U.S. hammers Bombardier with duties in Boeing spat
OTTAWA — The U.S. Department of Commerce has clobbered Canadian aerospace firm Bombardier with a 219 per cent preliminary countervailing duty on the sale of its CS100 commercial jets to a U.S. airline following a trade complaint from an American rival.
The department ruled that Bombardier benefited from improper government subsidies, a finding that deals a blow to the Montreal-based company’s chances in its ongoing dispute with U.S. rival Boeing.
Boeing, which had complained that Bombardier inked a deal with Delta Air Lines for up to 125 of the jets by offering the planes at below-market price, declared victory.
“Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing’s global supply chain,” the company said in a statement.
The dispute is not about limiting innovation or competition, it continued, but rather “has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements.”
The financial penalties aren’t officially due until Bombardier delivers the first CS100 to Delta some time in the spring. They are also temporary, at the moment, and could still be dropped or refunded.
The key will be whether U.S. officials find that the deal between Bombardier and Delta actually hurt Boeing’s business, an issue that’s not expected to yield a finding for at least six months.
But today’s ruling does give Boeing momentum as the dispute drags on, and more leverage in any future talks between the Trudeau government and Boeing to reach a negotiated settlement.
Tuesday’s ruling was a stunning turn in the dispute, as Boeing had been asking for an 80 per cent duty. The list price for the planes is around $6 billion. But the actual amount of money involved in the deal has not been made public, and Boeing has alleged that it is much less.
The case has major implications for Bombardier as it could not only endanger its deal with Delta, but also hinder future sales in the U.S. and hurt those Canadian aerospace companies that work with Bombardier.
Speaking before the ruling, Prime Minister Justin Trudeau promised to continue to stand with Bombardier and Canada’s aerospace industry. He also once again threatened to cut government ties with Boeing.
“Certainly we won’t deal with a company that’s attacking us and attacking thousands of Canadian jobs,” Trudeau said outside the House of Commons.
With one preliminary ruling out of the way, the Commerce Department will now turn its attention to whether Bombardier “dumped” its CS100s into the U.S. market by selling them below cost. That finding is scheduled on Oct. 4, but could be delayed.
But the real question is whether the deal between Bombardier and Delta hurt Boeing. That question is being tackled by the U.S. International Trade Commission, whose ruling likely won’t come out until spring.
The commission’s ruling will be the key to whether any duties slapped on the CS100s become permanent, or whether the case is dismissed, all duties paid are refunded and the BombardierDelta deal can go ahead as planned.