U.S. hits Bombardier with almost 80% preliminary duty on CSeries aircraft

The U.S. Commerce Department has hit Bombardier with more duties on its CSeries commercial jet in the Canadian company's trade fight with Boeing.

The department said Friday it will impose a 79.82 per cent preliminary anti-dumping duty against the Montreal-based company's 100- to 150-seat civilian aircraft.

The U.S. government move follows last week's decision to slap preliminary countervailing tariffs of nearly 220 per cent on Bombardier, bringing the total duties imposed by the U.S. on the CSeries to almost 300 per cent.

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Boeing, the petitioner in the case, has argued that the Canadian government unfairly subsidizes Bombardier in the construction of the CSeries commercial jets. Boeing launched its appeal to the U.S. government in April, several months after Bombardier announced the sale of up to 125 CSeries jets to Delta Airlines.

Bombardier called the new duties an "egregious overreach and misapplication" of trade laws.

The company said it is confident the U.S. International Trade Commission, which must still issue a final decision on the duties, will find that Boeing has suffered no harm in the case.

"The U.S. government should reject Boeing's attempt to tilt the playing field unfairly in its favour and to impose an indirect tax on the flying public through unjustified import tariffs," Bombardier said in a statement.

No collection until delivery

Reuters reported that Delta said it was confident regulators "will conclude that no U.S. manufacturer is at risk" from Bombardier's CSeries.

The duties being imposed by the U.S. won't be collected until Bombardier begins delivering the aircraft to Delta, which is expected in the spring.

"This determination confirms that, as Boeing alleged in its petition, Bombardier dumped its aircraft into the U.S. market at absurdly low prices," Boeing said Friday.

"These duties are the consequence of a conscious decision by Bombardier to violate trade law and dump their CSeries aircraft to secure a sale," Boeing said.

"This dumping in our home market was not a situation Boeing could ignore, and we're now simply asking for laws already on the books to be enforced."

Canada's Foreign Affairs Minister Chrystia Freeland said the government was "extremely disappointed by and in complete disagreement" with the latest U.S. duties.

"Boeing is manipulating the U.S. trade remedy system to prevent Bombardier's new aircraft, the CSeries, from entering the U.S. market, despite Boeing's admission that it does not compete with the CSeries," Freeland said in a statement, 

"We will continue to raise this issue with Boeing and with the U.S. government at the highest levels," she said.

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In announcing the latest duties, U.S. Commerce Secretary Wilbur Ross said the United States is committed "to free, fair and reciprocal trade with Canada, but this is not our idea of a properly functioning trading relationship."

"We will continue to verify the accuracy of this decision, while doing everything in our power to stand up for American companies and their workers."

The U.S. government says a final decision on the anti-dumping duties related to Bombardier is scheduled for Dec. 19, 2017. 

Countervailing duties are applied by the U.S. when the Department of Commerce finds that foreign governments unfairly subsidized the named producers and exporters. Anti-dumping duties are added if the department also decides that the exported product is being sold in the U.S. at a price below the producer's sales price in its home market or at a price that is lower than the cost of production.

Not surprised

David Chartrand, Quebec co-oordinator with the International Association of Machinists and Aerospace Workers, said Friday's move by the U.S. government didn't come as a surprise after last week's action on countervailing duties.

"We are supposed to be a trading partner with the United States and right now... they're trying to completely block the market for the CSeries in the United States," Chartrand said.

Unifor national president Jerry Dias said the two Commerce Department decisions, if allowed to stand, will hamper all level of governments as they attempt to encourage aerospace development in Canada. The union says it represents more than 11,000 aerospace workers across Canada.

"This isn't about one company or another, but about the rights of government to pursue an industrial policy that spurs innovation and helps Canadians get good jobs," Dias said in a release.

The Bombardier-Boeing case has spilled over into other areas of Canada's relationship with the United States. Canada has been eyeing the purchase of Boeing Super Hornet jet fighters as a possible replacement for its aging fleet of CF-18 Hornets. However, the spat over duties on the CSeries has led the Canadian government to say it wouldn't do business with a company trying to sue it.

Will take time to resolve

Shares of Bombardier closed up two cents at $2.21 on the TSX following the Commerce Department's announcement.

TD Securities analyst Tim James, in a research note, said Bombardier could appeal the Commerce Department decision to the U.S. Court of International Trade, NAFTA and the WTO.

"We believe that this issue will take time to fully resolve, and that it could present a challenge for successfully closing CSeries sales campaigns in the U.S., and potentially elsewhere," James said.  

"Given the importance of the CSeries to sentiment on the stock, we think it will continue to overhang the stock until more clarity emerges."