The U.S. Commerce Department today issued a preliminary finding that Canada’s Bombardier aircraft company was getting unfair subsidies for its CSeries jets — and laid out a plan that would more than triple the cost of the jets being bought by Delta Air Lines.
As a result of the ruling, the importers of Canadian civil aircraft with a capacity of 100 to 150 seats would have to pay a 219.63 percent tariff.
The ruling sides with Boeing, which filed a petition complaining that Bombardier’s sale of 75 CS100 jets to Delta was being subsidized by the governments of Canada as well as Britain. Bombardier is based in Montreal, but its wings are built in Northern Ireland.
“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Commerce Secretary Wilbur Ross said 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 scale of the tariff was higher than what Boeing had sought, and Bombardier could be hit by even more tariffs as the regulatory process continues.
There’s a risk that the issue could spark retaliation from Canada and Britain. Even before the ruling was announced, Canadian Prime Minister Justin Trudeau said that if the dispute continued, he might cancel a multibillion-dollar deal to buy Boeing’s F/A-18 Super Hornet fighter jets.
In a statement, Canadian Foreign Minister Chrystia Freeland said her government strongly disagreed with the ruling and would “always defend Canadian companies and Canadian workers against unfair and costly protectionism.”
She said some of the components for the CSeries planes were provided by U.S. suppliers, “directly supporting almost 23,000 well-paying jobs in many U.S. states,” including Washington state.
“Boeing’s petition is threatening these U.S. jobs,” Freeland said. She said the ruling was “clearly aimed at eliminating Bombardier’s CSeries from the U.S. market.”
In its own statement, Boeing said the ruling confirmed that Bombardier was guilty of illegal dumping.
“This dispute has nothing to do with limiting innovation or competition, which we welcome,” Boeing said. “Rather, it has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements.”
When the jet order was announced last year, Delta said Boeing didn’t offer a jet in the 100- to 110-seat category that it wanted. Boeing argued that the Bombardier deal nevertheless hurt prospects for sales of current and future models of its 737 jet.
The Commerce Department’s decision is only preliminary, and there’ll be more deliberations to come in the months ahead. But in the meantime, U.S. customs officials have been told to collect cash deposits from importers who bring the Canadian jets into the country, based on the preliminary 219.63 percent tariff.
The first Bombardier jets are due to be delivered to Delta next spring.
Delta’s 75-jet purchase would be worth about $5.6 billion if it were paying list price, which would translate into about $18 billion if the tariff were charged. Delta also has an option to buy 50 more jets. Airlines traditionally are charged less than list price, but whatever price Delta agreed to pay, the tariff would make the deal prohibitively expensive.
In addition to the Bombardier dispute, Boeing has been engaged in a years-long trade battle with Airbus, its European archrival. But that dispute is playing out in the World Trade Organization, where the process leading to tariffs is far more circuitous.