US slaps steep duties on Bombardier jets

Imposes 220% duty; UK warns Boeing it might lose business over the row

The US Commerce Department on Tuesday slapped preliminary antisubsidy duties on Bombardier’s CSeries jets after rival Boeing accused Canada of unfairly subsidising the aircraft, a move likely to strain trade relations between the neighbours.

The department said it imposed a steep 219.63 per cent countervailing duty on Bombardier’s new commercial jets after it made a preliminary finding of subsidisation. Boeing has complained that 110-to130 seat aircraft were dumped below cost in the US market last year while benefiting from unfair subsidies.

Britain told US planemaker Boeing on Wednesday that it could lose out on British defence contracts because of its dispute with Canadian rival Bombardier which has put 4,200 jobs at risk in Northern Ireland.

The ruling is a political headache for Britain’s minority Conservative government, which relies on support from a Northern Irish party to stay in power.

It also undermines the government’s assurances to Britons that free trade and London’s close ties with Washington will be pillars of Britain’s prosperity and global influence after it leaves the European Union in 2019.

An April 2016 order for 75 CSeries jets from Delta Air Lines stemmed from the same harmful sales practices European rival Airbus employed to win business in the 1990s, according to Boeing.

The Commerce Department’s penalty against Bombardier will only take effect if the US International Trade Commission (ITC) rules in Boeing’s favour in a final decision expected in 2018.

“We strongly disagree with the Commerce Department’s preliminary decision,” Bombardier said in a statement, calling the magnitude of the proposed US duty “absurd.” Commerce’s announcement and accompanying fact sheet on the preliminary duty order did not provide any rationale or methodology for how it calculated the 220 per cent duty.

The CSeries starts at $79.5 million, according to list prices, but carriers usually receive discounts of about 50 per cent.

If imposed, the duties would more than triple the cost of a CSeries aircraft sold in the US to about $61 million per plane, based on Boeing’s assertion that Delta received the planes for $19 million each. Bombardier has disputed the $19 million sales figure.

There are not that many Commerce countervailing orders that are this high, but it is lower than the 256 per cent final duties slapped on Chinese cold-rolled steel last year.

The timing is awkward because Canada and the United States are in a three-way negotiation involving Mexico to modernise the North American Free Trade Agreement.

A source familiar with the Canadian government’s thinking said the Boeing trade dispute was “separate” from the Nafta talks.

“This in no way is part of our conversation” the source said. “People should not read too much into this piece today.”