Delta Air Lines has stated that it will not pay import duties on the Bombardier CS100 jetliners that it has on order. The aircraft was recently hit with a 300% import tariff by the U.S. Commerce Department a couple of weeks ago. Boeing filed a complaint that accused Bombardier Aerospace of illegal dumping in a sale to Delta Air Lines of 75 CS100 aircraft in April of 2017. Boeing claimed the sales price of $19.6 million per aircraft was substantially below the planes estimated $33.2 million production cost. Delta agreed to the purchase in 2016, at a list price of almost $6 billion. However, a report from Bloomberg around the time of the agreement stated that the total value of the contract was likely closer to $2 billion for Bombardier. The order also included a clause giving Delta the option to convert some of the planes to the larger CS300 model, as well as an option for up to 100 additional aircraft.
Delta Air Lines CEO Ed Bastian stated “We will not pay those tariffs, and that is very clear.” He also stated that the airline intends to take delivery of the aircraft. The ruling by the Commerce Department has set off a trade dispute between the U.S. and Canada. Canadian Prime Minister Justin Trudeau has warned that the government of Canada won’t buy new military jets from Boeing unless the Chicago-based planemaker drops the case. The United Kingdom has also chimed in on the dispute. British Prime Minister Theresa May is lobbying on behalf of Bombardier, which employs more than 4,000 people at facilities in Northern Ireland.
Delta and Bombardier have both disputed the tariff decision. They note that the planes from Bombardier don’t compete head to head against any Boeing products. Of course, the issue of dumping in general is a much larger arguement than just these aircraft. Many US business have been decimated in the last 20 years or so by foreign entities dumping excess products into the US at a cost below what it costs to manufacture the parts. While the majority of this dumping is alleged to be from China, the current administration has stated it will defend US manufacturers. It could also give Delta an unfair advantage against its domestic airline competitors if it acquired new aircraft at a substantial discount to the prices the other air carriers paid for their new jets. I guess we’ll have to stay tuned to see how this drama continues to unfold.
