ITC stuns observers with ruling of no injury in Bombardier case
27 January 2018. By Adam Sigal.
Boeing's case against Bombardier before the US International Trade Commission ended with a surprise twist that left onlookers murmuring on Friday as the agency changed its mind and found that imports of Bombardier planes will not, in fact, harm the US aviation industry.
Friday's decision came after a one-day delay so that the ITC staff could file late amendments to the record. The staff report remains sealed, and in accordance with its usual process, the commissioners did not immediately release their reasoning for a 4-0 decision that reversed a preliminary finding — also on a 4-0 vote — that Bombardier imports of C-Series planes were harmful to the US industry.
The surprise from onlookers — there were audible gasps from the audience — came in part because of the reversal, in part because the ITC rarely sides against domestic companies and in part because the US Department of Commerce has already classified the imports as illegally dumped and subsidized.
But perhaps the most striking surprise was the commission's decision to contradict its own final report in the case.
In that report, the agency had found key indicators of injury to US plane manufacturer Boeing. The report said that with the imports, Boeing would likely be forced to either reduce prices or lose sales, and that Bombardier would continue to seek to boost its market share. The imports would also damage existing development and production efforts, the report said.
'Volume effects' were sole key indicator of injury that the ITC failed to find. The agency measures such effects by evaluating imports in recent years, but not a single Bombardier plane has yet entered the US. The ITC also found that Boeing production is operating at capacity, so imports will not idle production.
Two additional issues arose after the commission's preliminary finding of injury: Boeing acknowledged on Dec. 21 entering talks to buy Brazil-based Embraer; and Bombardier and Airbus announced a joint venture to manufacture C-Series planes for Delta in Mobile, Alabama.
Embraer is the third-largest aircraft manufacturer in the world, behind Boeing and Airbus. Bombardier argued that the ITC's analysis would change in its favor if the companies merged. Brazil's government, however, can veto any deal — a factor that the ITC can consider.
Boeing filed to change the scope of its request to only cover planes with a range of at least 2,900 nautical miles. Embraer told the commission less than two weeks ago that its planes could only fly 2,850 nautical miles.
Bombardier responded by asking the ITC to reopen its investigation — a request the agency denied without explanation on Tuesday.
In October, Bombardier and Boeing's European rival, Airbus, announced plans to shift C-Series production of the aircraft to a US Airbus facility. Doing so, Bombardier said, would allow the company to avoid US duties on the planes.
Because the ITC considers the effects of imports on the entire US aviation industry, the agency would take note of the fact that airplane manufacture in the US would increase investment and create jobs.
Bombardier argued that the imports and the Airbus deal would, on net, help US aircraft manufacturing.
The parties have not finalized a deal and as late as January 17th, the commission was still requesting and receiving updates about it. In briefs filed less than a week ago, however, Boeing told the Commission it should ignore the deal.
“Facts gathered in the final weeks of these investigations prove that those assurances are as hollow today as when they were first made. There is no joint venture. Period. And there may never be one. The parties have not broken ground on anything in Mobile relating to the joint venture, let alone a full C-Series production facility,” Boeing said.
“On this record, Bombardier’s continued insistence that the Commission should base its ruling on such rank speculation tells the Commission everything it needs to know about the utter lack of merit to Bombardier’s case.”
Delta, Bombardier, and Canada immediately claimed victory. Bombardier called the decision a “victory for innovation, competition and the rule of law.”
Bombardier said it is “moving ahead with finalizing our partnership with Airbus,” and that “integration planning is going well.”
Boeing has said it will continue to monitor the situation, assessing the injury it faces, and “will review the Commission’s more detailed opinions in full” when they are made public. Its attorneys will certainly seek a route to appeal.
Boeing can also refile its import case in as little as two years — less than that if it refines the scope of the inquiry.
By that time, Bombardier will have started bringing significant numbers of planes to the US, and the issues facing the ITC will be much more clear-cut. The existence of actual imports will make Boeing's case easier.
In that scenario, however, duty rates would be significantly less. Commerce assessed an antisubsidy rate of 219 percent based on subsidies Bombardier received in the last 10 years, but many of those subsidies were granted in the infancy of the C-Series project, from 2007 to 2012. Any time that elapsed before a new complaint would cut into the agency's consideration of those subsidies.
The ITC is scheduled to publish a decision memorandum by March 3 in which commissioners will clarify the reasons for their vote and by then, the last-minute staff addendum will be made public.
Those disclosures will answer the questions raised in the hearing room on Friday.