Bombardier facing 300% tariff on C-Series exports

Saul Bowman
October 8, 2017

Bombardier Inc's aerospace business spent $2.4 billion in the United States a year ago, tapping more than 800 suppliers in all but three US states, according to a confidential Bombardier report seen by Reuters on Thursday.

A final ruling in the case is due until early next year.

Bombardier can appeal any sanctions to a United States court or to a dispute-resolution panel created under the North American Free Trade Agreement.

Bombardier shares were last down 0.5 per cent to $2.18. Some analysts said the muted response reflected a view that the penalties might not actually be applied.

Bombardier last week finalised a deal to sell up to 50 Q400 planes to India's SpiceJet valued at $1.7 billion by list prices, its largest single order to date for the turboprop plane which will boost its presence in the country.

Countervailing duties target what the US considers unfair subsidies, while anti-dumping tariffs go after the alleged selling of imported products below market value.

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

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.

A second levy of 80% is also being applied to Bombardier's sales to the U.S. after a preliminary finding that the jets were sold below cost price to Delta Air Lines in 2016.

U.S. aerospace analyst Richard Aboulafia said the high duties will hurt CSeries sales efforts to leasing companies and shut the plane out of the U.S. unless the U.S. International Trade Commission effectively ends the challenge in February.

It says Boeing can't justify its claim of being harmed since it doesn't make a plane the size of the CS100.

The American firm has said the row had nothing to do with limiting competition, but was focused on maintaining a level playing field.

"The United States is committed to free, fair and reciprocal trade with Canada, but this is not our idea of a properly functioning trading relationship", stated Commerce Secretary Wilbur Ross.

"We will continue to verify the accuracy of this decision, all the while doing our best to defend the american companies and their workers", said Mr. Ross in a press release.

But the industry is not so simple. The tariff effectively quadruples the price of the CSeries jets for US buyers. The plane supports an estimated 22,700 jobs and Bombardier's aerospace division spent $2.14 billion in the United States past year, according to the company and documents seen by Reuters.

In a separate case, the World Trade Organization last week approved Brazil's request to investigate Canada's alleged use of more than $3 billion in government subsidies to produce Bombardier aircraft.

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