The United States accused China of tax discrimination against foreign-made aircraft on Tuesday in a complaint lodged with the World Trade Organization.

The United States launched the WTO dispute settlement process with a request for consultations with China “on its measures exempting certain aircraft produced in China from value-added tax while imposing those taxes on imported aircraft, affecting American-made aircraft and American parts producers who provide components to foreign-made aircraft,” the Obama administration said.

Photo: HKFP.

The top US trade envoy, US Trade Representative Michael Froman, said that China imposes a 17 percent value-added tax on imported aircraft, generally under 25 metric tons, while exempting from VAT comparable aircraft made in China.

US Trade Representative Michael Froman. Photo: Wikicommons.

In addition, he said, China has not published its tax exemptions for domestically produced aircraft.

These are two breaches of WTO rules: one prohibiting discriminatory taxation on the basis of national origin and the other transparency commitments.

“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 US aerospace sector employs nearly 500,000 people and is a major driver of US trade growth. Areospace manufacturers produce the largest trade surplus of any US manufacturing sector and account for more American jobs tied to exports than any other industry.

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