Latest news with #Section232
Gulf Today
2 days ago
- Business
- Gulf Today
Airbus seals VietJet deal as hopes rise at air show for tariff rollback
Airbus struck a deal with budget airline VietJet for up to 150 single-aisle jets at the Paris Airshow, where industry hopes for a return to tariff-free trade were given a boost by US Transport Secretary Sean Duffy. Duffy said he wanted civil aviation to return to a 1979 zero-tariff trade agreement, in one of the clearest signs yet that the Trump administration might favour such a move. However, Duffy added that while the White House was aware that the US is a net exporter in aerospace, it was also dealing with a complex tariff situation. 'Now, again, you look at what free trade has done for aviation. It's been remarkable for them. It's a great space of net exporters,' he said. 'And so the White House understands that, but if you go over there and you see the moving parts of what they're dealing with, it is pretty intense and it's a lot.' US President Donald Trump's sweeping 10% import tariffs are a headache for an industry already battling supply chain challenges and facing fresh turbulence from last week's deadly Air India crash and conflict in the Middle East. In early May, the US Commerce Department launched a 'Section 232' national security investigation into imports of commercial aircraft, jet engines and parts that could form the basis for even higher tariffs on such imports. Airlines, planemakers and several US trading partners have been lobbying Trump to restore the tariff-free regime under the 1979 agreement. On day two of the air show, European planemaker Airbus signed a provisional deal for VietJet to buy 100 A321neo planes, with the option to buy up to 50 more in future. Vietnam's largest private airline operates an all-Airbus fleet, apart from two Chinese-made regional jets. The airline has not to date taken delivery of any of the around 200 MAX planes it has ordered from Boeing. Airbus is the main supplier of jets to Vietnam, accounting for 86% of the planes currently operated by Vietnamese airlines. However, the export-dependent Southeast Asian country is under pressure from Washington to buy more US goods. VietJet Chairwoman Nguyen Thi Phuong Thao said the scale of the airline's orders was backed by plans to develop a major aviation hub in Vietnam, which Airbus says has seen its aviation market grow by 7.5% a year. A deal for 150 A321neos could be worth around $9.4 billion, according to estimated prices provided by Cirium Ascend. The agreement was the latest in a flurry of business announced by Airbus at the world's biggest aviation trade fair. AIRASIA FINALE US rival Boeing was having a subdued show and parking announcements as it focuses on the probe into last week's fatal crash of an Air India Boeing 787 and after it racked up huge deals during Trump's recent tour of the Middle East. Attention turned to another big Airbus customer, AirAsia, long associated with buzzy show finales and looking at buying 100 A220s, with Brazil's Embraer seeking to wrest away the deal after losing a key contest in Poland, delegates said. Airbus was also expected to reveal Egyptair as the airline behind a recent unidentified order for six more A350s. But its hopes of using the event as a showcase for its first significant deal with Royal Air Maroc faded after the airline postponed plans to announce a larger Boeing deal, delegates said. None of the companies involved in last-minute air show negotiations agreed to comment. Airlines have been battling the engine industry over long waiting times for repairs on the latest generation of engines in the busiest part of the market for workhorse narrow-body jets. Pratt & Whitney commercial engines head Rick Deurloo said durability was top priority and the number of aircraft out of service while waiting for engine repairs was stabilising. Rolls-Royce CEO Tufan Erginbilgic told reporters it was 'even more true' that the British jet engine maker wanted to re-enter the narrow-body market, preferably via a partnership. On the defence side, analysts are expecting a flurry of deals as European companies tap into a surge in arms spending. Leonardo CEO Roberto Cingolani said he saw advantages to new entrants joining an Italian-British-Japanese next-generation fighter jet programme, particularly in terms of technology, but added that it would be a decision for the governments involved. He said the addition of Saudi Arabia to the Global Combat Air Programme - something that has long been mooted - would open up a big market with great potential. Startup Riyadh Air has signed a deal with Rolls-Royce for 116 Trent XWB-97 engines that will power its Airbus large wide-body fleet, the Saudi airline said on Tuesday. The company said in a statement that the deal, which was signed at the Paris Airshow, was worth several billion dollars, without providing a specific figure. The engines will power 50 Airbus A350-1000 jets, Riyadh Air said, after the airline signed a deal on Monday to buy 25 of the jets with an option for 25 more. Riyadh Air is set to commence operations later this year and its fleet orders amount to 182 aircraft across three fleet types. Agencies
CNBC
2 days ago
- Business
- CNBC
'Tariff engineering' is making a comeback as businesses employ creative ways to skirt higher duties
Would you be bothered if your coat was officially classified as a windbreaker or a raincoat, or your shoes as slippers? Businesses do care though, as classifications under a preferred category can help them pay lower tariff rates. As U.S. President Donald Trump imposes duties on friends and foes alike, manufacturers are increasingly rethinking the classification of their products and resorting to "tariff engineering" to incur lower duties, several customs lawyers, supply chain and shipping experts told CNBC. Tariff engineering — a practice that precedes Trump — involves changing an item's materials, altering its dimensions or compositions so that the finished products can be justified to fit in a different "harmonized system code," legal experts said. Although most new tariffs added during Trump's second term are broad-based, the U.S. government has carved out exemptions for certain products, leaving doors open for companies to benefit through tariff engineering, trade lawyers pointed out. After Trump unveiled sweeping "reciprocal" tariffs in April, several overseas manufacturers moved to bundle steel and aluminum elements into their final products to qualify a lower 25% duty under Section 232, said David Forgue, a partner at Chicago law firm Barnes, Richardson & Colburn. Things, however, changed quickly in June as Trump jacked up tariffs on all steel, aluminum products and derivatives to 50%, except those from the U.K. "Now that the duties are reversed, we're now seeing companies remove those elements and ship them separately again," Forgue said. There is "nothing inherently illegal or even untoward about leveraging strategic design choices that result in creating different products that are subject to different tariff classification and duty rates," said John Foote, a customs lawyer at Kelley Drye & Warren in Washington D.C. "Tariff engineering is one of the few things you can do to try to get it right and reduce your duty liability." There are over 5,000 different product classification codes that U.S. customs authority uses while assessing tariffs. These tariff classifications were determined through decades of negotiations between governments and industry bodies, often varying by product category. Winnebago Industries, an American manufacturer of motorhomes, or recreational vehicle, said in its quarterly earnings call in March that it planned to "work with outside experts to develop and implement effective [tariff] mitigation strategies, including tariff engineering and deferrals." Aneel Salman, chair of economic security at Islamabad Policy Research Institute, described the act as "clever art of outsmarting customs," as importers and manufacturers tweak products "just enough" to qualify for lower duties. "I was talking to somebody recently and they were showing me their lapel pin," said Kelley Drye & Warren's Foote. The pin, tacked onto the person's suit, featured a "festive design" with pieces of cubic zirconia at the back, Foote said. The inclusion of cubic zirconia helped the company that manufactures those pins avert a 14% tariff, as the item no longer fell under festive article category but got classified as jewelry, Foote subsequently learnt. "The value attributable to the cubic zirconia was significant enough [and] it was a relatively easy manufacturing change," Foote said. The practice of tariff engineering can be traced back to 1882, when an importer coated sugar with molasses to avoid higher duties imposed on lighter-colored sugar. In a landmark ruling, the Supreme Court ruled the act perfectly legal: "so long as the goods are truly invoiced and freely and honestly exposed to the officers of customs for their examination, no fraud is committed." Since then, companies, big and small, have continued to play chess with the U.S. tariff classification system, with several household names successfully implementing strategic product tweaks to save on tariff costs. For instance, Columbia Sportswear has never been shy about its use of tariff engineering. "I have a whole team of people that work together with designers and developers and merchandisers and with customs, and to ensure that during the design process that we're considering the impact of tariffs," Jeff Tooze, the company's vice president of global customs and trade, told Marketplace during Trump's first term. Among its alterations, the company added small zippered pockets below the waist on women's shirts, allowing them to be exempted from higher duties under the U.S. customs rules. Similarly, footwear maker Converse adds fuzzy-felt fabric on the soles of its signature All Stars sneakers, rather than the typical full-rubber one, to be categorized as slippers rather than athletic shoes, helping it cut tariff drastically. Snuggies, the fluffy blanket with sleeves imported mainly from China, nearly halved its tariff costs by winning a lawsuit in 2017 classifying it as a blanket, not an item of clothing. Fast-moving consumer good and garments, apparel and footwear sectors can find it relatively easy to implement tariff engineering, said Andrew Wilson, supply chain strategist at consultancy Supplino Inc. For more sophisticated and "heavily-regulated" sectors such as automotive, aerospace, electronics and medical devices, "it's especially challenging ... because even minor changes may require extensive validation and approval," Wilson said. "You might be looking at another 12 to 24 months of testing, certification and validation in order to get that done," Wilson added, as it requires extensive collaboration across departments including design, engineering and legal team. Companies have to tread a fine between between redesigning their products and fraudulently misrepresenting product classifications. A case in point illustrating the challenges with tariff engineering is Ford Motor. The automaker had for years imported its Transit Connect van as a passenger van, then removed the second row seats to sell them as cargo vans. In doing so, Ford circumvented a hefty 25% tariff and only paid a 2.5% import duty. The U.S. Justice Department said in its ruling last year that Ford was "misclassifying cargo vans" and that the back-row seats "were never intended to be, and never were, used to carry passengers." "The article must be a 'commercial reality' at importation. The risk is that customs [may] find the changes to be "fraud or artifice," [that case] the tariff engineering may be rejected,' said Forgue. "In some cases changing certain things about a product doesn't change the essential character of what the good is," said Derek Scarbrough, founder of Global Logistical Connections. "If you add something to a shopping cart, it's still a shopping cart," he added. U.S. Customs and Border Control has developed a so-called "binding ruling" system where companies can obtain official determinations on product classifications and HTS code before importing. Adam Lees, an attorney at law firm Harris Sliwoski, who has helped clients prepare such ruling letter requests, described it as "a way for companies to get CBP's official blessing" before shipment. For businesses, even "small percentage savings can be meaningful," Lees stated, as volumes shipped could be substantial.
Yahoo
3 days ago
- Business
- Yahoo
US Transportation chief wants civil aviation to return to zero tariffs
By Joe Brock and David Shepardson PARIS/WASHINGTON (Reuters) -U.S. Transportation Secretary Sean Duffy said on Tuesday that he wanted civil aviation to return to a 1979 zero-tariff trade agreement but noted it is part of broader trade talks. Speaking at the Paris Airshow, Duffy said the White House was aware that the U.S. is a net exporter in aerospace, but added that it was dealing with a complicated tariff situation. Airlines, planemakers and several U.S. trading partners have been lobbying Trump to restore the tariff-free regime under the 1979 Civil Aircraft Agreement that has yielded an annual trade surplus of $75 billion for the U.S. industry. "You look at what free trade has done for aviation. It's been remarkable for them. It's a great space of net exporters. And so the White House understands that but if you go over there and you see the moving parts of what they're dealing with, it is pretty intense and it's a lot," Duffy said. "I think we should take aviation off the negotiating table by going back to '79 and that only helps us. And to take some tools away from our trading partners would be beneficial to us." U.S. President Donald Trump has imposed tariffs of 10% on nearly all airplane and parts imports, and in early May the Commerce Department launched a "Section 232" national security investigation into imports of commercial aircraft, jet engines and parts that could form the basis for even higher tariffs on such imports. Aerospace companies and many countries have urged Trump not to impose new tariffs. Trump's executive order on a trade deal with the United Kingdom signed Monday includes tariff free treatment of airplanes and parts. GE Aerospace CEO Larry Culp said the "U.S.-U.K. trade deal eliminating tariffs on the aerospace sector is a significant step forward in preserving the duty-free environment." He praised "the Trump Administration for recognizing the critical role aerospace plays in driving the U.S. economy and support this deal as a model for future trade agreements."
News18
3 days ago
- Business
- News18
Donald Trump Says Pharma Tariffs 'Coming Soon'; Indian Drug Stocks Fall Up To 4%
Last Updated: US Pharma Tariffs: Granules India becomes the top loser falling up to 4%, while Aurobindo, Natco and Lupic was down 3% each. US President Donald Trump on June 17 said tariffs on the pharmaceutical sector are 'coming soon". Following comments, which Trump made while speaking to reporters on board the Air Force One, India's pharma stocks declined up to 4%. The Nifty Pharma index declined as much as 2.5% following the Trump comments. Granules India became the top loser falling up to 4%, while Aurobindo, Natco and Lupic was down 3% each. This isn't the first warning — back in April, after imposing reciprocal tariffs on 60 countries (excluding pharma at the time), Trump had hinted that pharma tariffs would come in at 'never seen before" levels and were under active review. 'Pharma tariffs are going to come in at levels you haven't really seen before. We are looking at pharmaceuticals as a separate category. We will be announcing that sometime in the near future, and not too distant future. It's under review right now," Trump had said back in April. The US Commerce Department is currently investigating pharma imports under Section 232, which evaluates the impact of imports on national security. If such tariffs are imposed and companies are unable to pass on the cost, analysts at Citi estimate Indian firms with high exposure to the US generics market could see a 9%-12% one-time hit to their Ebitda.
RTÉ News
3 days ago
- Business
- RTÉ News
Airbus seals VietJet deal as hopes rise at Paris Air Show for end to tariffs
Airbus struck a deal with budget airline VietJet for up to 150 single-aisle jets at the Paris Airshow today, where industry hopes of a return to tariff-free trade were given a boost by US Transport Secretary Sean Duffy. Sean Duffy said he wanted civil aviation to return to a 1979 zero-tariff trade agreement, in one of the clearest signs yet that the Trump administration might favour such a move. However, Duffy added that while the White House was aware that the US is a net exporter in aerospace, it was also dealing with a complex tariff situation. US President Donald Trump's 10% tariffs on nearly all airplane and parts imports are a headache for an industry already battling supply chain challenges and facing fresh turbulence from last week's deadly Air India crash and conflict in the Middle East. In early May, the US Commerce Department launched a "Section 232" national security investigation into imports of commercial aircraft, jet engines and parts that could form the basis for even higher tariffs on such imports. Airlines, planemakers and several US trading partners have been lobbying Trump to restore the tariff-free regime under the 1979 Civil Aircraft Agreement. On day two of the air show, European planemaker Airbus said it had signed a memorandum of understanding for VietJet to buy 100 A321neo planes, with the option to buy up to 50 more in future. The agreement confirmed an earlier Reuters story. A deal for 150 A321neos could be worth around $9.4 billion, according to estimated prices provided by Cirium Ascend. The agreement was the latest in a flurry of business announced by Airbus at the world's biggest aviation trade fair. US rival Boeing is expected to have a more subdued show as it focuses on the probe into last week's fatal crash of an Air India Boeing 787 and after it racked up huge deals during Trump's recent tour of the Middle East. On the defence side of the show, Leonardo chair Stefano Pontecorvo said the Italian group had bought a European cybersecurity company to strengthen its position in an area seen as increasingly important in new combat systems.
