Boeing, Bombardier ruling coming

U.S. Commerce Department could make preliminary ruling Monday on subsidy allegation

OTTAWA — Politicians, defence officials and Canada’s aerospace industry have Monday circled on their calendars as the date to watch in Boeing’s ongoing trade dogfight with Montreal-based Bombardier.

Here’s what you need to know, and what is expected to follow: What’s at stake? U.S.-based Delta Air Lines agreed in April 2016 to buy 75 of Bombardier’s CS100 regional jets, with an option for 50 more. But Boeing alleges Bombardier sold the CS100s at an unfairly low price with help from government subsidies, and wants U.S. authorities to slap duties on the planes.

The case has major implications for Bombardier as it could not only endanger its deal with Delta, but also hinder future sales in the United States. What’s the latest? The U.S. Department of Commerce and U.S. International Trade Commission have been investigating whether Bombardier broke trade rules with the Delta deal.

The Trudeau government and Boeing were in talks, but they fell apart in August and the Liberals have since stepped up public pressure on the company to drop its case, including threatening to cancel the purchase of 18 Super Hornets. But Boeing has refused to back down. What happens on Monday? The U.S. Commerce Department will make a preliminary ruling on whether Bombardier benefitted from improper government subsidies, though the decision may not be made public until Tuesday.

The ruling will be based on information provided by Boeing, Bombardier and the federal government. If it goes against Bombardier, Delta will be required to pay duties on every CS100 it receives. Boeing is pushing for an 80 per cent penalty, which analysts have pegged at $15 million per plane.

While most expect the commerce department to rule against Bombardier, the impact won’t be felt until next spring when the planes start to be delivered. What happens next? The commerce department will make a preliminary ruling on whether Bombardier “dumped” its CS100s into the U.S. market by selling them at a price that was less than its fair value. This is scheduled for Oct. 4, but some expect it to be delayed.

Boeing wants an 80 per cent penalty for this as well, which would be on top of any duties applied because of the -subsidy ruling. If the commerce department says in either of its preliminary findings that Bombardier broke trade rules, it will then conduct a more detailed investigation to arrive at a final decision.

That investigation will look at everything from the cost of the raw materials to the cost of labour to determine the true price of the planes. That information will then be used to come up with a final duty. That would be the end of the case? No. Boeing will still be required to show that Bombardier’s deal with Delta hurt it before any duties become permanent.

The U.S. International Trade Commission is responsible for making that determination following a hearing, likely in December. A final decision won’t come until next year, possibly May or June.

However, any decision can be appealed through a variety of avenues, including the U.S. Court of International Trade and the World Trade Organization.