(Updated to include new statement from Bombardier)
The U.S. Commerce Department on Thursday said it planned to launch new antidumping and countervailing duty investigations into Bombardier's sale of 75 CS100 narrowbodies to Delta Air Lines. The announcement comes as the U.S. International Trade Commission (ITC) launches its own investigation into the matter in response to an April 27 complaint from Boeing that Bombardier sold each airplane for some $13.8 million less than they cost to manufacture.
“The U.S. market is the most open in the world, but we must take action if our rules are being broken,” said Commerce Secretary Wilbur Ross. “While assuring the case is decided strictly on a full and fair assessment of the facts, we will do everything in our power to stand up for American companies and their workers.”
If the Commerce Department determines that Boeing’s so-called dumping charges carry merit and the ITC determines that dumped and/or unfairly subsidized Canadian imports of civil aircraft into the United States harm U.S. industry, the Commerce Department can impose duties on the imports equal to the dollar value of the improper actions.
The ITC plans to make its preliminary determinations by June 12. If the commission determines that the Bombardier sale to Delta unfairly damages U.S. industry the Commerce Department will continue its investigations and render a preliminary countervailing duty determination in July, followed by a preliminary antidumping determination in October, absent any deadline extensions.
If it determines that dumping did occur, the department can instruct U.S. Customs and Border Protection to start collecting cash deposits from all U.S. companies importing the C Series. As of now Delta remains the only U.S. airline to order the airplane.
For its part, Bombardier has disputed the figures cited by Boeing, calling the allegations “absurd.”
“Boeing’s number is materially wrong; it is off by millions,” said Bombardier in a written statement. “We are confident that the government investments and our commercial activities comply with the laws and regulations in the jurisdictions where we do business.”
In a separate statement issued following a Thursday staff hearing before the ITC in Washington, D.C., Bombardier expressed confidence that facts would support its position.
“Our presentation provided the ITC with information about our superior C Series aircraft, which was designed to fill a market that Boeing abandoned,” it said. “We also highlighted that Boeing never lost a sale because of the C Series and that Boeing actually didn't compete against the C Series at Delta. In fact, Boeing executives have specifically and publicly acknowledged that the company does not make a plane of the size that Delta sought.”
In Boeing's petition, a footnote referencing its claims regarding the cost of the C Series refers to Delta's first- and second-quarter 2016 10Q reports with the Securities and Exchange Commission, and Bombardier's first quarter 2016 report, which cites a $500 million “onerous cost provision” associated with C Series sales to Delta, Air Canada and Air Baltic.
The contract with Delta includes options for an additional 50 aircraft, and the airline can convert a portion of its commitment to orders for the larger CS300. The Atlanta-based carrier will serve as the U.S. launch airline of the 110-seat CS100 as well as Bombardier’s largest C Series customer. Delta expects to start taking deliveries next spring.
Boeing had offered Delta the 737 Max 7, a re-engined derivate of the 737-700 that competes directly with the C Series. The U.S. company estimates that the C Series has received government support totaling more than $3 billion.
Delta’s order came six months after the province of Quebec agreed to infuse $1 billion in the financially strapped C Series program, giving it a 49.5-percent stake in a limited partnership with Bombardier. Less than a year later the Canadian federal government agreed to grant Bombardier C$372.5 million in interest-free loans for both the C Series and the Global 7000 business jet.