U.S. to Slap Big Tariff on New Jetliner From Canada's Bombardier -- Update

09/26/17 08:08 PM EDT
By Doug Cameron 

U.S. officials said they plan to slap a large tariff on sales of a new Bombardier Inc. jetliner to U.S. airlines, inflaming a simmering trade spat with Canada.

The Commerce Department ruled in favor of a complaint from Boeing and said it would add a 220% tariff to the cost of the new CSeries jet. The jet's sale to Delta Air Lines Inc. last year prompted a complaint from Boeing.

The U.S. agency's decision late Tuesday added to investor uncertainty over the fate of Montreal-based Bombardier after two of its main rivals in the global rail market agreed to combine their transport operations, triggering a double-digit gain in its share price during Tuesday trading.

"The Commerce Department will instruct U.S. Customs and Border Protection to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on these preliminary rates," the department said in a statement.

Delta, whose 70-jet order for the CSeries triggered the case, said it was confident the U.S. would take no action against it.

"Boeing has no American-made product to offer because it canceled production of its only aircraft in this size range, the 717, more than 10 years ago," it said in a statement.

The Commerce Department ruled in favor of Boeing's claims on the jet pricing despite vehement denials from Bombardier and Canadian officials.

Boeing said that "subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing's global supply chain."

Bombardier said Tuesday evening it strongly disagrees with the trade ruling.

"The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft program, " it said.

The Montreal-based company accused Boeing of using a "skewed process " to "stifle competition and prevent U.S. airlines and their passengers from benefiting from the CSeries. "

Canadian Foreign Minister Chrystia Freeland said Tuesday evening, while she hosted U.S. Trade Representative Robert Lighthizer at a private dinner in Ottawa, that Canada strongly disagrees with the U.S. tariff ruling.

"This is clearly aimed at eliminating Bombardier's CSeries aircraft from the U.S. market," she said, reflecting the strident tone her Liberal government has taken in recent weeks about Boeing's trade complaint.

The trade ruling is the second setback for the struggling Canadian transportation company. Bombardier was left on the sidelines when Germany's Siemens AG announced that it is forming an alliance with French train maker Alstom SA to create a train business with $18 billion of annual sales. The combination creates the world's second-largest train maker.

Bombardier had been in discussions with Siemens since early this year to form a similar partnership but talks broke down in August.

The trade decision was issued after the close of markets Tuesday. Speculation about failed talks with Siemens last week sent the price of Bombardier's Class A shares tumbling more that 14% since Thursday to a low of C$2.07 Tuesday morning on the Toronto Stock Exchange. A late day rally in heavy trading Tuesday lifted the stock to C$2.30 by the day's close.

The dispute over the CSeries jet has already frozen talks on a potential multibillion-dollar deal in which Canada would buy Boeing-made combat jets, and the trade ruling comes as talks continue between the U.S., Canada and Mexico over the future of the North American Free Trade Agreement.

The U.K. government had also called on Boeing and the U.S. to drop the punitive measure, fearing it could affect jobs at a Bombardier facility in Northern Ireland.

Industry experts believe Boeing is seeking to prevent Bombardier from expanding its product line and emulating the rise of Airbus SE, which over the past 30 years has claimed half the commercial jetliner market.

Beside the Nafta disagreements, other disputes exist between the U.S. and Canada over lumber and dairy exports. U.K. Prime Minister Teresa May has been drawn into the spat because of the Northern Ireland facility. Mrs. May relies on Northern Ireland's Democratic Unionist Party to maintain a majority in the British Parliament.

Write to Doug Cameron at doug.cameron@wsj.com

 

Corrections & Amplifications

This article was corrected Sept. 29, 2017 at 2:25 p.m. ET because an earlier version misstated the agency in the second paragraph. The Commerce Department, not the The International Trade Commission, ruled in favor of a complaint from Boeing Co. over alleged price subsidies for the Bombardier Inc. CSeries jetliner.

(END) Dow Jones Newswires

September 26, 2017 20:08 ET (00:08 GMT)

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