WASHINGTON/MONTREAL (Reuters) - The U.S. International Trade Commission on Friday gave a green light to the U.S. Commerce Department to begin preparing anti-dumping and anti-subsidy duties against new jets from Bombardier Inc (BBDb.TO), sending the Canadian planemaker’s stock down as much as 8 percent.
The ITC, as expected, voted to continue an investigation on Boeing Co’s (BA.N) complaint that Bombardier dumped its CSeries jet below cost in the U.S. market while benefiting from unfair subsidies.
The case has fueled trade tensions between the United States and its northern neighbor, with Canada calling on Boeing to abandon the anti-dumping challenge and threatening to scrap plans to buy the company’s fighter jets as an interim purchase in the renewal of its fleet.
The ITC probe could lead to steep duties on the CSeries, stoking investor fears that it will discourage future sales of the 110 to 130 seat jets, which have not secured a new order in about a year, said an analyst who spoke on condition of anonymity because he was not authorized to talk to reporters.
Bombardier spokesman Mike Nadolski said the ITC’s decision was expected given the “low bar” for Boeing at this early stage, while a company executive recently dismissed suggestions that the probe could hurt CSeries sales.
“Going forward, we are confident that a detailed review and analysis of the facts will demonstrate that Boeing’s claim is without merit,” Nadolski said by email.
A Boeing spokesman declined to say if the company was pleased with the ITC decision, instead emphasizing its support for Canada as a “customer and supplier-partner for both our commercial and defense businesses.”
Spokesman Dan Curran said by email that Boeing’s near century-old relationship with Canada “will continue to thrive after this commercial trade matter is resolved.”
Coupled with Canada’s pledge to move ahead with an interim fighter purchase, Boeing’s reaction indicates the careful path the U.S. planemaker must tread in challenging Bombardier while trying to preserve a lucrative military contract with the country.
Canadian Foreign Ministry spokesman Alex Lawrence reiterated that Canada would defend its aerospace industry.
“We are reviewing current military procurement that relates to Boeing,” Lawrence said by email.
Boeing has argued that the CSeries program would not exist without hundreds of millions of dollars in launch aid from the governments of Canada, Quebec and Britain, or a $2.5 billion equity infusion from Quebec and its largest pension fund in 2015. It warned that Bombardier’s actions could upset the wider market and erode future sales of its best-selling 737.
Boeing wants the U.S. government to investigate the 2016 sale of 75 CSeries aircraft to Delta Air Lines (DAL.N) for what it calls the “absurdly low” sum of $19.6 million each, despite the jet costing $33 million to build.
Bombardier, which described Boeing’s $19.6 million figure as “absurd,” has countered that the 110-seat CS100 plane it sold to Delta does not compete with Boeing’s smallest 737 model, the 130-seat 737 MAX 7.
The Commerce Department must now determine any preliminary anti-subsidy duties by around July 22, with a deadline for preliminary anti-dumping duties around Oct. 3.
The ITC will have a final say on whether to reject any duties.
In a separate ruling, the World Trade Organization largely cleared the United States of unfairly supporting Boeing, but noted it had failed to withdraw a tax break in Washington state, where Boeing builds most of its aircraft.
Additional reporting by Eric Walsh in Washington and Alwyn Scott in Seattle; Editing by Dan Grebler and Chizu Nomiyama