Boeing’s Illogical Attempt to Impose Import Taxes on Planes Made in the United States

12/04/2017 02:10 pm ET
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In recent public statements and filings with the U.S. government, Boeing has taken the very unusual position that airplanes made in the United States should be subject to import taxes. Boeing is resorting to this illogical argument because it was caught off guard by Bombardier’s decision to join with Airbus and make Bombardier’s new C Series aircraft at Airbus’s facility in Alabama. Bombardier estimates that this project will create more than 2,000 U.S. jobs and generate more $300 million in new investment in United States.

Earlier this year, Boeing petitioned the U.S. government to impose import taxes on the Canadian-made C Series. It argued that Bombardier was violating U.S. trade laws and threatening manufacturing jobs for American workers by selling the planes cheaply to U.S. airlines with financial backing from the Canadian government. Many commentators quickly pointed out that Boeing was accusing Bombardier of the exact tactics it practices – where by Boeing receives billions in support from the U.S. government and aggressive discounts.

Bombardier upended Boeing’s strategy by announcing a partnership with Airbus and the decision to make the C Series in Alabama. Rather than conceding that the trade laws worked as intended by prompting a foreign manufacturer to bring manufacturing to the United States, Boeing inexplicably decided to double down and argue that import taxes should apply to planes made in Alabama.

After the Bombardier-Airbus announcement, Boeing’s general counsel said import taxes would “have to be paid on any imported C-Series airplane or part.” In a recent filing in the trade cases, Boeing argued that the import taxes would apply to “sections of [the] aircraft imported for assembly in the United States.” Boeing is wrong, and this strategy will fail because Boeing brought trade cases about imported aircraft, not trade cases about imported aircraft parts, components, or sections.

Boeing, as the petitioner, was required to specify the technical scope of the proceedings, and it proposed a scope defined by seat counts (100 to 150 seats) and flight distance capability (2,900 nautical miles). Boeing said that this scope would apply to aircraft “fully or partially assembled.” Boeing is now trying to cram an entirely new proceeding into the phrase “partially assembled,” but the facts and the law are not on its side.

A partially assembled aircraft must still be an aircraft. In this context, a partially assembled aircraft might be a plane that lacks passenger seats, a lavatory, or galley equipment. Conversely, a wing, an engine, or a cockpit does not constitute an aircraft.

Tellingly, in Boeing’s petition, the company identified the tariff classifications that were relevant to the cases, and it identified only the tariff provision for aircraft. Aircraft parts and components are imported under entirely different tariff classifications that appear nowhere in Boeing’s petition. Indeed, the terms “components,” “parts,” and “sections” appear nowhere in the petition’s discussion of import taxes. Boeing, of course, is a huge importer of aircraft components, including from Canada, so import taxes on parts would harm Boeing as well.

Boeing might have a valid argument if Bombardier and Airbus were not building a full C Series assembly facility in Alabama. The trade laws have provisions designed to prevent circumvention of import taxes by sham facilities that conduct only “minor or insignificant” U.S. manufacturing. Unfortunately for Boeing, it conceded early in the case that an Airbus A319 made at the Alabama facility would constitute U.S. manufacturing. Airbus and Bombardier have said they will take the same approach with the C Series manufactured in Alabama.

Boeing’s attempt to impose import taxes on items made in the United States also has significant political problems. Boeing is arguing against the creation of U.S. aerospace jobs in Alabama, placing itself on the wrong side of the Trump Administration’s goals of creating U.S. jobs and expanding U.S. manufacturing. More fundamentally, Boeing is taking the absurd position that the trade laws, which were designed to promote U.S. manufacturing, should instead be used to punish U.S. industry with heavy tariffs.

Boeing’s CEO, Dennis Muilenburg, recently bragged that the company is “oversold on our production line capacity.” The company should focus on its own successes instead of trying to stifle investment and jobs in Alabama. Meanwhile, the U.S. government should welcome the investment by Airbus and Bombardier in the United States aerospace industry and the creation of new U.S. jobs in Alabama.

Steve Pociask is president and CEO of the American Consumer Institute, Center for Citizen Research, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow me @ConsumerPal.

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