In a decision that's bound to infuriate the leaders of Canada and the UK, the US Commerce Department on Friday tacked on an additional 80% tariff against Bombardier C-Series Jets imported from the US's northern neighbor, adding to a 220% preliminary levy authorized last week. The ruling is the culmination of a long-running feud between Boeing and Bombardier; Boeing accused its rival in April of benefiting from anticompetitive government subsidies. US customs will now begin imposing the now 300% combined tariff, potentially complicating Delta Air Lines' pending purchase order of 75 C-Series jets, a deal that would've been worth some $5 billion to Bombardier. As the National Post noted, the decision will make it effectively impossible for Bombardier to sell its planes in the US. It also has important ramifications for the aerospace industry in both Canada and the UK, and also casts doubt on Bombardier's future after a rocky stretch of thin sales.
"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," Commerce Secretary Wilbur Ross said in a statement.
"We will continue to verify the accuracy of this decision, while do everything in our power to stand up for American companies and their workers."
Bombardier hasn't responded to the decision, but last week said the 220% tariff was "absurd and divorced from the reality about the financing of multibillion-dollar aircraft programs" and that it would push for the decision to be reversed in the coming months. Bombardier has long maintained that Boeing can't justify its claim of being harmed by the C-Series since it doesn't manufacture any jets of comparable size.
The Commerce Department was expected to announce the preliminary anti-dumping duties yesterday, but last night said it would hold off until today. Bombardier has said it's confident the American penalties will be overturned and Canadian Prime Minister Justin Trudeau has blasted Boeing for its complaint, and has said the Canadian government will halt all orders of Boeing equipment until the company drops the complaint. The Premier of Quebec Philippe Couillard has painted the tariffs as "an attack on Quebec" and has said that the province will "resist" the decision. Trudeau is due to visit Washington on Oct. 10 for two days of talks on trade and other issues with President Trump as Canada, Mexico and the US struggle to revise the Nafta trade agreement before their self-imposed year-end deadline. Experts have said they don't expect the Bombardier tariff to impact Nafta talks.
Bombardier's shares have benefited recently from rumors that the company is on the verge of closing major deals with Chinese airlines, but there was little reaction on Friday because the decision was widely expected.
U.K. Prime Minister Theresa May said she was “bitterly disappointed” by last week’s decision, considering Bombardier employs more than 4,000 people at a factory in Belfast, an important constituecy for May's conservative party. UK Trade Secretary Liam Fox and Irish Foreign Minister Simon Coveney reportedly discussed the Bombardier tariffs with Commerce Secretary Wilbur Ross this week.
The case now goes to the International Trade Commission, which is expected to make a final ruling to decide whether Boeing suffered damages as a result of Bombardier's anti-competitive practices. If an affirmative ruling is returned, damages will be assessed.
After Boeing initially requesting an 80% anti-dumping tariff, it hiked that figure to 143.35% after it accused Bombardier of withholding information in the ongoing investigation. The company alleged in a document filed last week that Bombardier had “refused to provide virtually all the information the Department of Commerce requested for its dumping calculations” and that a higher adverse facts available (AFA) margin should be applied “to address Bombardier’s intransigence and its concealment of the true dumping margin.”
Bombardier replied by filing a document claiming it had “responded to each and every request for information by the Department and provided the Department with thousands of pages of evidence.” Delta also filed documents with the Department of Commerce, reiterating that Boeing never competed for the order that eventually went to Bombardier.
Here's a timeline of the Boeing-Bombardier dispute courtesy of the Canadian Press:
A timeline of the commercial dispute between Boeing and Bombardier:
- - April 27: Chicago-based Boeing Co. asks the U.S. Department of Commerce and the U.S. International Trade Commission (ITC) to take action against Bombardier's business practices.
- - May 18: The Department of Commerce confirms the beginning of an investigation. Ottawa replies by questioning a military order from Boeing for new Super Hornet jet fighters.
- - June 9: ITC gives the go-ahead for Washington to continue its investigation into CSeries sales south of the border.
- - 28 June: The Department of Commerce agrees to delay the disclosure of its preliminary decision on possible punitive duties by two months, until Sept. 25, at Boeing's request.
- - Sept. 4: Boeing International Division President Marc Allen says the U.S. giant has no intention to back down and withdraw its complaint against Bombardier.
- - Sept. 5: British Prime Minister Theresa May, in a telephone conversation with U.S. President Donald Trump, pleads in favour of the Quebec manufacturer, which has more than 4,000 employees in Belfast, Northern Ireland.
- - Sept. 13: Demonstrations in downtown Montreal of hundreds of union members in the aeronautics sector who denounce the Boeing approach.
- - Sept. 20: Bombardier workers in Toronto walk off the job to attend a rally to support company's battle against Boeing.
- - Sept. 24: JetBlue becomes latest U.S. airline to write to the ITC urging it to deny Boeing's petition, saying tariffs on the aircraft would harm competition and result in higher airfares.
- - Sept. 26: Department of Commerce announces a 219.63 per cent preliminary countervailing duty on CSeries exports to the U.S.
- - Oct. 6: Department of Commerce announced 79.82 per cent preliminary anti-dumping duties on the Bombardier aircraft.
- - Dec. 18: Department of Commerce expected to release its final countervailing and anti-dumping determinations.
- - Feb. 1: ITC expected to make its final determination in Boeing complaint.
Read the Commerce Department's fact sheet on the decision: