U.S. government slaps Bombardier with massive tariff
Published Tuesday, September 26, 2017 6:56PM EDT
Last Updated Wednesday, September 27, 2017 11:39AM EDT
The U.S. government says Bombardier has been selling planes at unfair prices so it's slapping a massive tariff on the aircraft manufacturer's CS100 jets.
Following a complaint from Boeing the U.S. Dept. of Commerce has, in a preliminary decision, placed a 219 percent duty on the sales of Bombardier planes to the U.S.
In a statement Secretary of Commerce Wilbur Ross said the duty was equivalent to the subsidies given by governments in Canada.
"The U.S. values its relationship with Canada, but even our closest allies must play by the rules," said Ross.
Bombardier called it an absurd decision.
"It's completely disconnected of the reality of aircraft programs, how we build them, how we sell them," said Olivier Marcil, VP External Communications for Bombardier.
He said Boeing was using U.S. law to stifle competition for a deal they never even tried to get.
"They did not and they do not produce an aircraft in the segment of the CSeries. It's not like they finished number two in a deal. They were not even in the playing field," said Marcil.
"We're going to fight this to the end."
Delta agreed to buy 75 C-Series planes in April 2016, with an agreement to buy up to 125, for up to $5.6 billion.
U.S. plane manufacturer Boeing said there was no way Bombardier could produce planes so cheaply and so complained to the U.S. government, which made its ruling Tuesday evening.
Boeing had been asking for an 80 percent duty, much less than the 219 percent duty imposed by the U.S. government.
The penalties are only due when Bombardier delivers the first plane to Delta next year.
The duties are not necessarily permanent: U.S. officials still need to investigate the matter further to determine if Delta's purchase of Bombardier planes actually hurt Boeing. That investigation is expected to take at least six months.
Quebec's Council of Employers denounced the actions of the U.S. Dept. of Commerce, saying that the American government was acting solely to weaken a smaller competitor.
In wake of this, the CPQ called on the Canadian federal government to drop its order for 18 Super Hornet fighter jets -- replacements for the military's aging CF-18s.
Quebec's economic development minister Dominique Anglade called the ruling a "frontal attack" on Quebec's economy.
"When you look at the size of what is imposed right now, 220 percent, you can see it's sending a pretty strong message. Earlier I said in French it's no to innovation and it's no to competition," said Anglade.
She said Quebec is already looking elsewhere for trade opportunities.
"First of all we will fight the decision, no question about that, and secondly we will make sure that we do everything that we are capable of doing to penetrate new markets," said Anglade.
Quebec's pension plan, the Caisse de Depot, has a 30 percent stake in Bombardier's rail division.
Before the ruling came down JetBlue, which does not use Boeing or Bombardier planes, urged the U.S. International Trade Commission to deny Boeing's petition, saying imposing tariffs on the CSeries would harm competition and result in higher airfares.
Spirit Airlines and Sun Country Airlines made similar petitions.
Meanwhile Canada's Foreign Affairs Minister had dinner Tuesday with her NAFTA counterparts.
In spite of Tuesday's ruling, financial markets seem upbeat about Bombardier because of a report that the company is close to making deals with three airlines in China.
Sources say the company hopes to complete a deal next month when Prime Minister Trudeau visits Asia.