90 Day Tariff Pause – What Does It REALLY Mean?

April 10, 2025 by Leave a comment

Yesterday, the President announced 90-day pause on tariffs. But there are still tariffs that we will have to pay. The original announcement on social media has been fleshed out with more formal language in the form of an executive order.

Products of Anywhere BUT Canada, China or Mexico

The announced 10% baseline tariff will still apply to all imports. The executive order is merely deferring for 90 days the higher, temporary country-based, rates that exceed 10%. These higher rates were originally published in Annex I of the earlier executive order.

So this means for most aircraft parts produced in most of the world, the import tariff will be 10% plus whatever the baseline tariff was (the baseline, or “applicable” tariff will often be zero under the Agreement on Trade in Civil Aircraft and General Note 6 of the HTSUS).

The 90-day pause applies through midnight on July 8, 2025. The higher tariffs from Annex I will apply staring July 9, unless other intervening rules are published.

China

China is a different story. The tariff on goods of China will be increased to 125% for goods entered on or after April 10 (today) under sub-heading 9903.01.63. This will be in addition to a 20% tariff under sub-heading 9903.01.24 and the 25% tariff (under sub-heading 9903.88.01) that was applied to certain aircraft parts and other headings in 2018. This will apply to goods produced in China. If you send non-Chinese goods to China for MRO work, then the value added (typically, the invoice price for the MRO work) will be subject to an import duty. The maintenance work is considered to be a value-added product of China in this case.

Canada and Mexico

Products of Canada and Mexico continue to be subject to the 25% tariffs that were previously applied. The 90-day pause does not appear to apply to them. For many aircraft parts, you can use the USMCA provisions to avoid tariffs; be sure to carefully follow the country-of-origin rules.

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Country of Origin

April 5, 2025 by 1 Comment

With the new tariffs going into effect, it will be important to be able to identify the country of origin for your imports, so you can properly calculate the effective tariff(s).

First of all, “country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. If you are importing an article you bought from an air carrier in country “A” but it was actually manufactured wholly in country “B,” then it is a product of “B” – not “A” – for purposes of determining country of origin. The rules for this are found in the ‘country-of-origin-marking-requirements’ in 19 C.F.R. Part 134.

If the goods are subject to further work or if material is added to the goods in another country, then this must be a “substantial transformation” in order to render such other country the “country of origin.”

Example: Imagine that you have aircraft parts produced in the U.S., the UK and Japan. The parts are imported into France where they are assembled into an aircraft. The assembly into an aircraft in France is a complex assembly operation that is typically considered to be transformative. That means that the complete aircraft is a product of France in this case.

Once parts have been transformed because of a complex assembly operation, Customs has confirmed that they retain the country-of-origin upon disassembly. Thus, parts that were made in the U.S. but transformed into products of France when assembled into an aircraft will continue to be products of France even after they are removed from the aircraft.

There is case law suggesting that country of origin can sometimes shift: the connection to the country where an article was built may be broken due to the extended period of time that the article was in use in another country. Ashdown, U.S.A. Inc. v. United States, 696 F. Supp. 661 (CIT 1988). However, Customs has confirmed that this principle applies “primarily in instances where the country of origin of used articles cannot be determined.” With aviation products, we typically have adequate records to identify the country of origin so use for a long time in some other country typically does not change the country of origin.

There are special rules for products of Canada or Mexico. These goods are subject to the USMCA, and subject to the country-of-origin rules set forth in 19 C.F.R. Part 102. The USMCA rules allow for ‘foreign’ constituents that come from the US, Canada or Mexico, and they also allow for a certain percentage of other foreign materials without upsetting the proposition that the goods are a product of the US, Canada or Mexico.

The USMCA country-of-origin rules set forth in 19 C.F.R. Part 102 also apply to certain other free trade agreements, like the U.S. trade agreements with Bahrain and Morocco.

One important USMCA country-of-origin rule is that for products under heading 8807 (which applies to aircraft parts that cannot be identified more specifically under another tariff heading), constituent sub-components will become subject to the same country-of-origin as the complete assembly (they undergo a transformation) if their base tariff sub-heading changes. So, Chapter 73 fasteners can be transformed and change their country of origin when they are assembled into a new USMCA product.

Typically, US goods are not subject to a duty when they re-enter the United States. But they can be subject to a duty when they are “advanced in value” abroad. The duty in that case applies to the foreign advancement in value. If a US-produced aircraft part is repaired in a foreign country, but the advancement does not transform the aircraft part into something wholly different, then when the part returns to the U.S., the duty would be paid based on the value of the repair (typically, invoice price for the repair) so that the original U.S. value would not be considered as part of this equation.

Example: if a U.S. good is sent to Canada for repair, and then returned to the U.S., the value of the repair will be subject to the applicable import duty under HTSUS subheading 9802.00.50. The repair will be a product of Canada (but not a good of Canada that might be subject to the USMCA). The amount of the import duty applied to the value of the repair will be 25% (under the current tariff for products of Canada, subheading 9903.01.10).

Note that the application of this rule to complete aircraft may be different! Normally, aircraft are subject to the same tariff rules as vessels. Under the U.S. Code, the tariff rules that previously applied a duty to repairs performed on aircraft were changed by section 601 of the Trade Agreements Act of 1979. That exempted aircraft from the duties previously applicable to them (the exemption appears in the vessel rules because of the norm that vessel rules typically apply). The Customs and Border Protection has held that “U.S.-registered commercial aircraft that are repaired or overhauled foreign are not required to make formal entry and pay duty on repairs or overhaul when returning to the United States.”

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(1) Tariff Update (2) Advice for Products of Canada and/or Mexico (3) Advice For Non-US Exporters

April 3, 2025 by 1 Comment

This evening we have guidance for you about tariffs:

  • An update on the latest tariffs
  • Guidance on using the USMCA to avoid certain tariffs on goods originating in Canada and Mexico
  • Guidance for non-US exporters who want to mitigate the impact of U.S. tariffs

Update on New Tariffs

I am getting a lot of questions about the latest round of tariffs and how they will affect aircraft parts that are the products of non-US countries and are imported into the United States. As of this evening, the United States has not yet filed the new tariff documents with the Federal Register. In some cases these filings can differ in significant ways from the descriptions found in the executive orders, so it is important to wait to read these documents before we can give any compliance advice. It is unfortunate that the short time-frame for implementation (between Executive Order and implementation date) lately has meant that the tariffs may not be published until after they become effective.

An example of the sort of things that are contained in the tariff details includes the USMCA provision that we talk about in the next section.

We will watch for the advance copies and get you information on the latest round of tariffs as soon as possible.

Products of Mexico and/or Canada

Products of Mexico and Canada are currently subject to 25% duties under the applicable Chapter 99 tariffs. We wrote about this in a previous blog post. One potential way to mitigate this is to import goods under the USMCA provisions. The USMCA applies to “goods originating in the territory of a USMCA country.” This includes goods that are 100% a product of the U.S. Canada or Mexico, but it also includes some goods that are mostly made of material from these jurisdictions. It also includes certain goods that are made from non-USMCA materials (‘non-originating goods’) according to rules that vary based on the tariff subheading of the imported good. The details of this exception are provided in General Note 11 to the HTSUS; this general note is 136 pages long, so I won’t attempt summarize it all, here, but I will note that aircraft parts imported under heading 8807 may be made from non-originating goods of any other (different) subheading and still have the potential to be classified as USMCA goods as long as they are “transformed” in a USMCA country. One reason for this is the process that makes them an aircraft part under heading 8807 is typically considered transformative.

You typically need to enter USMCA goods under the USMCA provisions of 9903.01.04 [Mexico] or 9903.01.14 [Canada] to avoid the 25% tariffs.

Special USMCA Note: Many aircraft parts are classified under other tariff headings, but the “aircraft parts” heading is 8807. Effective January 27, 2022, the primary tariff heading for aircraft parts changed from 8803 to 8807. The USMCA was originally signed in 2018 and became effective in 2020. This was before the change of tariff headings, so USMCA references 8803, instead of 8807. To find the 8807 reference in US law (as it applies to the USMCA) you need to start with 19 C.F.R. 102.11(a), which provides the rules for determining the country of origin of imported goods. That regulation incorporates 19 C.F.R. 102.20, which provides the up-to-date tariff rules including the rules for 8807 aircraft parts.  You can confirm that this rule is intended to be used to interpret the USMCA by looking at the scope clause found in 19 C.F.R. 102.0. 

One of the USMCA requirements in a certification of origin. You ought to consider working with the producer in Canada or Mexico – they may have a USMCA certificate of origin template already available but if they don’t then check out the ASA Webinar from last week for more details on what needs to be in that certificate. You can also find the nine elements of a certificate of origin listed in Annex 5-A to Chapter 5 of the USMCA. If the U.S. import from Canada or Mexico is 100% a product of Canada or Mexico then the certificate may be simple, but if a portion of the constituent components comes from outside of the U.S., Canada or Mexico then there are rules for whether it can be certified. The rules are too voluminous to repeat here but (as stated above) General Note 11 provides some useful guidance.

One final note: if you are sending goods to Canada or Mexico for repair, then the repair is considered an “advancement in value,” and the cost (or fair market value) of that advancement is subject to duty. This applies to U.S. goods. Examples:

  • If you send a US good to Canada and it is repaired there, then this is an “advancement in value” transaction whose value is subject to the 25% tariff on products of Canada. Dutiable value is typically going to be the invoiced amount for the repair. See Tariff Subheadings 9802.00.50 and 9903.01.10.
  • If you send a US good to Canada and it is repaired there on a warranty repair, then this is an “advancement in value” transaction. The value will be subject to the 25% tariff on products of Canada. Because there is typically no charge for a warranty repair, the value will be calculated based on the fair market value of the work performed. See Tariff Subheadings 9802.00.40 and 9903.01.10.

Guide for Non-US Exporters

For non-U.S. exporters watching the tariff news out of the United States, it can be frustrating to watch and think about how this could affect your own business. In effect, a tariff is like a tax on your goods that your customer in the U.S. must pay to the government. It effectively increases the cost to your customer (making your goods potentially less attractive) without putting any money into your pocket.

Working together, we can help to make sure that your importing customers don’t pay any more in impot duties than they need to. Here are some useful rules to remember:

Rule Number One: Tariffs apply to non-US goods and non-US “added value.” If you are selling Boeing parts that were made in the U.S. (and were not advanced in value outside the U.S.) to a U.S. customer, then the importer probably does not need to pay duty on those goods.

Rule Number Two: Communicate with your U.S. customer. Make sure that you are cooperating to make the right certifications and/or representations to minimize the effect of U.S. tariffs.

Rule Number Three: Try to identify strategies for minimizing duties associated with the tariffs. The USMCA strategy described above is just one way to use the tariff rules to reduce the potential duties that the importer needs to pay.

Rule Number Four: Be careful of the way that you classify your goods. There are special tariff codes for different situations. The USMCA provisions of 9903.01.04 [Mexico] and 9903.01.14 [Canada] are just two examples of tariff classifications that can help save your customer money. Also, make sure that you are accurately classifying goods (see our blog article on the subject). Misclassified goods run the risk of being held up in Customs.

The aviation industry is a global community. We will get through these tariffs, together.

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Tariffs DELAYED on Canadian and Mexican Goods

March 7, 2025 by Leave a comment

The President has issued two new executive orders providing some relief from tariffs on products of Canada and Mexico.

The essence of the two executive orders is that Canadian and/or Mexican goods that are subject to general note 11 to the Harmonized Tariff Schedule of the United States (HTSUS) may be entered under the duty-free provisions of that note. The note implements the trade agreement between the United States, Mexico, and Canada. This represents an alternative path to the one traditionally taken by aircraft parts importers, who often rely on the traditional zero-duty provisions that apply to many aircraft parts.

The good news is that many aircraft parts from these two jurisdictions are likely to be covered under this general note 11, so they can continue to enter duty-free until the expiration of this executive order. There is no stated expiration in either executive order; however the President has announced in social media that this forbearance shall only last until April 2, 2025.

The bad news is that there may be different documentation and analysis required to properly claim the duty-free treatment, so it may require importers to perform some additional due diligence and paperwork to support the claim of duty-free treatment.

In each case, the tariffs apply to products of Canada and Mexico, so aircraft parts that are products of these countries will be affected; and the dutiable value of maintenance that is performed in these two countries may also be affected.

As always, the implementation in the Federal Register could vary from the language of the executive order, so pay careful attention to the actual Federal Register publication implementing these executive orders.

Resources

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