Leeham News and Analysis
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Leeham News and Analysis
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Boeing gets favorable ruling against Bombardier
June 9, 2017: Boeing received a 5-0 favorable decision from the US International Trade Commission in its complaint that Bombardier dumped its CSeries order with 
Delta Air Lines at an illegally low price.
The full decision won’t be published until next week.
The press release and some additional information is below.
A Reuters story is here.
A Politico story is here.
The United States International Trade Commission (USITC) today determined that there is a reasonable indication that a U.S. industry is threatened with material injury by reason of imports of 100- to 150-seat large civil aircraft from Canada that are allegedly subsidized and sold in the United States at less than fair value.
Chairman Rhonda K. Schmidtlein, Vice Chairman David S. Johanson, and Commissioners Irving A. Williamson, Meredith M. Broadbent, and F. Scott Kieff voted in the affirmative.
As a result of the Commission’s affirmative determinations, the U.S. Department of Commerce will continue to conduct its antidumping and countervailing duty investigations on imports of this product from Canada, with its preliminary countervailing duty determination due on or about July 21, 2017, and its antidumping duty determination due on or about October 4, 2017.
The Commission’s public report 100- to 150-Seat Large Civil Aircraft from Canada (Inv. Nos. 701-TA-578 and 731-TA-1368 (Preliminary), USITC Publication 4702, June 2017) will contain the views of the Commission and information developed during the investigations.
The report will be available after July 10, 2017; when available, it may be accessed on the USITC website at: http://pubapps.usitc.gov/applications/publogs/qry_publication_loglist.asp.
UNITED STATES INTERNATIONAL TRADE COMMISSION
Washington, DC 20436
FACTUAL HIGHLIGHTS
Investigation Nos. 701-TA-578 and 731-TA-1368 (Preliminary)
100- to 150-Seat Large Civil Aircraft from Canada
Product Description: Aircraft, regardless of seating configuration, that have a standard 100- to 150-seat two-class seating capacity and a minimum 2,900 nautical mile range. “Standard 100- to 150-seat two-class seating capacity” refers to the capacity to accommodate 100 to 150 passengers, when eight passenger seats are configured for a 36-inch pitch, and the remaining passenger seats are configured for a 32-inch pitch. “Pitch” is the distance between a point on one seat and the same point on the seat in front of it. “Standard 100- to 150-seat two-class seating capacity” does not delineate the number of seats actually in a subject aircraft or the actual seating configuration of a subject aircraft. Thus, the number of seats actually in a subject aircraft may be below 100 or exceed 150. A “minimum 2,900 nautical mile range” means: (i) able to transport between 100 and 150 passengers and their luggage on routes equal to or longer than 2,900 nautical miles; or (ii) covered by a U.S. Federal Aviation Administration (“FAA”) type certificate or supplemental type certificate that also covers other aircraft with a minimum 2,900 nautical mile range.
Status of Proceedings:
1. Type of investigations: Preliminary antidumping and countervailing duty.
2. Petitioner: The Boeing Company, Chicago, Illinois.
3. Preliminary investigations instituted by the USITC: April 27, 2017.
4. Commission’s conference: May 18, 2017.
5. USITC vote: June 9, 2017.
6. USITC determinations to the U.S. Department of Commerce: June 12, 2017.
7. USITC views to the U.S. Department of Commerce: June 19, 2017.
U.S. Industry:
1. Number of producers in 2016: One.
2. Location of producers’ plants: Renton, Washington.
3. Employment of production and related workers in 2016: [1]
4. Apparent U.S. consumption in 2016: 1
5. Ratio of the value of total U.S. imports to total U.S. consumption in 2016: 1
U.S. Imports:
1. From the subject country during 2016: Zero.
2. From other countries during 2016: 1
3. Leading sources during 2016: Germany.
Not surprising given that the ruling isn’t by a neutral international body.
I certainly hope Bombardier responds with a similar action in Canada against Boeing’s sale of 737MAX to Westjet and Air Canada. Those deliveries are high enough on the delivery list to almost certainly have been sold below their anticipated full cost of production.
The cost of production is not the issue, it’s the alleged selling of planes cheaper in a foreign market than at home.
@Geo
You are wrong. The production cost is an important information in such cases.
It doesnt matter if Bombardier is making $10 mill per sale in Canada ( its not) but only making $ 5 mill per sale in US. Its still dumping when it causes harm to XXX manufacturer ( Boeing in this case)even if Bombardier was making a profit in both cases ( its not). The actual point above or below the manufacturing price doesnt matter.
the key acronym is LTFV- Less than fair value
Less Than Fair Value
“The deliberate sale of an export so that the export is significantly less expensive than a domestically produced good. A less than fair value sale is not simply less expensive, it is determined to be anti-competitive.”
Notice its the ‘sale price’ which is both less than the domestic price and its anti competitive in the other country
Unbelievable, what a load of crap….I am officially going to try to start flying anything but Boeing when I fly now…Boeing’s monopolistic abuse of market power is now bordering on the ridiculous….any competition loss can only be due to unfair trade in their view. The US government is starting to lose all credibility with rulings like this and softwood lumber (there allegations have been proven wrong in 5 consecutive cases over the last 20 years). Does the US government not realize they will double airfares when Boeing has no competition left and they can charge whatever they like for planes.
Not flying on Boeings is not going to solve anything, it will probably only make your life miserable when booking flights. 99.99% of consumers aren’t going to care what airplane they fly on.
I’m going to take the best deal, which in the future may well be the Comac C919 (a plane that’s inferior to the CS300 but yet conveniently benefits from all this Bombardier misfortune). I’m just a slave. I go with all I have.
Its not even certified for Western use , nor likely. Plus its more of a A320 type of plane which you wont be flying with 130 seats
But I thought This site had something like 8 pieces in the past two weeks about how silly and frivolous and hopeless boeings complaint is?
@Tex: Eight pieces yes, with most of them straight reporting of the filings and testimony at ITC. The other couple of commentaries focused on the frivolous and silly nature of the case. We never said it was hopeless. See Pontifications Monday on why.
More to the point the ruling only started that investigaciones Will continue
Hello Scott,
Do you consider your post on 5-23-17, titled “Delta shoots down Boeing’s CSeries dumping claim” to have been in the straight reporting category, or in the commentary category? Do you feel that the title you selected was not suggesting that Boeing’s case was hopeless?
I respect and enjoy reading your opinions, however, I must disagree with you about Boeing’s case being frivolous and silly. Elsewhere in this thread I posted a link to the bio of the head of Boeing’s legal team (ex general counsel to the US trade representative in the Clinton administration, ex NAFTA and WTO negotiator), and my opinion that anyone facing off against a team led by this individual in a trade case would be a fool if they did not take the litigation deadly seriously.
@AP: Delta was clearly trying to shoot down the Boeing claim. It was a headline that fairly represented Delta’s testimony.
@ Robert.
Its quite obvious you are up to your eyeballs in legalities.
It comes across clearly in both how you write and what you write.
No surprise that a lawyer, ex-lawyer or failed lawyer would not find issue with legal proceedings in an instance where anyone with a rudimentary knowledge of the subject matter would deem it utterly nonsensical.
Anyway – do carry on. Its just yet another thing to add to the list of “how lawyers have ruined the world”.
“… being frivolous and silly. Elsewhere in this thread I posted a link to the bio of the head of …”
The basic tenet of practicing law in the US seem to have turned to frivolous litigation and making that stick.
Good read in context: “Escape from Hell” by Larry Niven and Jerry Pournelle. Lawyers have usurped hell by insertimg themselves as an intermediary layer and controlling the racket 🙂
ref: https://www.firstthings.com/web-exclusives/2010/03/dante-meets-vatican-ii-in-sci-fi-hell
This commission makes determinations in proceedings involving imports claimed to injure domestic industry. It’s the same .gov that is Boeing biggest financer, customer, tax fixer and political sales supporter. Lets not suggest too much independancy / objectivity here.
If thats the case , Bombardier can appeal to the federal Courts if the case hasnt been determined properly in their view. ie they dispute certain facts or legal interpretations.
This being America this could be years tied up in courts.
Yes, or the L’Office de Certification Commerciale du Québec. Ask how they see this.
What interests me most is the possiable outcome of this “case”. What happens if a decision is made in favor of Boeing? Will that change anything? Can Bombardier challenge it? Is it binding and legal? Is is the same like the Boeing/Airbus WTO case? An article about that is highly appreciated!
Hello Redrikter,
Below are some excerpts from “Chapter 28: Litigation” of the USITA’s Enforcement and Compliance Division’s 2015 Anti-Dumping Manual, which may be found at the following link. Note CIT = US Court of International Trade, CAFC = US Court of Appeals for the Federal Circuit.
http://ia.ita.doc.gov/admanual/2015/Chapter%2028%20Litigation.pdf
“Under the Act, certain decisions of the Department are subject to judicial review by the CIT and, if appealed further, the CAFC. Specifically, the following types of decisions are subject to review: 1) determinations not to initiate an investigation; 2) a final determination to revoke based upon no or an inadequate response to a sunset review initiation; 3) a final, negative or affirmative, determination of sales at less-than-fair value; 4) final results of reviews, including administrative, new shipper, changed circumstances, and sunset; 5) a final determination to suspend an investigation; and 6) a final scope or anti-circumvention ruling. Pursuant to the NAFTA, when the underlying investigation or review involves Canada or Mexico, these same determinations, except decisions to suspend investigations, may be challenged before a NAFTA Panel instead of the Federal Court.”
“The United States is a member of the World Trade Organization (WTO), and the Tariff Act, as amended, implements the responsibilities of the United States under the WTO antidumping and countervailing duty agreements. In implementing the WTO Agreements, Congress expressly indicated that neither WTO Dispute Settlement Panel decisions nor WTO Appellate Body rulings change U.S. law. SAA at 659. Accordingly, arguments relating to the WTO Agreements and decisions of the WTO dispute settlement panels (“Panel) or Appellate Body are ordinarily not relevant to administrative proceedings. Likewise, neither the CIT nor the Federal Circuit is bound by decisions of WTO Panels or Appellate Bodies. Instead, the Federal courts consider whether Department regulations, practices, and decisions are consistent with U.S. law (and supported by substantial evidence).
However, if another member of the WTO believes that a regulation, decision, or practice of the Department is inconsistent with the obligations of the United States under the WTO antidumping or subsidy agreements, it may request “consultations.” SAA at 1011. The complaint may be that a regulation, for example, is inconsistent with our WTO obligations or that our application of a regulation in a particular situation is inconsistent with our WTO obligations. In consultations, the country may pose questions with regard to the matter believed inconsistent, and the Department, through the United States Trade Representative (“USTR”), responds to such questions. Accordingly, Operations analysts work closely with the staff attorney and USTR to respond to the consultation questions, and may participate in the consultations.”
I think now’s the time for Bombardier to sell out to COMAC. This isn’t going to end well for Bombardier.
As a Canadian I cannot see this happening (for political reasons) although I would agree if the CSeries was in Chinese hands neither Boeing or the American government would be taking such bullying actions despite the fact that the US has a massive trade deficit with China and a very large (over $11 Billion) trade surplus in good & services with Canada. So much for being good neighbors.
Isn’t it interesting that car makers just get on with the business of designing, making and selling cars while aerospace companies are constantly suing one another? The one sure-fire way to end all this nonsense is for governments to stop propping up manufacturers. Airbus, Boeing and Bombardier (LM, Dassault, etc. etc.) are all welfare cases which would be in trouble without taxpayers shoveling money in through the back door. Maybe we can get Saab back into the airliner business. They seem to be able to get things done at low cost and without offending anyone.
Have you seen any thing yet with car makers and autonomous technology. Just like smart phones a few years , it will be a huge bun fight
same as the battles with the original Tesla, Westinghouse, Edison and on so on with electricity.
The car makers are still in development, but the patent layers wont be asleep
Good buy Super Hornets to Canada 🙂
A tit for tat, I like my government 😉
http://news.nationalpost.com/news/canada/canadian-politics/f-35-jets-waiting-in-wings-as-interim-super-hornet-purchase-in-limbo
Boeing may also have it hard when we are going to replace the CC-150, will be hard to place their offering…
One needs to be careful about believing things attributed to unnamed sources; however, if the unnamed sources cited in the Reuters article at the link below are correct in their claim that “Boeing’s defense bosses signed off on bringing the trade case, highlighting the importance attached to the 737”, then Canada’s threat to cancel their F-18 acquisition was anticipated by Boeing, and Boeing decided that losing this deal would be an acceptable although surely undesired consequence of filing a complaint against Bombardier.
http://www.reuters.com/article/us-boeing-bombardier-analysis-idUSKBN18I23L
I truly hope, that the Canadian government is not just thinking about not buying those Super Hornets, but definitely canceling any talks with Boeing and source some other jets.
And I hope that Bombardier has a few good lawyers that could come up with a similar case challenging any Boeing sales within Canada.
More on this
https://www.theglobeandmail.com/report-on-business/canada-suspends-talks-with-boeing-jets/article35175915/
I think there is a unique opportunity for outsider to place their planes
The statement released by Canada about a requirement for 88 planes ( higher than before) seems to be exactly designed for another type of fighter.
I wonder who has 88 used or new planes available? They will have their hair on fire in St Louis and in Ft Worth.
Saab?
There were about 140 Eurofighter Tranche 1 models built, that most users dont want ( except Austria) as they want to stick with the later versions only and not upgrade the early models. 88 would be the bulk of this. I dont see the funding increase from buying more than the previous 65. I dont know their particular operational needs are but they operate roughly the same number of F18s now ( 77)
That would keep Canada going through to 2025 or so. Canada would have a homogeneous fleet, at ‘second hand prices’.
Then again Canada has made stranger choices than this before
What is the lowest acceptable sales price of a 777-9 in Germany or France before it is considered price dumping in Airbus territory?
Doesn’t matter legally, as they have yet to sell any 777s in their home market. I think that Boeing are smart enough to have already thought through that argument. Likewise the UA deal that was even less than BBD was prepared to offer was in their home market so it could be as low as they like. I wonder how legally binding BBDs offer was, as they were outbid by Boeing. Common sense does not not apply in this instance.
What would be interesting to know is at what price did Bombardier sell the CSeries to Air Canada? I suspect that a fairly big discount was offered in view of the importance of securing the Canadian flag carrier order. If sold at the same price or lower than the Delta order then Boeing’s complaint would have no basis. Bombardier should have anticipated such a challenge and *should* have offered Air Canada the CSeries at a ridiculously low price in order to inoculate itself against such a challenge. If they did not do this than it doesn’t say much about it’s management. Likewise what was the sale price of the CSeries to Porter?
Air Canada bought the CS300 whereas Delta bought a “short-range” CS100, so different aircraft.
Delta does have the option of converting up to the CS300, so in terms of that model, I agree that Bombardier would have been wise to offer a similar price.
It would still be interesting to know at what price Bombardier sold the CS300 to Air Canada. Was it a relative bargain compared to the sale of CS100’s to Delta? If so this would negate the “dumping” claim from Boeing.
That information is XXX’d out in the report. Its a good idea to rely on the general information that Delta did get a ‘great deal’, so essentially the dumping claim is broadly accurate.
The CSeries contains 50% U.S. content and this is how the US government treats a foreign company that employs 1,000’s of American’s in high paying jobs?
IMU the US under Trump now tries to “life” all their dumb^Hsimplistic assumptions on global standing and workings.
What in reality was due windfalls of history ( carefully crafted ones at that ) were attributed to national greatness and prowess. those nice tradewinds have gone to sleep ( climate change is real 🙂 greatness and prowess turning into the mirages they were.
Final touch will be (trying) to force a worldview on the rest by way of brute force ( be it bankrolling terrorism or direct military intervention.)
Anyone know how the prices are determined? For example would selling a handful (even just one) CS to another Canadian airline (eg Air North) at a price lower than they sold to Delta allow Bombardier to nullify the ruling? Or, could Bombardier argue that the UK or EU are domestic given the construction at what was Shorts and do likewise with eg BMI Regional?
I’m with Keith. Bombardier management really should have factored a threat like this in when agreeing the Air Canada terms. Not the first time they seem to have had poor to very poor managerial judgement.
Perhaps management quite reasonably assumed that they would be safe, as no one in the US makes a comparable product. There is potential for a huge amount of chaos in many industries should this case succeed.
Given the 5-0 ruling though suggests that had they retained a person/firm with sufficient knowledge of the workings of the ITC there ought to have been clear indication that, despite such a ruling looking implausible/bizarre/daft/just plain wrong to many (me included), possibly most, it was not an insignificant threat. Reasonableness does not appear, to me at least, to play a part here.
As for other industries, quite. Feels like a pathfinder for Trump trade philosophy to me and I suspect they’re feeling quite pleased right now.
Hello Woody,
See below for a link to bio for Robert T, Novick, the head of Boeing’s external team of trade lawyers.
Mr. Novick’s Previous experience includes General Counsel to the US trade Representative in the administration of US President Bill Clinton, including “establishing and implementing the Administration’s litigation priorities, strategy and settlement positions in WTO and NAFTA dispute resolution” and principal negotiator for the US-China-WTO market Opening Agreement.
https://www.wilmerhale.com/robert_novick/
The WilmerHale law firm for which Mr. Novick works is very prestigious and well known. Robert Mueller, formerly head of the US FBI, and presently Special Prosecutor for investigation of Russian interference in US Elections, was working for this firm before assuming his current position. I am of the belief that when an attorney who is very prominent in their field takes on a case against you, only a fool would not take the case deadly seriously. The mansion and yacht of the person leading the case against you were probably paid for years ago, and they don’t need new business badly enough to take on cases that they think have little chance of success or that would turn out so badly that they would damage their reputation.
In my recurring posts with excerpts from US trade regulations I have been trying to point out the difference between the reality that most posters on this site are living in and an alternative reality in which the Boeing vs. Bombardier cases (remember, there are two separate cases, one on dumping and one on subsidies) would be decided according to US trade regulations as they actually are written on paper, instead of the very different rules of trade proposed or imagined by most of the people posting on this site.
In the reality that I live in, the only ruling so far has been the USITC’s vote that there is a reasonable indication that a US industry has been damaged by the imports in question. This allows the US ITA (another agency) to proceed with determination of whether illegal dumping or subsidies have occurred. In the reality that I live in, I think it is unlikely that either Boeing or Bombardier will get everything they want. Boeing is swinging for the fence in their complaint (a US baseball analogy). They might not get a home run, butI think it is pretty unlikely that they won’t get at least a single or a double. Make no mistake that the game being played here is softball instead of hardball. Hardball is about winning, not about being nice to the players on the opposing team and making sure that everyone is having a good time. Narrow victories are better than losing, but crushing the opposition is even better and much preferred.
It seems to me that many posts here about legal sleights of hand or sophistries that Bombardier could use loose sight of the big picture, which is that the Canadian government bailed out a program that was failing due to gross failure to execute on time and on budget and bad luck on fuel prices, which had been unable to attract private capital sufficient to to bail out the program. Even if the US cases were to magically go away there would still be Brazil’s’ complaint with the WTO over the same subsidies. Do those that propose that the US complaints are part of some unjust and unfair conspiracy led by the US and Boeing believe that Brazil is a US puppet state that has been directed by the US and Boeing and Trump to file a similar subsidy complaint? Could it instead be possible that massive government bailouts of failing private programs are an exception the normal working of free market trade that are more likely than not to lead to trade complaints from overseas competitors?
So Boeing received no direct or in-direct support from the US Government? Seriously?
No argument about the bail out from here. Simply curious about the actions Bombardier could take with respect to the closed bounds of this ITC case.
“Perhaps management quite reasonably assumed that they would be safe, as no one in the US makes a comparable product”
The fact is Boeing makes a comparable product that the CS100 and CS300 product range overlaps. The fact that the Max 7 hasn’t sold well (only 60 orders – ironically 30 from Canada!) doesn’t make a difference in this trade dispute.
Bombardier’s management should have seen this challenge coming and should have taken action to inoculate itself. I suspect that they thought offering a product that competed in the low-end and uncompetitive range of the the 737 (and 320) would offer some protection but that was a mistake. They should have offered a Canadian carrier ridiculous rock-bottom pricing in order to protect itself from charges of “dumping”
BBD haven’t actually sold any C series in competition with the max 7 and the max 7.0 is no longer on offer. Cars, mobile phones, almost everything is offered for sale at less than cost price to begin with. No one knows whether they are are going to get a return (seeB 787).
I reckon BBD can afford to cancel the Delta deal if they have to. They are not getting enough money for them and they’ve made their point by getting selected by Delta,who still might buy the C series for more money, because it’s in a space of its own size and technology wise.
Common sense and the law are not compatible in this case, prepare for total mayhem.
Most painful for Boeing would be to develop an MPA based on the A 320 or C series in conjunction with European nations that still have a requirement. (perhaps both, with a common mission system). That would learn them.
Dumping cases occur all the time. there are hundreds already under US jurisdiction. Lots of other countries have the same rules.
No need to be alarmed, as you would be unaware countervailing duties are applied.
I do wonder.
In the Airbus vs Boeing case things went before the WTO ( litigation started by US/Boeing.) No “countermeasures” initiated on their own.
Will this be handled in a similar fashion.
Or will hard measures be kicked of by the US?
Can Canada then bring their grief to the WTO for arbitration?
The number of specifically ITC cases instituted per year is not in the hundreds, according to their website (https://www.usitc.gov/press_room/337_stats.htm). A couple of generations back it spiked to 43 in one year before dropping back to a stable, minor level. Been picking up for some years now but still just 40, 50s, 60s.
Hello Woody,
According to Chapter 7 of the US ITA Enforcement Division Anti-Dumping Manual, which is titled “EXPORT PRICE AND CONSTRUCTED EXPORT PRICE”, weighted averages of home market and export sales prices during the period of investigation are used to calculate dumping margins. A small number of sales at a very low price would thus be unlikely to have much effect on dumping margin calculations. See the excerpt below, which may be found at the link following the excerpt.
“Weighted-Average Price Comparisons
a. Weighted-Average Price to Weighted-Average Price
Under section 777A(d)(1)(A)(i) of the Act and section 19 CFR 351.414(b), the Department measures dumping margins in investigations, in most instances, on the basis of a comparison of a weighted-average of NVs for an identical or most similar like product with a weighted average of EPs or CEPs for each different type of the subject merchandise. These weighted-average prices are usually calculated for the entire POI. Only in situations where the Department finds that significant differences in prices over the POI would lead to a distorted dumping margin has the Department used an averaging period shorter than the entire POI. See 19 CFR 351.414(d)(3). Examples of these types of situations are dramatic exchange rate variations,
high inflation economies, and dramatic fluctuations in material costs.”
http://ia.ita.doc.gov/admanual/2015/Chapter%2007%20Export%20Price%20and%20Constructed%20Export%20Price.pdf
Here are some points that I think are important regarding the above excerpt.
1) POI = period of investigation.
2) The excerpt describes calculating dumping margins based on sales during the period of investigation, not merchandise actually delivered during the period of investigation. Some have pointed out that Delta has yet to receive any of the C-Series aircraft they ordered; however, according to the above quote, sales to Delta can be used for dumping margin calculation even if the aircraft sold have yet to be delivered.
3) According to the the initiation notice in the US Federal register for the Anti-Dumping component of the investigation, the period of investigation is 4-1-16 to 3-31-17, thus, any sales made after 3-31-17 will not be considered in the investigation. See excerpt and link after point (4) below.
4) Boeing filed their complaint just in time to have the Delta sale in April 2016 fall within the customary one year period investigation. It would seem that Boeing’s legal team is either very lucky or very well versed in US trade regulations.
“Period of Investigation
Because the Petition was filed on
April 27, 2017, pursuant to 19 CFR
351.204(b)(1), the period of
investigation (POI) is April 1, 2016,
through March 31, 2017. ”
https://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/2017/100-%20to%20150-Seat%20Large%20Civil%20Aircraft%20from%20Canada/Preliminary/aircraft_-_initiation_-_ad.pdf
I have realized that my characterization in my post above of the excerpt on weighted average price comparisons from the USITA anti-dumping manual had a significant error. I stated the following.
“According to Chapter 7 of the US ITA Enforcement Division Anti-Dumping Manual, which is titled “EXPORT PRICE AND CONSTRUCTED EXPORT PRICE”, weighted averages of home market and export sales prices during the period of investigation are used to calculate dumping margins.”
Actually the excerpt states that dumping margins are calculated, in most instances, by comparing weighted average export prices (EP or CEP) to weighted average normal value (NV).
Below is the first paragraph of the definition of normal value in the glossary of the USITA Antidumping Manual. See my posts above for links to this document.
“Normal Value
Normal value is the adjusted price of the foreign like product in the home or third-country (foreign) market, or the constructed value of the subject merchandise. The Department compares the normal value to the export price or constructed export price to determine the margin of dumping, if any.”
The above excerpt from the normal value definition talks about constructed value, which is defined as follows in the same USITA manual glossary.
“Constructed Value
When there are no sales of the foreign like product in the foreign market suitable for matching to the subject merchandise (including, for example, when the Department disregards sales because they are below the cost of production), the Department uses constructed value as the basis for normal value. The constructed value is the sum of (1) the cost of materials and fabrication of the subject merchandise, (2) selling, general, and administrative expenses and profit in the foreign market, and (3) the cost of packing for exportation to the United States. See section 773(e) of the Act; sections 351.405 and 351.407 of the regulations.”
My understanding of the above definition is that, in the case of there being no comparable home market sales, or when the department finds that home market sales were below cost of production, dumping margin is calculated from estimated cost of production, rather then weighted average home market sales price. If my understanding of the above definition is correct, then it may not be in Bombardier’s interest for them to argue that the aircraft they sold to Air Canada were not comparable to the ones they sold to Delta. I suspect that the dumping margin calculated from Air Canada selling prices would be less than that calculated form production costs.
Interesting AP. Thanks for looking into this and your thoughts.
I have a hard time believing luck came into Boeing’s timing. Seems much more likely its something they’ve planned for some time and a smart move by their legal teams. If I was at Bombardier I’d be contemplating if Boeing set a ‘trap’ for Bombardier specifically so they could use the ITC.
Following on from this, I wonder if Bombardier were under the impression that Boeing was bidding on the deal. Would also be important to know if Airbus were bidding and how aggressively. After all, why would anyone price really low (even if other terms, overall market effect etc could balance out the lowball price), especially with a superior product, unless they expected to have to undercut a much bigger competitor?
Re the investigation dates, do you know if cases are always across 1 year, or is the duration chosen by the complainant? If the latter is it subject to appeal?
TRIGGER WARNING: For those who will be distressed by taking time out from venting about the purity or evils of their favorite or least favorite airplane manufacturer in order to to learn about the regulations that will be used, in the real world, to decide the Boeing vs. Bombardier cases, STOP READING HERE.
Hello Woody,
Below is the text of the CFR section that was cited in the statement of period of investigation of the dumping investigation notice that I quoted above. According to this excerpt, the period of investigation is normally one year, but the Secretary (of Commerce?) may select an additional or alternate period if they deem it to be appropriate. Regarding appeals, my understanding of the excerpt from the USITA Anti-Dumping Manual that I quoted above, it that only final decisions by the ITC or ITA may be appealed. As of yet, there have been no final decisions in the investigation, only a preliminary ruling by the ITC that there is “reasonable indication” that the imports in question are causing material injury to a US industry. I don’t claim to be an expert in any of this, reading trade regulations in just a weird hobby I’ve developed for relaxation and a change of pace during breaks from calculating targeting of brain tumors to millmeter accuracy and trying to read and understand Nuclear Regulatory Commission regulations in my day job as a medical physicist.
19 CFR 351.204 – Time periods and persons examined; voluntary respondents; exclusions.
§ 351.204 Time periods and persons examined; voluntary respondents; exclusions.
(a)Introduction. Because the Act does not specify the precise period of time that the Secretary should examine in an antidumping or countervailing duty investigation, this section sets forth rules regarding the period of investigation (“POI”). In addition, this section includes rules regarding the selection of persons to be examined, the treatment of voluntary respondents that are not selected for individual examination, and the exclusion of persons that the Secretary ultimately finds are not dumping or are not receiving countervailable subsidies.
(b)Period of investigation –
(1)Antidumping investigation. In an antidumping investigation, the Secretary normally will examine merchandise sold during the four most recently completed fiscal quarters (or, in an investigation involving merchandise imported from a nonmarket economy country, the two most recently completed fiscal quarters) as of the month preceding the month in which the petition was filed or in which the Secretary self-initiated an investigation. However, the Secretary may examine merchandise sold during any additional or alternate period that the Secretary concludes is appropriate.
(2)Countervailing duty investigation. In a countervailing duty investigation, the Secretary normally will rely on information pertaining to the most recently completed fiscal year for the government and exporters or producers in question. If the exporters or producers have different fiscal years, the Secretary normally will rely on information pertaining to the most recently completed calendar year. If the investigation is conducted on an aggregate basis under section 777A(e)(2)(B) of the Act, the Secretary normally will rely on information pertaining to the most recently completed fiscal year for the government in question. However, the Secretary may rely on information for any additional or alternate period that the Secretary concludes is appropriate.
Looks like the scope is tidy for Boeing then.
“The Commission’s public report 100- to 150-Seat Large Civil Aircraft […]”
So just 50 % bigger aircraft are within one group of aircraft like A330-200 and 777-9 or 777-9 and A380. Maybe some lawyers can see some sense in this. I can’t.
We must not forget the political level. Now, it is also a political relationship of government to government. And it is normal that in this relationship other negotiating elements such as the purchase of 88 military aircraft could be used. Do not forget that Emmanuel Macron, the new French president, made friends with Justin Trudeau, the Canadian Prime Minister, and personally invited him, recently in Italy to the G7, to come and spend time with his family. In addition, Dassault has already offered the Canadian government its Mirage to be assembled by … Bombardier. All this would be a formidable demonstration to the effect that one can always say no to Trump, and Boeing, and to learn to leave them alone in the world …
http://www.cbc.ca/news/politics/f-35-s-french-rival-pitches-canadianized-fighter-jet-1.2577234
http://ici.radio-canada.ca/nouvelle/594788/dassault-ottawa-avions
http://www.lexpress.fr/actualite/monde/europe/video-macron-et-trudeau-posent-ensemble-les-reseaux-sociaux-s-enflamment_1911970.html
When will Macron visit Canada?
http://www.trbimg.com/img-5926f772/turbine/ct-trump-macron-handshake-20170525
Macron has an election coming up, plus theres plenty on his plate concerning EU, Russia and the USA.
Canadas problems are of little concern, as it should be.
Spreading the seat range so wide and starting it down at a point where you definitely don’t have a product may be deliberate. Anti dumping legislation is really designed for directly comparable simple products like a ton of steel. Airliners are never directly comparable, so Boeing is trying to see what it can get away with. Boeing can sell as cheaply as it likes in the US or anywhere other than Airbus producing countries and apparently Canada. Boeing can be reasonably confident that they will have done a deal in the US for less than any that they have done in Canada. Basically this is protectionism,and as suggested before, aimed at Airbus and in particular models that are not produced in the US. I’m not really sure if Boeing has a point or are merely admitting that their products are uncompetitive.
Good points Grubbie. That is noticeable when you see the lists of many products which have been defined as dumping. The most sophisticated manufactured product seems to be ‘large home washing machines’, where Whirlpool won . No comparison to a high tech airliner , although the selling prices are just as complicated.
The more I think about it, it is actually quite clever isn’t it?Although if your company was really threatened you would stop the share buybacks and invest in better products and more efficient tooling.
The share buybacks are just another form of dividends. Plus with money so cheap to borrow why wouldnt you use that to keep the markets happy. The alternative is a hostile takeover and sell off of various parts. People just need to get past the share buybacks
Boeing has a big whack of spending on research and development , much the same amount for the last 15 years ( except a bump recently when they rebooked a couple of early 787s as research funds)
Thats been enough to do the 787,747-8 and now the 777X.
Accusing Bombardier not following trade rules when Boeing have been ruled by WTO for it?
The USITC has posted to its website a 140 page report detailing the reasoning behind its decision that there is “a reasonable indication that an industry in the United States is threatened with material injury by reason of subject imports of 100- to 150-seat LCA from Canada that are allegedly sold in the United States at less than fair value and that are allegedly subsidized by the GOC”. This decision allowed the USITA (different from USITC) to proceed with preliminary investigation of whether illegal dumping or subsidies have occurred.
See the link below for the report.
https://www.usitc.gov/publications/701_731/pub4702.pdf
By my reading of the report, the commission is very thorough, and takes it work very seriously. Below are some excerpts from the report.
From Section VI.B.3
“Based on the record of the preliminary phase of the investigations, we find that there is a moderate to high degree of substitutability between subject imports and domestically produced 100- to 150-seat LCA.173 *** responding domestic LCA producers and four of six responding U.S. importers/purchasers reported that subject imports were always
interchangeable with 100- to 150-seat LCA produced in the United States.174 Although petitioner and respondents agree that the 737-700 and 737 MAX 7 compete with the CS300,175 there is some evidence that the higher seating capacity of the 737-700 and 737 MAX 7 limits competition between those models and the CS100. 176 Nevertheless, United ***, and placed an order for 737-700s ***.177″
From Section VI.D:
Delta launched a campaign in 2015 to purchase 100- to 110-seat mainline aircraft, and initially considered used Embraer E170s and Boeing 717s and new Embraer E195 and Bombardier CS100s.227 ***.228 Delta purchased the used Embraer E190s from Boeing but subsequently resold them.229 Unable to secure sufficient quantities of used 717s, or sufficient quantities of used Embraer E190s at competitive prices, Delta reconsidered the CS100, having rejected ***.230 Delta ultimately accepted *** in April 2016, placing a firm order for 75 CS100s (with an option to substitute CS300s after the first 35 deliveries) and an option for 50 CS100s (with an option to substitute CS300s).231 Delta emphasizes that Boeing was unable to supply a new aircraft with 100 to 110 seats, or any 737 family aircraft in the requisite 2018-19 timeframe due to capacity constraints.232 In any final phase of the investigations, we will examine the extent to which Boeing’s 100- to 150-seat LCA offerings were a viable choice for Delta, and more generally the extent to which such LCA are a viable alternative to subject imports for
other U.S. airlines.”
From Section VI.E:
“We have also considered factors other than subject imports to ensure that we are not attributing any threat of material injury from other such factors to the subject imports. Although *** commercial deliveries of 100- to 150-seat LCA in the U.S. market during the period of investigation consisted of nonsubject imports from Airbus, ***.265 Furthermore,there is no evidence that Airbus competed ***.266 Nevertheless, Airbus’s new model for the
100- to 150-seat LCA market, the A319neo, is scheduled to enter service in 2018,267 and many U.S. airlines possess existing fleets of A319s, making it likely that Airbus will compete for orders from U.S. airlines for the A319neo in the imminent future.268 In any final phase of the investigations, we intend to investigate further the likely effects of such competition on the
domestic industry in the imminent future.
Respondents also argue that subject imports could not threaten to materially injure Boeing in the imminent future because Boeing’s capacity to produce the 737 family, including the 737 MAX 7, is “maxed out” for the next eight years, with an order backlog of 4,506 planes.269 Even with additional orders, Bombardier claims, Boeing could not produce or deliver additional 737-700s or MAX 7s in the imminent future. 270 Disputing that its production of 100- to 150-seat LCA is capacity-constrained, Boeing claims that, with enough orders, it could increase the rate of production of 100- to 150-seat LCA to match the orders within two years.271 In any final phase of the investigations, we intend to further investigate whether capacity limitations constrain Boeing’s ability to compete for orders in the 100- to 150-seat LCA market.”