A Bombardier CS300 C Series aircraft lands after a flying display on day two of the 51st International Paris Air Show in Paris, France, on June 16, 2015.Jasper Juinen/Bloomberg
The U.S. Department of Commerce has issued its final ruling in the escalating clash between Boeing Co. and Bombardier Inc., upholding its previous finding that the Canadian plane maker must pay duties of nearly 300 per cent to import its C Series airliner into the United States.
Commerce ruled to implement anti-dumping duties of 80 per cent and countervailing duties of about 212 per cent, slightly lower than its initial calculation, for total tariffs of about 292 per cent. That would nearly quadruple the price of a C Series imported into the United States.
The department's decision, made public Wednesday, was expected and is not the ultimate verdict in the trade dispute. That will come in February when the U.S. International Trade Commission decides whether Boeing was harmed, or threatened with harm, as a result of Bombardier's actions. That ruling can be appealed in turn.
"It's not unreasonable to think that the extraordinarily high [penalties] found by the commerce department do, to some extent, reflect the ideological bent of this administration," said Edward Alden, a trade expert at the Council on Foreign Relations in Washington. "You now have a Commerce secretary who's a cheerleader for protectionist tariffs. We're in a very different world."
As the trade battle works its way through legal institutions in the United States, the stakes continue to climb for the companies and countries involved. The fight has fuelled trade tensions between Canada and the United States, emerging as a flashpoint as the two countries try to hammer out a new continental trade pact.
Canada this month cancelled a planned purchase of 18 Super Hornet fighter jets from Boeing in retaliation for the company's trade challenge against Bombardier. The government of the U.K., where parts of the C Series are built, has warned Boeing it risks losing defence contracts. The European Union has also joined the fray, saying the 300-per-cent duties levied by U.S. authorities on the C Series are unwarranted.
U.S. President Donald Trump is said to covet such duties as he tries to put in place an "America first" trade strategy that aims to save manufacturing jobs. Boeing is only one of several U.S. companies that have launched complaints against foreign rivals in recent months, aligning itself with the political winds to push its own interests.
Through Sept. 20, Commerce initiated 65 anti-dumping or subsidy investigations, a 48-per-cent increase from the last year under the Obama administration and a 16-year high in such actions, according to the Washington Post. Targets for complaints this year include imports of South Korean washing machines and steel from Vietnam.
"The Government of Canada is deeply troubled by the protectionist nature of Boeing's allegations, which seek to advance its market dominance by excluding Bombardier's C Series aircraft from the U.S. market," Chrystia Freeland, Canada's minister for foreign affairs, said in a statement. The final duties are "highly punitive to aerospace workers on both sides of the border," she said.
Boeing filed a trade challenge against Bombardier in April this year, alleging the Montreal-based maker of luxury jets and single-aisle planes used unfair government subsidies to clinch an important contract for 75 CS100 C Series planes to Atlanta-based Delta Air Lines at "absurdly low" sale prices. Quebec helped secure the deal by providing Bombardier with a $1-billion (U.S.) investment lifeline the province says adheres to international trade rules.
The American aerospace giant has argued that Bombardier is offering the C Series at used-airplane prices, which is pressing rivals to offer cut-rate deals in their own right. It says its 737 Max 7 plane is at "extreme risk" because of Bombardier's tactics.
"[Wednesday's] decision validates Boeing's complaints regarding Bombardier's pricing in the United States, pricing that has harmed our workforce and U.S. industry," Boeing said.
Bombardier counters that Boeing's challenge is an unfounded assault on airlines, the flying public and the U.S. aerospace industry, which will all benefit when the high-tech C Series enters the fleets of U.S.-based carriers. The airplane, which is expected to open up dozens of new routes in North America alone and has been lauded for its cabin comfort, is the first clean-sheet designed single-aisle aircraft to come to market in nearly 30 years.
"The Commerce Department decision is divorced from this reality and ignores long-standing business practices in the aerospace industry, including launch pricing and the financing of multibillion dollar aircraft program," Bombardier said Tuesday, adding it remains confident the International Trade Commission will rule in its favour.
The C Series does not threaten Boeing, Bombardier says. Boeing did not compete in the Delta sales campaign. It has not made a plane of the size Delta needed since abandoning production of the 717 and 737-600.
"According to its public financials, Boeing is making money hand over fist," said Peter Lichtenbaum, a Washington lawyer acting for Bombardier. "And with a backlog of 737 orders years into the future, there are no signs of difficulty on the horizon. In sum, Boeing does not deserve protection under the trade laws and any lack of Max 7 sales has nothing to do with the C Series."
In any case, the trade dispute is rendered moot by Bombardier's new agreement with Airbus Group SE, Mr. Lichtenbaum said.
Under that deal, the European plane maker will take control of the C Series program for no upfront cash, pledging in exchange to throw its considerable global logistics and sales power behind the Bombardier aircraft. The partners plan to spend $300-million to set up a second assembly line at Airbus's Mobile, Ala. facility to build C Series for the U.S. market.
The arrangement would make the aircraft a domestic U.S. product that is not subject to import duties, Mr. Lichtenbaum said. Building C Series in the United States "means that there is no longer any prospect, much less an imminent threat, of material injury caused by imports," he said. "There will not be any imports."
Nicolas Van Praet