Duty-Free Treatment for Civil Aviation Products of Japan: May Be Returning

Today the White House issued an executive order describing the new tariff agreement with Japan.

The new executive order establishes a baseline 15% tariff on goods of Japan. But it appears that aircraft parts produced in Japan may be authorized for duty-free entry into the United States.

The new executive order appears to recognize the Agreement in Trade on Civil Aircraft (“ATCA”) as providing for duty-free treatment of civil aviation products from Japan. The language is complicated because it directs that “the tariffs imposed through the following Presidential actions and subsequent amendments to those actions shall no longer apply.” The clause lists four Presidential actions. The problem is that the new executive order is not described as a specific amendment to those four Presidential actions, although it cross-references them. This leaves the administration some room to decide that the ATCA doesn’t really exempt aircraft parts from the 15% duty on goods of Japan.

But it appears that the current intent of the Administration is to recognize the ATCA duty-free treatment of civil aircraft parts that are the product of Japan. If this is implemented as we expect, then Japan will join the United Kingdom as only the second jurisdiction in which the ATCA is allowed to once-again provide duty-free treatment to civil aircraft parts, overcoming the Chapter 99 tariffs. It will take a few days for this to get implemented in the HTSUS, and when it is then the implementation will clarify the impact on aircraft parts.

In addition, the White House executive order announced a $550 billion investment in the United States by Japan. The Japan Times reported that 1-2% of this will be direct investment and the remainder will be provided in the form of loans and loan guarantees in the United States.