Thursday, 21 December 2017

US upholds 300% duties on Bombardier jets.

The United States of America's Commerce Department confirmed on Wednesday it had finalised trade duties of nearly 300 percent on the CSeries of passenger jets made by Canadian firm Bombardier. 

That decision brings a bitter and acrimonious trade-war between the US, Canada and the UK a step closer which also threatens to tumble over into other business areas other than aviation.  

The Commerce Department first recommended the duties against Bombardier's CSeries jets earlier this year following complaints by American mega-giant manufacturer Boeing. He bemoaned the belief that Bombardier had sold the C Series to US airline Delta at prices below the cost of production.  

Many in the aviation industry see Boeing's increasingly Trump-like bullying of Bombardier as absurd, as the US manufacturer doesn't make commercial aircraft of the same size and category as the CSeries from Bombardier. Boeing also relies on similar government subsidies on almost all of its military products as well as taking advantage of various tax breaks and offering such substantial discounts on large orders for its commercial aircraft - so far below list prices, that they defy belief that they can be produced at cost price.    

Bombardier said yesterday that the US Commerce Department had not considered that it was industry standard practice to offer discounts to launch customers. "Unfortunately, the Commerce Department decision is divorced from this reality and ignores long-standing business practices in the aerospace industry, including launch pricing and the financing of multibillion-dollar aircraft programs," the company said in a statement. "Moreover, we are deeply disappointed that the Commerce Department did not take this opportunity to rectify its past errors."

Bombardier doesn't deny that Delta received a good price for the 75 C Series aircraft, as initial and early customers hardly ever pay the 'price-list' price and Bombardier CEO Alain Bellemare defended that position, "When you launch a new program you have aggressive pricing to start with,  - Boeing does the same thing."

Delta boss Ed Bastian has called the duties 'absurd' promising the airline won't pay the tariffs and has turned Delta into a non-Boeing airline. 

The decision isn't yet final as it is now up to The International Trade Commission, who is scheduled to make a final determination by February. It will see if Boeing has actually been harmed by Bombardier's action. 

If the ITC upholds the tariffs in February 2018, not only will it spark the threatened trade war, it will also greatly harm American jobs.  More than half the components used to make the C Series aircraft come from the US. It will also cost US jobs, as Bombardier plans to build the C Series aircraft in an Airbus factory in Mobile, Alabama.  

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