In a victory for Boeing, U.S. agency slaps 220% tariff on Bombardier

on Sep27

27 September 2017 | 2:02 pm

WASHINGTON — The Commerce Department has slapped duties of nearly 220 percent on Canada’s Bombardier C Series aircraft in a victory for Chicago-based Boeing Co. that’s likely to raise tensions between the United States and its allies Canada and Britain.

The federal agency ruled Tuesday that Montreal-based Bombardier used unfair government subsidies to sell jets at artificially low prices in the United States, backing a Boeing complaint against Bombardier and saying “the subsidization of goods by foreign governments is something that the Trump administration takes very seriously.”

“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” said Commerce Secretary Wilbur Ross, whose agency is scheduled to issue a final ruling in the case on Dec. 12.

Canada responded by saying it “strongly disagrees” with the move.

“This is clearly aimed at eliminating Bombardier’s C Series aircraft from the U.S. market,” said Chrystia Freeland, Canada’s minister of foreign affairs.

 

Bombardier called the decision “absurd …. U.S. trade laws were never intended to be used in this manner, and Boeing is seeking to use a skewed process to stifle competition.”

Britain Prime Minister Theresa May said she was “bitterly disappointed” with the U.S. decision, which threatens more than 4,000 jobs in Northern Ireland. May had lobbied President Donald Trump after Boeing accused Bombardier of using unfair government subsidies to sell planes at artificially low prices.

Britain Defense Secretary Michael Fallon warned Boeing that its behavior “could jeopardize” future defense contracts with his nation.

British Liberal Democrat leader Vince Cable urged May to stand up to the United States, as her Canadian counterpart Justin Trudeau has done. And the leader of the Democratic Unionist Party, Arlene Foster, said she would the use party’s influence with the government to press the issue.

“Unfortunately, it’s not a surprise,” Foster told Sky News. “What we must do now is to continue to work with our own government, with the American government, with the Canadian government, in trying to get Boeing to see sense in relation to this issue.”

In April, the American aircraft manufacturer said Bombardier received at least $3 billion in subsidies from the governments of Britain, Canada and the province of Quebec, allowing it to sell planes to U.S.-based Delta Air Lines for less than the cost of production. Boeing asked the Commerce Department and the U.S. International Trade Commission to investigate the alleged “predatory pricing.”

Specifically, Boeing said Bombardier sold Delta Air Lines 75 CS100 aircraft last year for less than it cost to build them, with an option to buy as many as 50 more of the planes. Bombardier valued the firm order at $5.6 billion based on the list price of the aircraft.

“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,” Boeing said Tuesday.

But Delta says Boeing doesn’t even make the 100-seat planes that it needs for short- to medium-range trips.

“Boeing has no American-made product to offer because it canceled production of its only aircraft in this size range — the 717 — more than 10 years ago,” Delta said Tuesday.

Trump, who campaigned on a promise to get tough on trade, has repeatedly criticized Canada, saying it unfairly blocks U.S. dairy products and subsidizes its softwood lumber industry. Trump also has threatened to pull out of the North American Free Trade Agreement if he can’t negotiate a better version with Canada and Mexico.

Boeing’s complaint against Bombardier drew a backlash even before Tuesday’s decision. Canadian Prime Minister Justin Trudeau threatened this month to stop doing business with Boeing, which is in talks to sell Canada 18 Super Hornet jet fighters.

Connecticut Democratic Sens. Richard Blumenthal and Christopher Murphy wrote a letter last week urging U.S. government officials to “refrain from taking action that will endanger the many jobs in Connecticut that depend upon Bombardier.”

Engines for the C Series aircraft are made by Pratt & Whitney, based in East Hartford, Connecticut.

The Commerce Department’s findings aren’t the end of the matter. The department is expected to announce its findings in another case against Bombardier early next month. And the International Trade Commission — an independent federal agency that rules on trade cases — will decide early next year whether to uphold the tariffs imposed on Bombardier by the Commerce Department.

Bombardier could appeal any sanctions to a U.S. court or to a dispute-resolution panel created under NAFTA. The Canadian government also could take the case to the World Trade Organization in Geneva, Switzerland.

Commerce Secretary Ross, on a visit to Hong Kong, told reporters that part of the problem was Bombardier’s lack of cooperation with the investigation.

“It’s not out of any anti-Canadian or any anti-U.K. or certainly any anti-Northern Ireland sentiment,” Ross said.



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