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US slaps stiff tariffs on Bombardier

September 27, 2017

The US Commerce Department has said Canada unfairly subsidized the aircraft maker and announced that it will impose duties of 220 percent on every Bombardier C Series plane imported into the United States.

Flugzeug Bombardier CS300
Image: Getty Images/AFP/E. Piermont

The decision by the US Commerce Department announced on Tuesday, follows a complaint by American manufacturer Boeing, which had claimed that Bombardier unfairly benefited from state subsidies in selling its C Series aircraft below cost to Delta Airlines.

Commerce Secretary Wilbur Ross said Washington valued its relationships with Canada, but even the closest allies of the United States must play by the rules.

"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," he added.

Both Canada and the United Kingdom, where some of the parts are built, had sought to persuade the US to drop the case. Now, the ruling — which is set for a final determination on December 12 — could further strain relations between Ottawa and Washington, already at a low point after US President Donald Trump pushed for a redraft of the North Atlantic Free Trade Agreement (NAFTA) with Canada and Mexico.

Stifling competition

The Montreal-based Canadian planemaker is unwilling to swallow the extra costs and described the proposed duty as "absurd and divorced from the reality about the financing of aircraft programs."

"This result underscores what we have been saying for months: the US trade laws were never intended to be used in this manner, and Boeing is seeking to use a skewed process to stifle competition," Bombardier said in a statement.

Read more: Bombardier reportedly considering closing plants in Germany

Boeing had claimed Bombardier sold American Delta Airlines 75 CS100 aircraft for $19.6 million (€16.6 million), despite manufacturing costs of $33.2 million. The levies imposed by Washington would bring the theoretical cost of each plane to more than $60 million.

That has prompted some aerospace analysts to speculate the deal could fall through unless Bombardier agrees to soften the blow for Delta. Experts said the Canadians could technically import the jets itself through a local subsidiary in a way that would be neutral for Delta. But this would significantly depress the net amount Bombardier receives and could be seen as legitimizing Boeing's complaint on prices, which Bombardier has rejected.

Relations at rock bottom

Canadian Foreign Minister Chrystia Freeland stressed that the US investigation was only in its preliminary stages and duties can only be imposed once the final probe is 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 US market," she said in the wake of the move.

Freeland vowed that the Canadian government would defend its companies against "unfair and costly protectionism," noting that 23,000 American jobs created by Canadian companies in the US could be threatened.

Last week, Canadian Prime Minister Justin Trudeau already threatened to call off a $5.2 billion purchase of 18 Boeing Super Hornet jet fighters from the US unless the case was dropped.

Boeing soars past Airbus in Paris

uhe/aos (Reuters, AP, AFP)