On December 12, the Office of the United States Trade Representative (“USTR”) published in the Federal Register a notice proposing to impose tariffs of up to 100% ad valorem on a wide range of European products. If enacted, these proposed tariffs would escalate the U.S. response to the European Union’s (“E.U.”) subsidization of Airbus, which the World Trade Organization’s (“WTO”) Appellate Body found to violate WTO rules. USTR has already imposed duties of 10% and 25% – effective October 18, 2019 – on a variety of European goods in response to these subsidies. USTR is currently seeking comments on the December 12 proposal with respect to both product coverage and duty rates, which must be submitted January 13, 2020.
USTR’s proposal to impose additional duties on European products follows recent developments in the decades-old dispute between the United States and Europe at the WTO. In particular, since the imposition of 10% and 25% duties on $7.5 billion of European goods on October 18, which followed an arbitral award permitting the United States to retaliate up to $7.5 billion, a WTO compliance panel determined that the E.U. had not ceased providing WTO-inconsistent subsidies to Airbus. Citing the compliance panel’s report and the “lack of progress in efforts to resolve this dispute,” USTR announced that it was initiating a process to assess whether it should subject additional European products to duties, and also whether it should increase tariff rates on products covered under the original $7.5 billion action.
As noted above, USTR is currently accepting comments on various aspects of its proposed escalation of the retaliatory measures applicable to certain E.U. products. USTR is seeking comments on the inclusion or exclusion of particular products from the list proposed on December 12, as well as comments on the appropriate duty rate, between zero and 100%, that should be imposed on any merchandise newly covered by this action. USTR is also seeking comments on the October 18 tariff action against $7.5 billion of European goods, particularly with respect to “whether specific products of specific E.U. member states should be removed from the list or should remain on the list, and if a product remains on the list, whether the current rate of additional duty should be increased to as high as 100 percent.” With regard to both the products covered in the October 18 action and the December 12 proposal, commenters may address whether maintaining or imposing additional duties on a specific product of one of more specific E.U. countries would: (i) be appropriate to enforce U.S. WTO rights or to obtain the elimination of the E.U.’s subsidies, and (ii) cause disproportionate economic harm to U.S. interests, including small or medium-size businesses and consumers.
The WTO arbitrator’s decision of October 2, 2019 granting the United States up to $7.5 billion in retaliation does not instruct the United States as to the specific manner in which it may implement its retaliatory measures. Accordingly, USTR may continue to raise tariffs and/or adjust the scope of goods covered, so long as the sum total of the value of the covered goods and the average duty imposed on those goods is less than or equal to $7.5 billion. This leaves USTR with significant discretion to combine tariff increases with adjustments to the scope of covered products as it revisits this issue during the coming weeks and months.