Bombardier loses first stage of trade dispute

U.S. panel gives green light to probe into alleged unfair practices against Boeing

The United States International Trade Commission voted to continue its investigation into Bombardier Inc.’s trade practices on Friday, a decision that was largely expected and that could stall the company’s efforts to sell its CSeries jets in the U.S. market.

After a 45-day preliminary investigation, the five members of the USITC panel all voted in the “affirmative,” deciding that there is “a reasonable indication” that the Boeing Company is threatened with material injury as a result of Bombardier’s alleged sale of subsidized jets for less than fair value.

The U.S. aerospace giant filed the petition with both the USITC and the U.S. Department of Com- merce, alleging that Bombardier had used illegal government subsidies and launched an “aggressive campaign” to dump its CSeries jets in the U.S. market.

Because of the USITC’s “affirmative determination”, the investigation into whether Boeing has been harmed by Bombardier and the Commerce probe looking at whether countervailing duties should be imposed will continue.

The Department of Commerce will make a decision on what preliminary countervailing duties should be imposed on Bombardier’s CSeries jets on July 21, while an anti-dumping determination is due on Oct. 4.

Bombardier is scheduled to begin delivering its CSeries aircraft to Delta in 2018.

“Today’s preliminary decision was expected given the very low bar for Boeing in this first step of the process,” said Mike Nadolski, Bombardier’s vice-president of communications, in an emailed statement.

“Going forward, we are confident that a detailed review and analysis of the facts will demonstrate that Boeing’s claim is without merit.”

At the centre of Boeing’s petition are two order bids for Bombardier’s previously beleaguered CSeries aircraft, including Delta Air Lines’ purchase of 75 CSeries jets. The petition has pitted Boeing against Bombardier, Delta and the Canadian government, which all argued that the trade commission should dismiss the complaint and issue a negative determination.

Delta said there was “no reasonable indication of threat of material injury” to Boeing, as the company never tried to sell new aircraft to the airline, and does not make an aircraft the size Delta wanted.

Although Bombardier has yet to deliver one of its new aircraft to Delta, Boeing said its use of highly distortive pricing is an attempt to eliminate the 737 Max 7 from the 100 to 150-seat single aisle market home to the CSeries.

The trade spat could have many immediate reverberations, for both Boeing and Bombardier.

As the investigation continues, Boeing risks further straining its relationship with the Canadian government, which has suggested it may reconsider purchasing billions of dollars worth of Super Hornet fighter jets.

Last week, Defence Minister Harjit Sajjan suggested that the U.S. company can no longer be considered a trusted partner as a result of the petition.

Boeing spokesperson Daniel Curran said the company values Canada as a customer and supplier partner for both its commercial and defence divisions.

“Global trade only works if everyone plays by the same rules of the road, and that’s a principle that ultimately creates the greatest value for Canada, the United States, and our aerospace industry,” Curran said.

“Regarding recent statements about our petition, this is a commercial matter that Boeing is seeking to address through the normal course for resolving such issues. We are confident that our partnership with Canada will continue to thrive long after this commercial trade matter is resolved.”

As for Bombardier, a lengthy investigation could hurt efforts to sell the CSeries in the lucrative U.S. market, even if the result of the probe is positive for the company. The timing of the investigation is also problematic, as the company is in the midst of a five-year turnaround plan, and is planning on ramping up production of the CSeries.

A Department of Commerce document estimates that a final determination by the USITC could be made in February of next year.

Bombardier’s stock fell seven per cent on the Toronto Stock Exchange , closing at $2.37.

“Going forward, we are confident that a detailed review and analysis of the facts will demonstrate that Boeing’s claim is without merit.”