Bombardier risks losing contested U.S. trade dispute with Boeing

By Allison Lampert

MONTREAL (Reuters) - Bombardier risks losing a hotly-contested U.S. trade dispute on Thursday which would effectively bar its CSeries jet from the United States for at least a year, a potential setback as the Canadian plane-and-train maker races to meet its 2018 delivery targets and attract sales from American carriers.

The International Trade Commission's (ITC) ruling this week is unlikely to put an end to months of wrangling between Boeing Co , the world's largest maker of jetliners, and Bombardier, along with Canada and the United Kingdom, which have sided with the smaller planemaker.

The Boeing-Bombardier trade dispute has cast a shadow over the ongoing North American Free Trade Agreement (NAFTA) modernization talks, which entered its sixth round this week in Montreal.

 

The ITC, which oversees U.S. trade remedy laws and sides more often with American companies, is expected by some experts to back the U.S. Commerce department's recommendation to slap Bombardier's CSeries with a near 300-percent duty on sales to American carriers.

Boeing has argued that its business was hurt because Bombardier received illegal government subsidies and dumped the CSeries in the United States through the 2016 sale of 75 jets at "absurdly low prices" to Delta Air Lines .

For Bombardier to win, at least three of the body's four commissioners would have to rule for the Canadian planemaker.

"A tie vote goes to petitioners," said U.S. trade expert William Perry who believes Boeing will win the case.

But former ITC chairman Dan Pearson said he would not rule out a Bombardier victory in what's an "unusual" case for the commission.

"If I was there still, I'd be looking sceptically at Boeing's claims," he said.

The trade case has left Bombardier seeking delivery alternatives to Delta, which was supposed to start taking its CSeries orders this year.

One option under consideration includes AeroMexico , which is 49-percent owned by Delta, taking an unknown number of CSeries, Reuters reported last year..

But no decision has been made and AeroMexico could still buy jets from Bombardier's Brazilian rival Embraer SA , said a source familiar with the matter Reuters earlier this month.

AIRBUS-BOMBARDIER DEAL

A win for Boeing would not deter Bombardier from continuing to target U.S. airline customers. Bombardier has struck a deal with Airbus SE , expected to close this year, giving the European planemaker a majority stake in the CSeries and the ability to assemble the planes in Alabama starting in 2019 for delivery to Delta.

While Bombardier says CSeries assembled in Alabama would be duty-free, Boeing has challenged those plans. The two planemakers have clashed on whether the case that mentions aircraft and "partially assembled" aircraft from Canada, would lead to duties on parts used in the CSeries.

Pearson said by email that foreign parts, like a wing made in Belfast, should not face a duty, but there could be charge on Canadian-made parts.

"This week's vote by the ITC is an opportunity to restore a level playing field and recommit to the global trading rules we have all agreed to," said Boeing spokesman Dan Curran on Tuesday.

But Bombardier called Boeing's trade case self-serving after the U.S. planemaker revealed on Dec. 21 it was discussing a "potential combination" with Embraer.

"This case is nothing more than Boeing's transparent attempt to misuse the U.S. trade laws to create an artificial market advantage for itself, including its recent move to acquire Embraer - the CSeries' true competitor - while simultaneously trying to block the CSeries from the U.S. market," Bombardier spokesman Mike Nadolski said by email.

Boeing spokesman Curran denied that the company's ongoing conversations with Embraer have anything to do with its case against Bombardier.

Embraer declined to comment.

(Reporting By Allison Lampert; Editing by Denny Thomas and Nick Zieminski)