I almost titled this post “Boeing Wins. Aviation Loses.” But I am not sure that Boeing even wins under this Agreement.
The United States and China have signed a new trade agreement. For most of the aviation industry, very little changes. Aircraft parts imported into the United States that were subject to the 25% duty associated with the section 301 tariff, continue to be subject to the 25% duty levied on parts from China.
China has agreed to place orders for additional manufactured goods. The list of manufactured goods includes complete aircraft, but does not include aircraft parts. The obligation can be met by merely placing orders. Thus China can meet its obligations under the new agreement by placing orders for aircraft for the first three years and then refusing delivery after the three year term of the agreement. So even though it looks like this could be a boon for Boeing, it might not be as beneficial as one might think. Furthermore, there is no agreement to purchase aircraft parts, and companies like Boeing sell a significant volume of parts.
The agreement does not appear to change the List One tariffs. The list one tariffs became effective on July 6, 2018 and placed an additional duty rate of 25% on $34 billion worth of goods from China. The list one goods include (but are not limited to):
- 40113000 (New pneumatic tires, of rubber, of a kind used on aircraft)
- 40121300 (Retreaded pneumatic tires, of rubber, of a kind used on aircraft)
- 84071000 (Spark-ignition reciprocating or rotary internal combustion piston engines for use in
aircraft) - 84091000 (Parts for internal combustion aircraft engines)
- 84111140 (Aircraft turbojets of a thrust not exceeding 25 kN)
- 84111240 (Aircraft turbojets of a thrust exceeding 25 kN)
- 84112140 (Aircraft turbopropellers of a power not exceeding 1,100 kW)
- 84112240 (Aircraft turbopropellers of a power exceeding 1,100 kW)
- 84118140 (Aircraft gas turbines other than turbojets or turbopropellers, of a power not
exceeding 5,000 kW) - 84118240 (Aircraft gas turbines other than turbojets or turbopropellers, of a power exceeding
5,000 kW) - 85030045 (Stators and rotors for electric generators for use on aircraft)
- 85030090 (Parts for electric generators suitable for use on aircraft)
- 85443000 (Insulated ignition wiring sets and other wiring sets of a kind used in vehicles, aircraft
or ships) - 88031000 (Parts of airplanes and other aircraft, propellers and rotors and parts thereof)
- 88032000 (Parts of airplanes and other aircraft, undercarriages and parts thereof)
-
88033000 (Parts of airplanes and helicopters, not elsewhere specified or included)
As a condition of the agreement, the United States apparently agreed to cut certain (non-aviation) tariffs from a 15% duty to a 7.5% duty. The USTR Fact Sheet acknowledges that “The United States has agreed to modify its Section 301 tariff actions in a significant way.” These alleged modifications/reductions in duty rates are not part of the written agreement between China and the US, that has been released, so it is possible that US importers will continue to pay these duties.