U.S. trade panel strikes down tariff on C Series jets, dealing blow to Boeing

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

The decision Friday is a significant blow to Chicago-based Boeing and gives an unexpected boost to Airbus, Boeing’s rival in the commercial airline market.

By voting in Bombardier’s favor, the commission has certified that it does 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 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.”

In Wichita, Bombardier employs 1,600 people who assemble Learjet business jets, perform maintenance and overhaul all Bombardier business jet models, and flight test all of the company’s aircraft including the C Series.

The dispute over imported jets stems from a $5 billion deal struck between Bombardier and Atlanta-based Delta Air Lines in 2016 for 75 C Series commercial airplanes.

Boeing contends 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 its own subsidies in the U.S., which include federal contracts and tax breaks from state governments.

Whether the two planes are direct competitors was a key question in Friday’s ruling. Boeing contends that Bombardier’s C Series competes with its own 737 Max 7, something Bombardier disputes.

Boeing officials have said they tried to resolve their concerns diplomatically before Trump took office, to little success. But it wasn’t until May 2017 that the firm sought punitive tariffs against the Canadian airliner, a move that drew immediate condemnation from officials in Canada and the United Kingdom, where the plane’s wings are assembled. The dispute heated up late last year when the U.S. Commerce Department issued preliminary rulings in Boeing’s favor, levying nearly 300 percent tariffs on jets imported from Canada.

Aerospace experts were surprised by the size of the tariff, which effectively quadruples the price that airlines like Delta would have to pay when they acquire C Series planes.

The Canadian government has already retaliated against Boeing.

Late last year, Canadian officials made good on an earlier threat to cancel a proposed sale of F/A-18 Super Hornet fighter planes, dealing a blow to Boeing’s defense contracting business.

Now, Boeing finds itself in a situation where 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 airline looks forward to introducing the innovative CS100 to its fleet for the benefit of Delta’s employees, customers and shareowners,” Delta said in a statement Friday.

The dispute took a twist in mid-October when Bombardier agreed to sell the C-series plane to Airbus, Boeing’s European competitor. 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 said that moving production in this way should allow them to avoid the tariff.

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

Contributing: Jerry Siebenmark of The Eagle

This story was originally published January 26, 2018 at 4:02 PM with the headline "U.S. trade panel strikes down tariff on C Series jets, dealing blow to Boeing."