Canada’s 100- to 150-seat civil aircraft do not injure US industry

Airbus took control of Bombardier C Series production, marketing, in October 2017.

On Jan. 26, 2018, the United States International Trade Commission (USITC) determined that “a U.S. industry is not materially injured or threatened with material injury by reason of imports of 100- to 150-seat large civil aircraft from Canada that the U.S. Department of Commerce (DOC) has determined are subsidized and sold at less than fair value.”

The Boeing Co. claimed “Bombardier has taken billions of dollars in illegal government subsidies to prop up its C Series program” and alleged that the price Delta Airlines was paying for 75 Bombardier C Series aircraft ($19.6 million each) was significantly below production cost. Fred Cromer, president of Bombardier Commercial Aircraft, told CNBC in June the numbers quoted by Boeing “are way off base.”

The DOC asked Bombardier for information, but the Canadian company refused because rivals would gain access to its business and pricing structure. After the refusal, the DOC upheld Boeing’s complaint and issued a preliminary 300% anti-dumping tariff on Bombardier C Series aircraft in December 2017. Now, because of the USITC’s negative determinations, no antidumping or countervailing duty orders will be issued.

The tariff threat brought Boeing rival Airbus into the controversy in October 2017, when Airbus officials announced the company was taking a majority stake to develop, market and sell in the Bombardier C-Series jet. The non-cash transaction between Bombardier and Airbus paves the way for C-Series production at Airbus’ facility in Mobile, Alabama, exempting it from any anti-subsidy or anti-dumping duties.

Bombardier estimates that the new Alabama assembly line being planned for the C Series will add 400 to 500 direct U.S. jobs, along with thousands more indirect, along with approximately $300 million in new foreign direct investment to the United States. Bombardier had orders for 346 C Series planes at the time of the announcement.

In December 2017, Boeing management announced it was engaged in discussions with Embraer regarding a potential combination. Embraer produces airliners in the 100-to-150-seat class.

Bombardier responded to the USITC decision with a press release stating it “is a victory for innovation, competition, and the rule of law,” adding that the C Series’ development and production represent thousands of jobs in the United States, Canada, and the United Kingdom.

The Boeing Co. responded, “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. 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 officials claimed the C Series did not threaten Boeing, which did not compete in the Delta campaign, and did not offer a 100-to-150-seat jetliner since halting production of the 717 and 737-600.

T. Augustine Lo, an attorney at the international law firm Dorsey & Whitney who specializes in commercial litigation, government enforcement actions, and customs compliance, says, “We should not be surprised if Boeing’s response to this ITC decision is to file a lawsuit in the days or weeks ahead.”

USITC Chairman Rhonda K. Schmidtlein, Vice Chairman David S. Johanson, and Commissioners Irving A. Williamson and Meredith M. Broadbent voted in the negative.

USITC’s public report will be available by March 2, 2018.