Boeing Is Asking the Commerce Department to Investigate Bombardier for Dumping Jets
Boeing (BA) on Thursday asked the U.S. Commerce Department to investigate alleged subsidies and unfair pricing for Canadian plane maker Bombardier‘s (BDRAF) new CSeries airplane, adding to growing trade tensions between the United States and Canada.
The petition against Canada’s new competitor to the Boeing 737 aircraft came just days after the Commerce Department imposed duties averaging 20% on imports of Canadian softwood lumber, saying that the product’s origin from public land amounted to an unfair government subsidy.
On Wednesday, U.S. President Donald Trump told Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto that he intended to begin renegotiating the 23-year-old North American Free Trade Agreement, after White House officials said Trump had been considering an order to withdraw from the pact.
Boeing said in its petition that Bombardier, determined to win a key order from Delta Air Lines (DAL) after losing a competition at United Airlines, had offered its planes to the airline at an “absurdly low” $19.6 million each, well below what it described as the aircraft’s production cost of $33.2 million.
“Propelled by massive, supply creating and illegal government subsidies, Bombardier Inc has embarked on an aggressive campaign to dump its CSeries aircraft in the United States,” Boeing said in its petition.
Boeing‘s similarly sized 737-700 model has a list price of $83.4 million, with the new 737-MAX 7 priced at $92.2 million. Sales discounts from list prices are typically 40% to 50% in the industry.
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In April 2016, Bombardier won the Delta order, its biggest yet, for 75 CS100 jets, worth an estimated $5.6 billion based on the list price of about $71.8 million.
In its complaint against Bombardier, Boeing argued that the CSeries program would not exist without hundreds of millions of dollars in launch aid from the governments of Canada, Quebec and Britain, or a $2.5 billion equity infusion from Quebec and its largest pension fund in 2015.
Quebec Economy Minister Dominique Anglade said in a statement that her government would defend “the commercial partnership concluded with Bombardier” for a $1 billion injection in the CSeries.
Boeing also took a shot at European rival Airbus (AIRBUS-GROUP-N-V) , which it accuses of benefiting from similar “unfair” government subsidies in a long-running dispute before the World Trade Organization.
Bombardier is “taking a page out of the Airbus strategy book” by trying to muscle into the U.S. market with cut-rate pricing, Boeing charged.
A Commerce Department spokesman said the petition would be given “a thorough review” and further comment was premature.
Commerce Secretary Wilbur Ross has taken action in recent weeks to protect the U.S. steel and aluminum industries from foreign competition, launching national security investigations that could lead to import restrictions.
An investigation could lead to duties on the Bombardier aircraft to offset any below-cost pricing or any subsidies deemed unfair.
In a statement, Canada’s government objected to Boeing‘s allegations and noted that the CSeries has many U.S. suppliers, including for engines, and supports thousands of U.S. jobs.
“The Government of Canada will mount a vigorous defense against these allegations and stand up for aerospace jobs on both sides of the border,” it said in the statement.
Bombardier’s chief executive conceded the company had been “aggressive” on pricing in order to win, and sources familiar with the deal pegged the discount closer to two-thirds off the nominal list price.
Bombardier said in a statement that it was reviewing the petition and said it structures its dealings to ensure compliance with all relevant laws.
The request for anti-dumping measures was also addressed to the U.S. International Trade Commission, an independent U.S. trade body that will review any decisions by the Commerce Department.