A US bipartisan trade commission board granted an unexpected victory to Bombardier over Boeing on Friday in the case of CSeries aircraft import tariffs. The ruling allows Bombardier to sell its CSeries planes to US carriers without the 300% import tariffs that Boeing proposed after alleged price dumping. 

“Today’s decision is a victory for innovation, competition and the rule of law. It is also a victory for US airlines and the US traveling public,” Bombardier said in a statement after the vote.

“The government of Canada will always vigorously defend the Canadian aerospace industry and its workers against protectionist trade policies,” Chrystia Freeland, the Canadian Foreign Minister, said in a statement.

US International Trade Commission (ITC) members voted unanimously that Bombardier’s prices did not harm Boeing’s sales. The board dropped a US Commerce Department recommendation to put the 300% tariff on CSeries sales for five years.

“Hopefully this can now be an end to the stress and worry for our Bombardier members and they can concentrate on the job they’re paid to do,” said GMB organizer Michael Mulholland.

The board has yet to provide a reason for its decision. However, one of the largest factors in the case could have been the sizes of competing aircraft made by Boeing and Bombardier, who argued that Boeing didn’t suffer hard because it doesn’t make a plane similar in size to CS100 jets. Boeing’s smallest 737, the 737-700, is larger than the 100-seat CS100 by about 40 seats. In addition, Boeing didn’t offer its 737-700 or 737 MAX 7 to customers because Boeing couldn’t start deliveries of planes until 2022, while the customers wanted deliveries to start this year.

The 737-700 is the smallest 737 that Boeing makes. Bombardier argued that the CS100’s smaller capacity doesn’t compete with the 737-7 and can’t harm it.
Image by Aero Icarus on Wikimedia Commons

“U.S. industry is not materially injured or threatened with material injury by reason of imports of 100- to 150-seat large civil aircraft from Canada that the U.S. Department of Commerce has determined are subsidized and sold at less than fair value,” the ITC’s ruling read.

US Commerce Secretary Wilbur Ross said that the commission’s ruling “shows how robust our system of checks and balances is.”

“It’s reassuring to see that facts and evidence matter,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “This part of the trade policy process works unimpeded despite President Trump’s protectionist rhetoric.”

“The decision by the International Trade Commission confirms what the UK and Canadian governments working hand in hand has maintained from the outset, that this case is unjustified. We are pleased that the ITC has now recognized this,” said UK Business Secretary Greg Clark. Over 50 companies in the UK supply Bombardier with parts for C Series planes.

The ITC was expected to side with Boeing, who alleged that it was forced to sell 737 narrow-bodies at lower prices to compete with Bombardier after the Canadian company used government subsidies to sell 75 CSeries planes to Delta Airlines at “absurdly low prices”. Bombardier called the case self-serving after Boeing revealed late last year that it was discussing a “potential combination” with Brazilian planemaker Embraer. Boeing denies that their accusation was motivated by the talks.

“Bombardier and its innovative workforce play a vital role in the Northern Ireland economy,” said UK Prime Minister Theresa May. Over one thousand jobs in Belfast depend on the success of the CSeries project.

An Airbus factory in France. Over 50 companies in Europe, most of which are in the UK, produce parts for Bombardier.
Image by Nicholas Halftermeyer on Wikimedia Commons

“[The ruling] is good news for workers at Bombardier’s Belfast plant, where parts for the C-Series are made, but it’s also good news for Airbus, which took advantage of Bombardier’s struggles to take a majority stake in the C-Series,” said Theo Leggett, a business correspondent with the BBC.

The ruling will allow Bombardier, which is currently swimming in debt, to get more orders than it would have had the tariffs been implemented. This will help the company fuel a comeback.

“Other airlines in the U.S. are probably going to take a closer look,” said Dan Fong, an analyst at Veritas Investment Research Corp. in Toronto. “If you get another U.S. anchor, it will accelerate the sales momentum globally. The U.S. is home to the most experienced aircraft operators in the world, and everyone will be keeping an eye on what happens there.”

This case, however, isn’t necessarily over. Boeing can still appeal the ruling. The Chicago-based planemaker says, however, that it won’t consider an appeal until it sees the ITC’s reasoning in February.

“Boeing remains confident in the facts of our case and will continue to document any harm to Boeing and our extensive U.S. supply chain that results from illegal subsidies and dumped pricing,” said a statement released by Boeing. “We will not stand by as Bombardier’s illegal business practices continue to harm American workers and the aerospace industry they support. Global trade only works if everyone adheres to the rules we have all agreed to. That’s a belief we will continue to defend.”

This isn’t the only time that Canada has stiffed Boeing out of potential sales. In December of last year, Canadian officials upheld a threat to cancel a proposed purchase of F/A-18 Super Hornet fighter jets, dealing a blow to Boeing’s defense sector.

Boeing has 30 days from the date of the ruling to file an appeal. Boeing cannot appeal to the World Trade Organization for procedural reasons.

This decision, if ultimately upheld, could help US President Donald Trump’s goal of boosting US jobs as the aircraft will likely be made at the Airbus plant in Alabama rather than in Canada. Bombardier says that, due to Airbus’ majority stake in the CSeries program, CSeries planes manufactured in Alabama will be sold to US carriers starting next year.

“I am happy that [Bombardier won the case]. It shows that sober business is still prevailing and it does not change our project; we will go ahead full throttle,” Tom Enders, the Airbus Chief Executive, said. “The single largest market for the CSeries – as also for the (larger mainline) single-aisle – is the U.S. and it cannot be wrong to have a strong position in the U.S.”

Featured image by Karlis Dambrans from Flickr

Categories: Industry Talk

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