Home / NEWS / U.S. trade panel strikes down 300 percent tariffs on Canadian jets, dealing a blow to Boeing

U.S. trade panel strikes down 300 percent tariffs on Canadian jets, dealing a blow to Boeing

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TOP: A Boeing 737 MAX at Paris-Le Bourget Airport in June. (Pascal Rossignol/Reuters). ABOVE: Shareholders view a Bombardier CS300 in Mirabel, Quebec, in April 2016. (Christinne Muschi/Reuters)

A U.S. International Trade Commission panel struck down 300 percent tariffs against narrow-body Canadian jetliners, siding with Montreal-based jetmaker Bombardier in a contentious trade dispute between the United States and Canada.

The unanimous decision by the four-member panel is a significant blow to Chicago-based aerospace giant Boeing and gives an unexpected boost to Airbus, Boeing’s closest commercial competitor in the U.S. commercial airline market.

It also removes a sticking point in relations between the United States and Canada at a time when officials from the two countries are meeting in Montreal to renegotiate the North American Free Trade Agreement, which covers the United States, Canada and Mexico.

By voting in Bombardier’s favor, judges have certified that they do not believe Boeing’s business has been materially harmed by Bombardier’s trade practices, a key qualifier for imposing tariffs.

“We are disappointed that the International Trade Commission did not recognize the harm that Boeing has suffered from the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market,” Boeing spokesman Dan Curran said in a statement. “Those violations have harmed the U.S. aerospace industry, and we are feeling the effects of those unfair business practices in the market every day.”

Bombardier applauded the ruling.

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

The ruling comes as a growing number of U.S. companies file complaints against overseas rivals, hopeful to win support from the Trump administration.

On Tuesday, the White House signed off on steep tariffs on washing machines imported from South Korea and solar-panel components from China. Those decisions had immediate economic and diplomatic implications, with at least one importer promising to raise prices and South Korean leaders promising to try the case at the World Trade Organization.

The fight over imported jets stemmed from a $5 billion deal struck between Bombardier and Atlanta-based Delta Air Lines in 2016 for 75 CS100 commercial airplanes and has since grown into a multi-country trade dispute entangling French and Brazilian aerospace firms.

Boeing argues that Bombardier’s deal with Delta is a violation of U.S. trade laws against “dumping,” a term that refers to selling products abroad at a lower price than they would be sold at home. Boeing also alleges that Bombardier is propped up by unfair government subsidies that allow it to undercut foreign competitors. Bombardier has countered that Boeing benefits from subsidies in the United States, including federal contracts and tax breaks from state governments.

Whether the Bombardier planes are direct competitors with Boeing planes was a key question in Friday’s ruling. Boeing argues that Bombardier’s C Series planes compete with its 737 MAX 7, a narrow-body commercial jetliner, something Bombardier denies.

Boeing officials have said they tried to resolve their concerns diplomatically before Donald Trump took office, to little success. It wasn’t until May that the company sought punitive tariffs against the Canadian airliner, a move that drew immediate condemnation from officials in Canada and the U.K., where the plane’s wings are assembled. Aerospace companies have traditionally avoided such measures, for fear of alienating potential business partners, including the U.S. airlines that buy jets from foreign firms.

Canadian and British officials reacted sharply to the news, accusing Boeing of pursuing protectionist measures for its financial benefit.

The dispute heated up late last year when the U.S. Commerce Department issued preliminary rulings in Boeing’s favor, levying 300 percent tariffs on jets imported from Canada.

Aerospace experts were surprised by the size of the tariff, which effectively quadrupled the price that airlines such as Delta would have to pay when they acquire new CS100 model planes.

The Canadian government has already retaliated against Boeing.

Late last year, Canadian officials made good on an earlier threat to cancel a proposed purchase of F/A-18 Super Hornet fighter planes, dealing a blow to Boeing’s defense contracting business, which was already smarting from losses on giant U.S. defense contracts for the F-35 Joint Strike Fighter and the B-21 Raider.

Now, Boeing finds itself in a situation in which it has alienated a key customer for its defense business in the Canadian military and irked a key commercial customer in Delta Air Lines, and it has not succeeded in limiting its foreign competitors’ U.S. expansion.

The dispute took a twist in mid-October when Bombardier agreed to sell the C Series plane to Airbus, a deep-pocketed European aerospace giant that is Boeing’s closest competitor in the commercial aviation market. In a sign of Bombardier’s financial difficulties, the company handed over a controlling stake as part of a deal that included no cash payment.

As part of the combination, the companies promised to shift future production of the plane from Canada to Mobile, Ala. Airbus’s executives argued that moving production in that way should allow them to avoid the tariff.

“It’s not intended to circumvent anything, but the fact is that when you produce an aircraft in the U.S. it’s not subject to any U.S. import tariff rules,” Bombardier President Alain Bellemare said in an October news conference.

In its arguments before the trade commission, Boeing’s lawyers cast doubt on the idea that Airbus will set up an Alabama-based production line, arguing that the company could change its plans.

“There is no joint venture. Period. And there may never be one,” Boeing’s lawyers argued in the company’s most recent official filing with the commission. “The parties have not broken ground on anything in Mobile related to the joint venture, let alone a full C Series production facility.”

Boeing later revealed in December that it is pursuing a joint venture with Brazilian aerospace firm Embraer, a close competitor with Bombardier in the market for smaller commercial jets. The two companies have not announced a finalized deal yet.

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