U.S. backs 300 percent in duties on Bombardier after Boeing complaint

By Alwyn Scott
FILE PHOTO: A Bombardier CS100 aircraft sits in their hangar after a news conference announcing a contract with Delta Air Lines, in Mirabel, Quebec, Canada April 28, 2016. REUTERS/Christinne Muschi/File Photo

By Alwyn Scott

WASHINGTON (Reuters) - The U.S. Commerce Department on Friday notched up proposed trade duties on Bombardier Inc CSeries jets to nearly 300 percent, affirming Boeing Co's complaint that the Canadian company received illegal subsidies and dumped the planes at "absurdly low" prices.

The decision underscored the defensive trade policy of U.S. President Donald Trump, and could effectively halt sales of Bombardier's innovative new plane to U.S. airlines by quadrupling the cost of the jets imported to the United States.

The Commerce Department proposed a 79.82 percent antidumping duty on Friday, on top of a 219.63 percent duty for subsidies announced last week.

The new duty follows a preliminary finding that Bombardier sold 75 CSeries jets below cost to Delta Air Lines Inc in 2016. The total was well above the 80 percent Boeing sought in its complaint.

The proposed duties would not take effect unless affirmed by the U.S. International Trade Commission (ITC) early next year.

The duties are expected to heighten trade tensions between the United States, Canada and Britain, where CSeries wings are made. The United States, Canada and Mexico also are negotiating to modernize the North American Free Trade Agreement.

After the first duty was announced on Sept. 26, Canada and Britain threatened to avoid buying Boeing military equipment, saying duties on the CSeries would reduce U.S. sales and put thousands of Bombardier jobs in their countries at risk.

Bombardier shares were last up 0.5 percent to C$2.20. Some analysts said the muted response reflected a view that the penalties might not actually be applied.

Boeing, the world's largest plane maker, hailed the decision and hinted at an alternative for Bombardier.

"These duties are the consequence of a conscious decision by Bombardier to violate trade law and dump their CSeries aircraft to secure a sale," Chicago-based Boeing said in a statement.

"Bombardier always has the option of coming into full compliance with trade laws," Boeing added.

Canada's foreign ministry said Boeing was "manipulating the U.S. trade remedy system" to keep the CSeries out of the country.

Canada is in "complete disagreement" with the decision and would keep raising concerns with the United States and Boeing, Foreign Minister Chrystia Freeland said in a statement.

To win its case before the ITC, Boeing must prove it was harmed by Bombardier's sales, despite not using one of its own jets to compete for the Delta order.

Bombardier said it was confident that the ITC would find Boeing was not harmed, calling the Commerce Department decision a case of "egregious overreach."

Delta said the decision was preliminary and it was confident the ITC "will conclude that no U.S. manufacturer is at risk" from Bombardier's plane.

Boeing has said the dispute was about "maintaining a level playing field" and was not an attack on Canada or Britain.

U.S. Commerce Secretary Wilbur Ross said the decision affirmed Trump's "America First" policy.

"We will ... do everything in our power to stand up for American companies and their workers," Ross said in a statement.

But the industry is not so simple. More than half of the purchased content of each CSeries aircraft comes from U.S. suppliers, Bombardier has said. The plane supports an estimated 22,700 jobs and Bombardier's aerospace division spent $2.14 billion in the United States last year, according to the company and documents seen by Reuters.

Boeing has said the CSeries would not exist without hundreds of millions of dollars in launch aid from the governments of Canada and Britain and a $2.5 billion equity infusion from the province of Quebec and its largest pension fund in 2015.

(Additional reporting by David Ljunggren in Ottawa, Tim Ahmann in Washington and Allison Lampert in Montreal; Editing by Meredith Mazzilli)