments themselves. Similarly, to the extent possible, please include any exhibits, annexes, or other attachments in the same file as the comment itself, rather than submitting them as separate files.

For any comments submitted electronically containing business confidential information, the file name of the business confidential version should begin with the characters “BC”. Any page containing business confidential information must be clearly marked “BUSINESS CONFIDENTIAL” on the top of that page and the submission should clearly indicate, via brackets, highlighting, or other means, the specific information that is business confidential. If you request business confidential treatment, you must certify in writing that disclosure of the information would endanger trade secrets or profitability, and that the information would not customarily be released to the public. Filers of submissions containing business confidential information also must submit a public version of their comments. The file name of the public version should begin with the character “P”. The “BC” and “P” should be followed by the name of the person or entity submitting the comments or rebuttal comments. If these procedures are not sufficient to protect business confidential information or otherwise protect business interests, please contact the USTR Section 301 line at (202) 395-5725 to discuss whether alternative arrangements are possible.

USTR will post submissions in the docket for public inspection, except business confidential information. You can view submissions on the https://www.regulations.gov website by entering docket number USTR-2019-0003 in the search field on the home page.

Annex

Section 1— The products that are enumerated and described in Section 1 of this Annex are being considered for additional import duties if they are the product of any of the following four member States of the European Union: France, Germany, Spain or the United Kingdom.

Note: In general, products that are described in the 10-digit statistical reporting numbers of the Harmonized Tariff Schedule of the United States (HTS) that are listed in Section 1 of this Annex are covered by the proposed action. For purposes of statistical reporting numbers 8802.11.0030, 8802.11.0045, 8802.12.0040, 8802.40.0040, 8802.40.0060, and 8802.40.0070, the product descriptions that are contained in Section 1 of this Annex are provided for informational purposes only, and are not intended to delimit in any way the scope of the proposed action. However, for purposes of statistical reporting numbers 8803.20.0030, 8803.30.0030 and 8803.90.9030, the product descriptions define and limit the scope of the proposed action. Any questions regarding the scope of a particular HTS statistical reporting number should be referred to U.S. Customs and Border Protection. In the product descriptions, the abbreviation “nesoi” means “not elsewhere specified or included”.

Section 2— The products that are enumerated and described in Section 2 of this Annex are being considered for additional import duties if they are the product of any of the twenty-eight member States of the European Union.

Note: All products that are classified in the 8-digit subheadings of the HTS that are listed in Section 2 of this Annex are covered by the proposed action. The product descriptions that are contained in Section 2 of this Annex are provided for informational purposes only, and are not intended to delimit in any way the scope of the proposed action. Any questions regarding the scope of a particular HTS subheading should be referred to U.S. Customs and Border Protection. In the product descriptions, the abbreviation “nesoi” means “not elsewhere specified or included”.