The office of the U.S. Trade Representative (USTR) has launched dispute settlement proceedings at the World Trade Organization over China’s exemption of value added tax (VAT) on domestically made commercial jets weighing less than 25 metric tons, including the new Comac ARJ-21, U.S. Trade Representative Michael Froman announced Tuesday. The U.S. claims that China’s 17 percent VAT on imported aircraft in that weight category constitutes a breach of WTO rules against taxation on the basis of national origin and that China’s failure to publish measures to exempt its own manufacturers from the tax violates transparency commitments the country made when it joined the WTO.
Scheduled for entry into service with China’s Chengdu Airlines in February, the ARJ-21 has drawn orders for 278 copies, mainly from Chinese carriers. Although no U.S.-built airliner competes directly with the ARJ-21, several U.S. suppliers make parts for airplanes that do, such as the Embraer E-Jets, Mitsubishi MRJ, Sukhoi Superjet and Bombardier CRJ series jets. The complaint also extends to general aviation, which, according Washington state Congressman Rick Larsen, supports 102,600 jobs in the U.S.
“China’s discriminatory, unfair tax policy is harmful to American workers and American businesses of all sizes in the critical aviation industry, from parts suppliers to manufacturers of small and medium-sized aircraft,” said Froman in a statement. “We’re also especially concerned that China attempted to hide this discriminatory tax policy. Transparency of laws and regulations impacting trade is a core WTO commitment that China must uphold, just as it expects other countries to do. For these reasons, the United States is filing a trade enforcement case to hold China accountable. The Obama Administration is committed to strong trade enforcement to ensure that our trading partners play by the rules so that American workers and businesses get all of the benefits we've negotiated under our trade agreements, supporting high-quality U.S. jobs and strengthening the middle class. We are taking this action today because American workers and producers deserve a fair shot to compete—and win.”