WTO - EU Tariffs Update: Next Steps

Posted 11/13/2019

Many of our members are anxious to know about the status of the EU retaliatory tariffs and whether or not additional products will be added to the originally published list, or whether there is any hope that these tariffs will be lifted. In brief, we hope to answer these questions with the information provided below.  Our thanks to our friends at DISCUS for helping us work through the weeds of the process!

The USTR is required by law to review and potentially amend the goods on the retaliation list 120 days after the tariffs are applied. Following that date, they review the list every 180 days. There are two exceptions to this requirement. The first is if the USTR finds that the other party is heading toward compliance with the WTO ruling. The second is if they hear from the company/industry affected (Boeing in this circumstance) stating that it is unnecessary to re-evaluate the list. This review process is legally referred to as "carousel." For this case, the first "carousel" must be completed by February 15, 2020, and the next two "carousels" will have to take place before July 4, 2020, and November 21, 2020.

As we understand it, the USTR has the freedom to decide whether they will "carousel" the list or whether to apply one of the two exceptions above. To be specific, the USTR could issue a Federal Register Notice (FRN) before February 15, 2020, which would provide an opportunity for stakeholders to submit comments. If the USTR decides to carousel and add goods to the tariff list, or potentially change the tariff percentage, the additional products are limited to those included on the April and July proposed lists which were agreed to during the case negotiations. New products could only be added by going through an extensive and time consuming process. Should you want a copy of these lists, please let us know.

There are many rumors circulating about what may or may not be added or taken off the list, but speculation surrounds the blended whisky, wine over 14%, sparkling wine, and wine in containers over 2 liters. Furthermore, tariffs could also be raised or lowered in these review periods. The "carousel" process has only happened in one other case, so perhaps it will not occur during this one. We are keeping in touch with all of the industry associations to get as much insight as possible on this issue and will keep all of our members posted on its progression.  

Keep in mind that the tariffs can be in place indefinitely—they are not tied to the 7.5 billion in damages—this is just the value of the goods permissible for retaliation. However, Robert Lighthizer, the United States trade Representative, has stated that the "goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.  When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted."

Thus, the uncertainty in the industry will continue, and, in the meantime, we are continuing to push for USMCA passage and CBMA extension, both of which are more likely than the removal of any EU tariffs in the short term. As always, please feel free to reach out to us if you have any questions or concerns.