Canadian plane maker Bombardier has hit back at a US Commerce Department preliminary decision to slap a 219 per cent tariff on its C-series aircraft.
The size of the tariff surprised the aviation industry observers and produced an angry reaction in Canada and the UK.
Bombardier makes the C Series wings in Northern Ireland and is a major employer in region, where there are now fears of big job losses as a result of the US decision.
The Commerce Department began looking at the issue after a complaint by US aerospace giant Boeing about unfair subsidies involved in a deal to sell 75 CS 100 aircraft to Delta Air Lines. Delta plans to fly the aircraft in a 108-seat configuration on short- to medium-haul routes.
Boeing had asked for a 79 per cent tariff but US Secretary of Commerce Wilbur Ross said the investigation had calculated the Canadians had received subsidies worth 219.63 per cent from the governments of Canada, Quebec and the UK.
“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Ross said in the department’s announcement.
“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.”
Bombardier strongly disagreed with the decision.
“The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multi-billion-dollar aircraft programs,’’ it said in its response.
“This result underscores what we have been saying for months: the U.S. trade laws were never intended to be used in this manner, and Boeing is seeking to use a skewed process to stifle competition and prevent U.S. airlines and their passengers from benefiting from the C Series.
“The simple truth is that Bombardier created a superior aircraft that is more efficient, more comfortable, and quieter. “
Bombardier argued the C Series served a market segment not supported by any US manufacturer and one Boeing abandoned years ago. It says Boeing also did not compete for the Delta contract.
The Commerce Department assessed the plane as part of the 100-150-seat category with a minimum range of 2,900 nautical miles range
The battle is not yet over: The Commerce Department is not scheduled to issue its final determination until December and the US International Trade Commission will issue a judgment in early 2018 that will determine whether Boeing suffered any injury because of the C Series.
This would see an order issued in February.
Boeing said the decision affirmed that Bombardier had “taken massive illegal subsidies in violation of existing trade law”.
The US manufacturer has previously claimed Bombardier sold the CS100 for just $US19.6 million but it cost $US33.2m to make. The plane’s listed at $US79.5m, although no airline ever pays the full sticker price.
Estimates are the tariff would boost the price of the CS 100 to $US40m, potentially undermining the Delta deal.
“Global trade works only if everyone plays by the rules that we’ve all endorsed to ensure fair competition, as adjudicated by independent national and international bodies,’’ Boeing said in its response to the decision.
“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.”