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Subsidies dispute and foreign content restrictions fuel USAF KC-X tanker replacement contest controversy

The revised US Air Force KC-X contest for tankers to replace ageing KC-135 is threatening to cause controversy with the USAF requiring competing companies must show full “treaty compliance”.

Contestants must account for any potential advantages as outlined by the US and European government groups locked in the long-running World Trade Organisation (WTO) dispute over subsidies for Airbus and Boeing. The USAF request for proposals (RFT),  issued in September, has prompted Boeing to unveil its proposed KC-777 tanker as a running mate to the KC-767.

Each must also meet stringent US government International Trade in Arms Regulations (ITAR) rules, which restrict businesses selling defence-related products commercially from sharing sensitive technical data with non-US citizens. Another compliance hurdle, particularly to Northrop Grumman/EADS team offering an Airbus A330-based  tanker, is the Berry Amendment that restricts the US Department of Defense from acquiring particular items that are not produced in the USA. In the past this has impacted on the aerospace industry with provisions applying to speciality metals such as titanium, nickel and zirconium alloys. Northrop and EADS have argued that the current WTO subsidies dispute is a government-to-government matter, and said previously that including the issue in the RFP and acquisition process “would be unprecedented”. 

Although the treaty compliance clause appears to threaten the KC-30 more than the Boeing offerings, McGraw says: “Berry compliance is a difficult issue for both of us.” Northrop says “the injection of any issue into this competition that favours one of the bidders over the others is inconsistent...and does not represent fair and open competition”.

With planned production in Mobile, Alabama, the KC-30 team says “more than 50% of the aircraft, subsystems and support is being provided by US partners and suppliers”.

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