US Imposes Steep Duty on Bombardier after Boeing Complaint
The US government issued a preliminary ruling in favor of Boeing (BA) and imposed an anti-subsidy duty on rival Bombardier’s C-Series jets. The preliminary investigation conducted by the government found evidence of Bombardier receiving unfair government subsidies.
The current decision is only a preliminary one. The final decision is expected to come in 2018 and would be taken up by the United States International Trade Commission. The decision would be based on evidence to support Boeing’s claim that imports of the Bombardier CS100 jets would harm US aircraft manufacturers.
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The US Department of Commerce has proposed a significant 219.6% countervailing duty on each C-Series jet purchased by any entity in the United States.
According to Boeing’s statement, “Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing’s global supply chain.”
Impact on Bombardier
Bombardier has received financial support from the Canadian and British governments. If finalized, the decision would be a huge setback for Bombardier, as it would almost triple the CS100’s price. Bombardier is already finding it difficult to find new buyers for its jets.
In addition to the financial implications for the company, the decision also endangers almost 4,500 Bombardier jobs. The aircraft manufacturer has already been bailed out twice by the Canadian government.
Boeing forms the third-largest holding of the Dow Jones Industrial Average ETF’s (DIA) portfolio with an ~6% allocation. DIA also holds 3.9% of its portfolio in rival United Technologies (UTX). However, DIA has no holdings in competitors Lockheed Martin (LMT), General Dynamics (GD), and Northrop Grumman (NOC).