Navigating Aircraft Import Tariffs & Customs

Importing a multi-million-dollar aircraft from a far-away country is a daunting task, especially when navigating tariffs and customs regulations. But with the right experts on your team, the right plane at the right place justifies the process.

Currency fluctuations can make a foreign aircraft a great buy, and aircraft are uniquely situated to be imported—they are the most mobile asset in the world!

Basic Customs Process

Any product entering the U.S. stream of commerce from overseas must go through the customs/import process. Just like a shipment of toasters or televisions, aircraft must follow a similar set of rules.

Until a prominent aircraft title company executive was indicted in December 2020 for customs violations (among other more dramatic charges), customs formalities were often overlooked. Now, there is no excuse.

The customs process, when managed properly through an experienced customs broker, is not terribly complicated, nor terribly expensive.

The customs broker will typically provide a detailed set of instructions, including the required documentation. A limited power of attorney form is required for the customs broker to complete the process. Otherwise, the documents are fairly standard: registration and airworthiness certificates, a commercial invoice, and often some other paperwork necessary to establish an exemption from tariffs.

The Cost of Customs

Customs costs, including broker fees, are typically less than $10,000 on a $10,000,000 aircraft. This includes a flat cost component and a small variable amount based on the aircraft value. The customs process is more to measure the flow of goods into and out of the U.S. than a governmental money-grab.

Flight details must be coordinated with the customs broker at least 24 hours before the aircraft’s departure to the U.S. The customs broker can help pick a suitable airport to handle the customs process. Last time I checked, there were about 50 to choose from. Each airport has its pros and cons, depending on the planned flight path and the day of the week and time of arrival.

How Tariffs Impact Aircraft Imports

Nobody has escaped the constant talk of tariffs over the past few months. While tariffs may serve as an international negotiating tool (hammer), they often lead to higher costs for consumers. They can also be especially harmful to industries that rely on international supply chains.

Perhaps worst of all is the uncertainty the threats of tariffs create, making it difficult for businesses to plan. The early March stock market fluctuations reflect this challenge.

On March 4, the U.S. implemented a 25% tariff against most Canadian products, including Canadian-manufactured aircraft (e.g., Bombardier and certain Diamond aircraft).

While these tariffs were temporarily lifted a few days later, the confusion has set in. Further, tariffs have been threatened against the EU, which would also affect Dassault Falcon aircraft.

Key Considerations for Aircraft Tariffs    

The potential tariffs on any particular aircraft are very fact-specific, but there are a few key items to keep in mind when planning:

• Manufacturer’s origin. Generally, tariffs are based on the country of manufacture, not the country where the plane is registered or where it is arriving from.
  
  For instance, if tariffs were in effect against Canadian products, then a Bombardier product could be subject to tariffs whether it’s coming from Canada or England. But a U.S.-manufactured Gulfstream or Textron aircraft coming from Canada would not be subject to the tariffs.

• Timing. Tariffs are due when the plane arrives in the U.S. to clear customs, not when title changes. If a plane arrived in the U.S. and cleared customs on March 1 before tariffs took effect, no tariff would be required. This remains true even if the transaction was completed weeks later after the tariffs were in effect.
  
  Likewise, if you bought a plane overseas before tariffs took effect, the timing of the purchase wouldn’t matter. Tariffs would still apply if the plane wasn’t imported to the U.S. until after they were in effect.    

With tariffs and an intercontinental trade war brewing, the purchase agreement should specify what happens if the tariff environment changes mid-transaction.

All parties should also endeavor to get the plane imported through U.S. customs as soon as possible before tariffs could affect the foreign-made plane that could be affected.

Stay tuned for upcoming articles that break down the challenges of buying a foreign aircraft—and how to navigate them with confidence.

Part 2: Aircraft Title: Registration and Deregistration

Part 3: Airworthiness: How to Get the Aircraft Ready to Fly

Part 4: How to Balance Taxes Between Multiple Jurisdictions

Part 5: Logistics: Where to Inspect the Plane and Complete Closing?

Part 6: Contractual Quirks of Foreign Transactions

This article is not intended, nor should it be construed or relied upon, as legal advice. The comments, recommendations, and analysis expressed in this article are those of the individual author, John Farrish, are purely informational. This article does not create an attorney-client relationship between you and the author or his law firm. If specific legal information is needed, each person should retain and consult an attorney with knowledge of the subject matter.

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