Japan Joins up with US in WTO Case on China Aircraft Tax of 17% on Imports

Domestic Industry Exempted, Discrimination Alleged

Japan has applied to join itself in proceedings against China that the U.S. initiated over alleged tax discrimination on imported airplanes, joining Canada and the European Union in asking to participate as an interested third party.

Japan’s Mitsubishi Heavy Industries Ltd., Kawasaki Heavy Industries Ltd. and Fuji Heavy Industries Ltd. are among major suppliers to Chicago-based aircraft manufacturer Boeing Co. The measures identified in the U.S. complaint, lodged Dec. 10, could adversely affect parts from Japan used in planes destined for China, Japan said in a request it filed Monday. 

The U.S. alleges China imposes a 17 percent value-added tax on imported small and medium-sized planes, while exempting similar aircraft made in China, such as Commercial Aircraft Corp. of China’s ARJ21 regional jet. The U.S. also claims China has failed to publish the measures establishing these exemptions.

‘Discriminatory Taxation’

“China’s measures appear to breach WTO rules prohibiting discriminatory taxation on the basis of national origin,” the office of U.S. Trade Representative Michael Froman said in a December statement on its website. “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.”

China regrets the U.S. decision and will handle dispute settlement proceedings according to WTO procedures, the Chinese Ministry of Commerce said in a statement last month.

Under WTO rules, parties to a trade dispute must attempt to resolve their differences within 60 days, failing which the U.S. can ask for the case to be heard by a panel.

This is the 11th case the Obama administration has brought against China at the WTO. The U.S. has won seven and favorably settled another, leaving three outstanding.