World Economy

US Slaps 220% Import Duties on Bombardier Jet

US Slaps 220% Import Duties on Bombardier JetUS Slaps 220% Import Duties on Bombardier Jet

Bombardier Inc.’s all-new jetliner, which cost at least $6 billion to develop, just got harder to sell in the world’s largest aviation market.

The US Commerce Department slapped import duties of 220% on the C Series plane Tuesday, citing improper subsidies after a complaint by Boeing Co. The preliminary determination threatens to upend Bombardier’s planned deliveries next year to Delta Air Lines Inc., which ordered at least 75 jets with a list value of more than $5 billion, Bloomberg reported.

The US government’s decision on the aircraft added to the pressure on Bombardier. Separately, the company missed out on a potential merger of its rail unit with that of Siemens AG. Hours before the Commerce Department’s announcement, Siemens and France’s Alstom SA agreed to join their rail businesses in a deal that gives rise to a European transportation giant better able to counter competition from China.

The US penalties create a new hurdle for Bombardier Chief Executive Officer Alain Bellemare, who is trying to turn the company around after the C Series came in more than two years late and about $2 billion over budget. With the exception of a two-aircraft order from Air Tanzania in December, Bombardier hasn’t booked a major sale of C Series jets since the Delta deal in April 2016.

“We believe the key area of concern will be what Delta does with its order,” Walter Spracklin, an analyst at RBC Capital Markets, said in a note to clients. “Moreover, the impact on other US-based airlines will also be in question under such a ruling.”

 Trade Tensions

The Bombardier-Boeing spat is roiling trade relations just as the US tries to renegotiate the North American Free Trade Agreement with Canada and Mexico. “Even our closest allies must play by the rules,” US Commerce Secretary Wilbur Ross said in announcing the decision on Canadian jets with 100 to 150 seats. Canada “strongly disagrees” with the US probes into its aerospace industry, Foreign Affairs Minister Chrystia Freeland said in a statement.

“This is clearly aimed at eliminating Bombardier’s C Series aircraft from the US market,” said Freeland.

The import duties could be reversed by the US International Trade Commission if the trade tribunal determines that Boeing wasn’t injured by Bombardier’s jet program. That decision is expected to be made next year. Prime Minister Justin Trudeau has said the Canadian government won’t buy Boeing military jets unless the company drops its case against Bombardier.

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