A deal for the sale of Bombardier jets to Delta Air Lines is under scrutiny over subsidies, and now the U.S. Commerce Department is proposing tariffs.
Aircraft manufacturer Boeing Co. had raised concerns about the deal between the Canadian aircraft manufacturer and the Atlanta-based airline, and requested an investigation.
Siding with Boeing, U.S. Secretary of Commerce Wilbur Ross announced a preliminary determination Tuesday that the subsidies amounted to 219.63 percent and that duties would be based on those preliminary rates.
“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,” Ross said in a written statement.
The Commerce Department said enforcement of U.S. trade law “is a prime focus of the Trump administration.”
Still pending is a final determination by the Commerce Department in December and by the U.S. International Trade Commission in February.
Delta would start flying the planes in spring 2018.
The order could be valued at $5.6 billion, but airlines typically negotiate steep discounts for large plane orders. Scoring the Delta order was also a big win for Bombardier, in competition against heavyweights Boeing and Airbus.
When announcing the order, Delta CEO Ed Bastian called the deal “opportunistic”. He said he believed Delta’s order made Bombardier “a third competitor,” along with Boeing and Airbus, “and we’re thrilled to be able to have that choice in the marketplace.”
Delta in a written statement Tuesday emphasized that the Commerce Department’s decision is preliminary and that the International Trade Commission’s determination will be the “real decision.”
“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,” Delta said.
“Boeing had the chance to compete with Bombardier for Delta's purchase of aircraft in this size range, but Boeing's only proposed alternative to the CS100 was to offer Delta used Brazilian-made regional jets,” Delta said. “Boeing has no American-made product to offer because it cancelled production of its only aircraft in this size range - the 717 - more than 10 years ago.”
Delta struck a deal in 2012 for used Boeing 717s from Southwest Airlines, which inherited the jets from AirTran Airways in a merger.
Bombardier issued a statement saying: “The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft programs.”