U.S. Slaps Stiff Tariff On Bombardier's New Jet

CNN/Stylemagazine.com Newswire | 9/27/2017, 8:07 a.m.
The U.S. Commerce Department has backed Boeing in its challenge to Bombardier, recommending an enormous tariff on sales of the ...
Montreal-based Bombardier's C Series airliner's 110-seat cabin is designed with an aisle wide enough to maneuver around the drink cart, overhead bins big enough to fit your bag, larger windows and half as many middle seats as bigger aircrafts.

Jon Ostrower

(CNN Money) -- The U.S. Commerce Department has backed Boeing in its challenge to Bombardier, recommending an enormous tariff on sales of the Canadian firm's C Series jetliner.

The initial ruling by the International Trade Commission, an arm of the Commerce Department, recommends a 219.63% tariff on the delivery of each airliner.

Boeing, America's largest exporter and sole producer of commercial airliners, is suing Bombardier. At issue is whether the plane maker received financial backing from the Canadian government that allowed it to stay afloat and sell to Delta for what Boeing alleges were "absurdly low prices."

"The U.S. values its relationships with Canada, but even our closest allies must play by the rules," said Commerce Secretary Wilbur Ross in a statement. "The subsidization of goods by foreign governments is something that the Trump Administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination."

The ruling announced Tuesday is the first of two in the case. The second is expected on as early as Oct. 5 and may add even more to Bombardier's tariff penalty.

The dispute stems from a 2016 Delta order from the Montreal-based air and rail giant for as many as 125 C Series aircraft. Boeing alleges government support helped its Canadian rival establish the all-new airliner at the expense of Boeing's own 737 jets.

Boeing claims that Bombardier is selling each C Series jet to Delta for $19.6 million. That's not accurate, said Delta.

The jet's list price is nearly $80 million, but steep discounts are common.

Boeing had recommended a heavy tariff on the C Series, paid by Delta or any U.S. airline importing the aircraft in what would be considered a major blow to Bombardier and its ability to establish the new jet in the world's largest aviation market. The preliminary decision by the trade commission for a 219.63% tariff was steeper than the 160% recommended by Boeing.

Bombardier reacted to the decision, saying: "We strongly disagree with the Commerce Department's preliminary decision. The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multi-billion dollar aircraft programs."

Boeing in a statement hailed the result, saying, "This dispute has nothing to do with limiting innovation or competition, which we welcome. Rather, it has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements."

The dispute has drawn in the leaders of Canada and the United Kingdom and now threatens to shoot down a $5.2 billion Boeing F/A-18 Super Hornet fighter deal with the Royal Canadian Air Force if the case isn't dropped or settled.

"We won't do business with a company that's busy trying to sue us and put our aerospace workers out of business," Canadian Prime Minister Justin Trudeau said earlier this month. Bombardier's aerospace division employs 28,500 worldwide, including 4,000 in Northern Ireland where the jet's wings are manufactured.

Chrystia Freeland, Canada's Foreign Affairs Minister, said: "While this is only a preliminary stage in the investigation, and no duties can be imposed until the final investigations are completed, Canada strongly disagrees with the anti-dumping and countervailing duty investigations into imports of Canadian large civil aircraft. This is clearly aimed at eliminating Bombardier's C Series aircraft from the U.S. market."