Notice of Determination and Action Pursuant to Section 301: Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice of determinations and action.

SUMMARY:

The U.S. Trade Representative has determined that the European Union (EU) and certain member States have denied U.S. rights under the World Trade Organization (WTO) Agreement and have failed to implement WTO Dispute Settlement Body recommendations concerning certain subsidies to the EU large civil aircraft industry. The U.S. Trade Representative has determined to take action in the form of additional duties on products of certain member States of the EU, as specified in Annex A to this notice.

DATES:

The additional duties set out in Annex A are applicable with respect to products that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on October 18, 2019.

FOR FURTHER INFORMATION CONTACT:

For questions about the determinations in this investigation, contact Assistant General Counsel Megan Grimball, (202) 395-5725, or Director for Europe Michael Rogers, at (202) 395-3320. For questions on customs classification of products identified in Annex A, contact Traderemedy@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

A. Proceedings in the Investigation

On April 12, 2019, the U.S. Trade Representative announced the initiation of an investigation to enforce U.S. rights in the WTO dispute against the EU and certain EU member States addressed to subsidies on large civil aircraft. See 84 FR 15028 (April 12 notice). The April 12 notice contains background information on the investigation and the dispute settlement proceedings, as well as the website where you can find the WTO reports: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm.

The April 12 notice solicited comments on a proposed determination that, inter alia, 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 Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the General Agreement on Tariffs and Trade 1994 (GATT 1994), and have failed to comply with the WTO Dispute Settlement Body (DSB) recommendations to bring the WTO-inconsistent subsidies into compliance with WTO obligations. The April 12 notice invited public comment on a proposed action in the form of an additional ad valorem duty of up to 100 percent on products of EU member States to be drawn from a list of 317 tariff subheadings and 9 statistical reporting numbers of the Harmonized Tariff Schedule of the United States (HTSUS) included in the annex to that notice.

The public comment process following the April 12 notice included an opportunity for the submission of written comments, and the opportunity to participate in a public hearing. The Office of the United States Trade Representative (USTR) received over 600 submissions, and held a 2 day public hearing where 47 witnesses provided testimony.

In response to these public comments, and upon further analysis, USTR published a notice inviting public comment on a second list of products also being considered for an additional ad valorem duty of up to 100 percent. See 84 FR 32248 (July 5, 2019) (July 5 notice). USTR received nearly 1,900 submissions in response to the July 5 notice, and held a hearing on August 5, 2019, where 31 witnesses provided testimony.

The public versions of submissions received in response to the April 12 and July 5 notices, as well as transcripts of both hearings, are available on www.regulations.gov under docket number USTR-2019-0003.

As stated in the April 12 and July 5 notices, any final list of products subject to additional tariffs would take into account the report of the WTO Arbitrator on the appropriate level of countermeasures authorized by the WTO. On October 2, 2019, the WTO Arbitrator issued a report that concluded that the appropriate level of countermeasures in response to the WTO-inconsistent launch-aid provided by the EU or certain member States to their large civil aircraft domestic industry is approximately $7.5 billion annually.

B. Determination of Whether U.S. Rights Under a Trade Agreement Are Being Denied

Based on the original panel and appellate reports, the compliance panel and appellate reports, the report of the WTO Arbitrator, and information obtained during the investigation, including public comments and the advice of the Section 301 Committee, the U.S. Trade Representative has determined, under sections 301(a), 304(a), and 306(b) of the Trade Act of 1974 (Trade Act) (19 U.S.C. 2411(a), 2414(a) and 2416(b)), that the rights of the United States under the GATT 1994 and the SCM Agreement, particularly Articles 5 and 6.3 of the SCM Agreement, are being denied; that subsidies provided by the EU and certain member States violate, or are inconsistent with, the provisions of these agreements; and that the EU has not satisfactorily implemented a recommendation of the WTO DSB. For these reasons, the U.S. Trade Representative has made an affirmative determination of actionability under sections 301(a), and 304(a)(1)(A) of the Trade Act.

C. Determination of Action

Upon making an affirmative determination that U.S. rights under a trade agreement are being denied, or that an act, policy, or practice of a foreign country violates, or is inconsistent with, the provisions of, a trade agreement, section 301(a) of the Trade Act provides that the U.S. 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 U.S. Trade Representative to take under section 301(a), to enforce such rights or to obtain the elimination of such act, policy, or practice.

Pursuant to sections 301(a), 301(c), 304(a)(1)(B), and 306(b) of the Trade Act (19 U.S.C. 2411(a), 2411(c), 2414(a)(1)(B), and 2416(b)), the U.S. Trade Representative has determined to impose additional duties on products of certain EU member States, as specified in Annex A to this notice. The annual trade value of the list of tariff subheadings subject to additional duties is approximately $7.5 billion, which is consistent with the WTO Arbitrator's finding on the appropriate level of countermeasures. Annex A identifies the products covered by the action, the rate of duty to be assessed, and the EU member States affected. The final list of products and rates of additional duty take into account the public comments and the testimony from the public hearings, the advice of advisory committees, and the advice of the Section 301 Committee. In accordance with section 306(b)(2)(F) of the Trade Act (19 U.S.C. 2416(b)(2)(F)), Annex A includes reciprocal goods of the affected industry. Annex B contains the same list of tariff subheadings, with unofficial descriptions of the types of products covered in each subheading.

In order to implement this determination, effective October 18, 2019, subchapter III of chapter 99 of the HTSUS is modified by Annex A of this notice. Products provided for in new HTSUS subheading 9903.89.05 will be subject to an additional ad valorem duty of 10 percent. Products provided for in new HTSUS subheadings 9903.89.10, 9903.89.13, 9903.89.16, 9903.89.19, 9903.89.22, 9903.89.25, 9903.89.28, 9903.89.31, 9903.89.34, 9903.89.37, 9903.89.40, 9903.89.43, 9903.89.46, and 9903.89.49, will be subject to an additional ad valorem duty of 25 percent.

The additional duties provided for in the new HTSUS subheadings established by Annex A apply in addition to all other applicable duties, fees, exactions, and charges.

Any product listed in Annex A, except any product that is eligible for admission under `domestic status' as defined in 19 CFR 146.43, which is subject to the additional duty imposed by this determination, and is admitted into a U.S. foreign trade zone on or after 12:01 a.m. eastern daylight time on October 18, 2019, only may be admitted as `privileged foreign status' as defined in 19 CFR 146.41. Such products will be subject upon entry for consumption to any ad valorem rates of duty or quantitative limitations related to the classification under the applicable HTSUS subheading.

The U.S. Trade Representative will continue to consider the action taken in this investigation. In determining whether future modifications may be appropriate, the U.S. Trade Representative will take into account the public comments and testimony previously provided in response to the April 12 and July 5 notices. USTR remains open to discussing matters related to this investigation with the EU and EU member States.