The Commerce Department will slap stiff tariff on Bombardier’s new jet

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The U.S. Commerce Department backed Boeing in its challenge to Bombardier, recommending an enormous tariff on sales of Bombardier’s C Series jetliner, a major blow to the Canadian plane maker.

The initial ruling by the International Trade Commission, an arm of the Commerce Department, recommends a 219.63% tariff on the delivery of each airliner, according to a person briefed on the ITC’s findings.

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Boeing (BA), America’s largest exporter and sole U.S. producer of commercial airliners, is suing Bombardier. At issue is whether Bombardier received financial backing from the Canadian government that allowed the plane maker to stay afloat and sell to Delta for what Boeing alleges were “absurdly low prices.”

“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” said Commerce Secretary Wilbur Ross in a statement. “The subsidization of goods by foreign governments is something that the Trump Administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination.”

Tuesday’s decision by the International Trade Commission is the first of two in the case. The second is expected on as early as Oct. 5 and may add even more to Bombardier’s tariff penalty.

Related: This plane may vastly improve flying in the U.S., if it doesn’t first start a trade war

The dispute stems from a 2016 Delta order from the Montreal-based air and rail giant for as many as 125 C Series aircraft. Boeing alleges government support helped its Canadian rival establish the all-new airliner at the expense of Boeing’s own 737 jets.

Boeing had recommended a heavy tariff on the jet, paid by Delta or any U.S. airline importing the aircraft. in what would be considered a major blow to Bombardier and its ability to establish the new jet in the world’s largest aviation market. The preliminary decision by the trade commission for a 219.63% tariff was steeper than the 160% recommended by Boeing.

Bombardier reacted to the decision, saying: “We strongly disagree with the Commerce Department’s preliminary decision. The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft programs.”

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Boeing in a statement hailed the result, saying, “This dispute has nothing to do with limiting innovation or competition, which we welcome. Rather, it has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements.”

The dispute has drawn in the leaders of Canada and the United Kingdom and now threatens to shoot down a $5.2 billion Boeing F/A-18 Super Hornet fighter deal with the Royal Canadian Air Force if the case isn’t dropped or settled.

“We won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business,” Canadian Prime Minister Justin Trudeau said earlier this month. Bombardier’s aerospace division employs 28,500 worldwide, including 4,000 in Northern Ireland where the jet’s wings are manufactured.

British Prime Minister Theresa May has asked U.S. President Donald Trump to intervene in the dispute to help protect jobs in Northern Ireland.

Boeing claims that Bombardier is selling each C Series jet to Delta for $19.6 million. That’s not accurate, said Delta.

The jet’s list price is nearly $80 million, but steep discounts are common.

Bombardier also maintains that the smallest single-aisle 737 does not compete with the CS100, the roughly 110-seat Bombardier model purchased by Delta. During the 2016 competition, Boeing offered Delta, the second largest U.S. airline, used jets from another manufacturer.

Delta, which will use the jet on short and medium range flights around the U.S., cautioned that the ITC’s decision was preliminary.

“We are confident the USITC will conclude that no U.S. manufacturer is at risk because neither Boeing nor any other U.S. manufacturer makes any 100-110 seat aircraft that competes with the CS100.”

CNNMoney (Seattle) First published September 26, 2017: 6:41 PM ET

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