US upholds 300% duties on disputed Bombardier jets, a win for Boeing

Key Points
  • A final decision is expected by February.
  • Bombardier intends to make the jets in Alabama.
  • Delta last year agreed to buy at least 75 C Series jets from Bombardier.
US finalizes proposed Bombardier C-series tariffs
US finalizes proposed Bombardier C-series tariffs

The U.S. Commerce Department on Wednesday finalized duties of nearly 300 percent on passenger jets made by Bombardier, a win for Boeing, which lodged the complaint against its Canadian rival.

The decision escalates the bitter trade dispute between the two air craft manufacturers, a battle that has ensnared one of the largest U.S. airlines and strained relations between the U.S. and Canada.

The Commerce Department first recommended the duties on Bombardier's CSeries jets, earlier this autumn after Boeing complained that the planes were dumped in the U.S. below cost and that the company received unfair government subsidies in Canada.

Bombardier said the Commerce Department did not consider a common practice of airplane manufacturers in which they offer discounts to launch customers.

"Unfortunately, the Commerce Department decision is divorced from this reality and ignores long-standing business practices in the aerospace industry, including launch pricing and the financing of multibillion dollar aircraft programs," the company said in a statement. "Moreover, we are deeply disappointed that the Commerce Department did not take this opportunity to rectify its past errors."

Delta Air Lines in 2016 agreed to buy at least 75 of the some 100-seat planes from Bombardier.

In October, European aerospace giant Airbus, Boeing's chief rival, said it would take a majority stake in the CSeries program, in a twist.

The U.S. International Trade Commission is scheduled to make a determination by Feb. 1 if Boeing was harmed by Bombardier's actions, a decision that will determine whether the investigation will be terminated.

Delta CEO Ed Bastian has repeatedly said the airline won't pay the tariffs and called the duties "absurd." Spokesman Morgan Durrant reiterated the final say on the matter will come in early 2018 when the ITC makes its decision, but declined to comment further.

The airline has not taken delivery of the C Series jets yet, so it has not been subjected to the tariffs. Delta, the second-largest U.S. airline, said it opted for the Bombardier jets because Boeing offered it no feasible alternative.

Boeing cheered the Commerce Department's decision on Wednesday.

"Today's decision validates Boeing's complaints regarding Bombardier's pricing in the United States, pricing that has harmed our workforce and U.S. industry," the company said in a statement. "We look forward to the conclusion of this matter when the International Trade Commission makes a final decision in early 2018."

In an effort to escape what could be crippling import duties, Bombardier has said it intends to build the planes in Alabama, where its newfound partner Airbus produces single-aisle jets.

But that arrangement didn't appear to be taken into account. The Commerce Department's statement on Wednesday said that Bombardier, petitioners and the government of Canada agreed that the proposed arrangement "does not impact these investigations."

Earlier this month Canada's government ditched plans to buy 18 new Super Hornet fighter jets made by Boeing. In September, Prime Minister Justin Trudeau had threatened not to buy the jets from Boeing unless it dropped its suit against Bombardier.