Written by Jamie Rodgers, CEO of J.M. Rodgers Co., Inc.
While all energy has been rightly focused on the extensive ongoing trade war with China, a new front is opening- this time over the Atlantic. For years, a court case involving the WTO and rulings on if European companies illegally subsidized their airline industries have been working its way through international trade courts, but a ruling was recently made that will have a big impact on tariffs.
Back in 2006, the Bush administration first filed a complaint with the WTO that the EU was illegally subsidizing Airbus, the French aerospace giant, and was in violation of fair-trade rules that the WTO regulates. While it’s taken 13 years for the case to be litigated, this week it was announced that the ruling has been made by the judges that the EU had illegally subsidized Airbus and is granting permission for the USA to impose tariffs on European products in retribution.
In anticipation, the office of the US Trade Representative had prepared a list of products that could be subject to the imposition of up to 100% ad valorem duties. Many of these are big-ticket items of high value that make up European exports to the USA, including, of course, airplanes. The full determination of what and how much gets dutied has not yet been presented.
At the same time this had been going on, a countersuit filed by the EU that the USA had illegally subsidized Boeing had been working through the WTO. In May of 2019, the WTO ruled in favor of the EU and cleared the way for the bloc to begin imposing penalties or duties on American exports. Given the bilateral permission to impose duties given by the WTO along with the Trump administration’s preference for using tariffs, it’s very possible that this could turn into a full-blown trade war soon.
President Trump had previously expressed a desire to implement a 25% tariff on European automobiles, an idea that was shelved earlier this year to the great relief of many manufacturers. However, given permission by the WTO to implement some tariffs could very well change that. The WTO ruling puts some limits on what’s permissible for dollar amounts, but this could be a jumping-off point for the President to implement other tariffs if he chooses.
It’s not immediately clear if these duties would be eligible for duty drawback refunds. In principle, they would be more closely related to anti-dumping or countervailing duties, both of which are not eligible for refunds. At this time there isn’t anything but speculation, but we will be providing updates as soon as we have further advice from Customs.
If you’d like to discuss how these or other tariffs might affect your business or your eligibility for them to be refunded, please contact our VP of Sales Andrew Galloway at agalloway@jmrodgers.com or 973-726-5340.
