The US Department of Commerce has launched an investigation to determine if Bombardier received unfair subsidies and sold CSeries aircraft to a US customer at artificially low prices, the department announces on 18 May.
“The US market is the most open in the world, but we must take action if our rules are being broken,” says commerce secretary Wilbur Ross in a media release.
“While assuring the case is decided strictly on a full and fair assessment of the facts, we will do everything in our power to stand up for American companies and their workers,” the release adds.
The investigation results from a legal petition filed by Boeing on 27 April, in which the US company alleged Bombardier sold CS100s at a major loss to Delta Air Lines as part of a strategy to build market share.
Bombardier sold 75 CS100s to Delta Air Lines in April 2016, with deliveries scheduled to begin in 2018.
Boeing’s petition said the CS100, which has about 110 seats, competes with its larger 737-700 and 737 Max 7s.
By examining other CSeries transactions and Bombardier’s financial statements, and allowing for incentives accompanying the sale, Boeing alleged Bombardier sold aircraft at “absurdly low prices” of $ 19.6 million each, according to the petition.
Boeing estimated the aircraft cost $ 33.2 million to produce.
Boeing also alleged Bombardier has benefited from billions of dollars in government support.
Bombardier did not immediately respond to a request for comment, but the company’s chief executive defended Bombardier last week.
“Boeing would prefer that airlines buy older larger aircraft based on older technology,” chief executive Alain Bellemare said during the company’s shareholder meeting on 11 May.
“We believe this action could have a very negative impact on airlines, the travelling public… and the aerospace industry,” Bellemare added, noting Bombardier employs thousands of US workers and buys components from US manufacturers.
The Commerce Department’s investigation will focus on whether Bombardier “unfairly dumped” the aircraft in the USA, and whether Canadian producers received unfair subsidies, says the release.
Dumping occurs when a “foreign company sells a product in the United States at less than its fair value”, says a document from the Commerce Department.
In addition to the Commerce Department investigation, the US International Trade Commission will run a parallel investigation to determine if the deal harmed US industry. The Trade Commission’s preliminary findings are expected to be released by 12 June, says the Commerce Department.
If the trade commission determines US industry may have been injured, the Commerce Department investigation will continue, it says.
In that case, the Commerce Department expects it would make a preliminary determination about alleged subsidies as soon as July, and a preliminary determination about dumping by October.
“If the Commerce Department preliminarily determines that dumping or subsidisation is occurring, then it will instruct US Customs and Border Protection to start collecting cash deposits from all US companies importing the subject civil aircraft from Canada,” says the release.