Jan. 10, 2018, © Leeham Co.: Canada upped the ante in the Boeing-Bombardier C Series trade complaint today by filing one of its own against the US with the World Trade Organization.
This filing comes on the eve of the US International Trade Commission (ITC) staff report, due Friday, on whether Boeing was “harmed” by Bombardier’s near-miss in selling the CS100 to United Airlines and an order in 2016 by Delta Air Lines for 75+50 CS100s, with an option to covert some of the orders to the larger CS300.
The US Commerce Department concluded Canada, the province of Quebec and the United Kingdom illegally subsidized the C Series program. Commerce also concluded BBD “dumped” the C Series in the US with the Delta order and attempted to do so with the United competition.
Commerce levied tariffs of about 292% for any C Series imported from Canada.
The Canadian complaint with the WTO challenges the DOC’s action and the pending decision, due next month, by the ITC. The move was expected, but generally thought would occur after the ITC ruled. ITC is expected to support Commerce’s conclusions.
LNC expects the staff report will be a predictor of how the ITC will rule. The Commission has five members. It sent the Boeing complaint to Commerce on a 5-0 vote.
Although Commerce and ITC are two distinct agencies (often confused as both being part of the Commerce Department), observers believe the ITC will endorse Commerce’s decision.
A hint of the direction may have come from a Jan. 4 filing at the ITC:
Bombardier’s response to the below question (originally sent on December 20, 2017) was incomplete because the requested information was not submitted. The Commission is providing a second opportunity to explain or remedy the response. Please respond with an explanation or remedy no later than the 11:00 am on Monday, January 8, 2018.
Please provide the annual value (in USD) of aircraft parts for 100‐ to 150‐seat LCA projected to be imported into the United States by the CSALP through 2022. Please separate into imports from Canada and imports from all other countries and provide a list of the type of parts contained therein. If exact projections are unavailable, please provide estimates based on Bombardier’s experience at its Mirabel facility.
The first paragraph may be crucial. Commerce determined that BBD failed to respond to questions and, under the policy of “All Facts Available,” determined Bombardier was guilty of dumping the C Series into the US with the Delta deal below cost.
(The industry practice and history, including from Boeing, is that early airplanes in a new airplane program invariably are built, sold and delivered below cost before the learning curve makes the program profitable.)
The ITC question above suggests a similar path may be emerging at the ITC.
William Perry, a trade attorney with the Seattle law firm of Harris Bricken who previously worked at the ITC and Commerce, said failure to answer questions was a “fatal error” by Bombardier. He is not involved in the current case.
Filing has no affect on ITC
Reacting to the Bombardier complaint with the WTO, Perry provided this information to LNC:
In truth a filing at the WTO, does not have any direct effect on the case. The complaint will start up a litigation dispute at the WTO between the US and Canada, but getting an answer from a Dispute Resolution Committee will literally take years. By the time the WTO issues its actual opinion, the time for annual reviews will come up.
Also, the WTO has no power to literally tell the Commerce Department and the ITC what to do, never mind actually interfere in an ongoing proceeding. It takes years to litigate WTO cases and at the end of them, for example, if the US government is determined to be in violation, the remedy is that Canada would have the right to retaliate against the US using trade restrictions, but only after the litigation is truly ended, which again takes years.
The Canadians in their complaint focus on the Counter Vailing Duties but do not focus on Bombardier’s failure to respond in the Antidumping Case. The WTO will affirm Commerce on that decision.
With regards to critical circumstances and the imposition on duties 90 days prior to the preliminary determinations, the ITC has yet to rule and often respondents can win on critical circumstances at the ITC. I have won several cases at the ITC on critical circumstances.
More importantly, at the ITC a critical circumstances decision is focused on stockpiling, where importers have imported large quantities of subject merchandise before the Preliminary determination and the stockpiled imports would seriously undermine the remedial effect of any AD and CVD orders issued.
But in this case, there have been no imports of Civil Aircraft. That is supposedly months away, so critical circumstances should be dead at the ITC.