U.S. Hits Bombardier with New C Series Duties

 - October 6, 2017, 3:10 PM
Preliminary punitive tariffs imposed on the Bombardier C Series by the U.S. Commerce Department now total nearly 300 percent. (Photo: Bombardier)

The Department of Commerce has proposed a 79.82 antidumping tariff on sales of Bombardier C Series jets in the U.S., the agency announced Friday. The decision comes only nine days after the department announced it would impose countervailing measures amounting to 219.63 percent on the new narrowbodies. Together, the near 300 percent duty on each airplane would effectively disqualify them from sale in the U.S., removing the biggest market from Bombardier's available pool of potential customers. The rulings come ahead of planned delivery next spring of the first of 75 Bombardier CS100s to Delta Air Lines, the U.S. launch customer for the program.

The latest determination stems from a complaint filed by Boeing with the International Trade Commission in April that Bombardier sold the narrowbody jets for well below their cost of manufacture with the help of improper subsidies from the province of Quebec and the Canadian federal government. Bombardier has contested both the basis of the claims and the cost estimates provided by Boeing in its complaint, arguing the C Series competes with no Boeing product, and therefore could not have caused any harm to the U.S. company. Boeing claims Bombardier sold the airplanes for $19.6 million each, or some $13.8 million less than they cost to manufacture.

In a statement, the Commerce Department said it had to calculate the value of the penalties based on so-called adverse facts available (AFA) because Bombardier failed to fully answer the department's questionnaire. It said it would continue to evaluate the accuracy of its determination based on whatever new information comes available. Bombardier insists it cannot give the Commerce Department an accurate production cost figure because it hasn't yet incurred the costs. 

"As we have explained repeatedly to the department, Bombardier cannot provide the production costs for the Delta aircraft for a very simple reason; they have not yet been produced," the company said in a statement. "Commerce’s attempt to create future costs and sales prices by looking at aircraft not imported into the United States is inappropriate and inconsistent with the agency’s past practices. This departure from past precedent and disregard of well-known industry practices is an apparent attempt to deprive U.S. airlines from enjoying the benefits of the C Series, even though Boeing abandoned the segment of the market served by the C Series more than a decade ago."

Bombardier also characterized the Commerce Department's approach as hypocritical, citing Boeing’s own program cost accounting practices of selling aircraft below production costs for years after launching a program. "This hypocrisy is appalling, and it should be deeply troubling to any importer of large, complex and highly engineered products," said Bombardier. "Commercial aircraft programs require billions in initial investment and years to provide a return on that investment.  By limiting its antidumping investigation to a short 12-month period at the very beginning of the C Series program, Commerce has taken a path that inevitably would result in a deeply distorted finding."

The ITC must determine that the subsidies to Bombardier harmed Boeing before it begins to impose any tariffs. Schedules call for the Department of Commerce to announce final determination on December 19 and the International Trade Commission to issue its final ruling on February 1. If both rule in the affirmative, tariffs would take effect on February 8.