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US trade staff issue final report before Bombardier-Boeing ruling

The US International Trade Commission (ITC) has released a detailed report that reviews arguments on both sides of the Boeing-Bombardier trade dispute and provides a basis on which commissioners will decide if Bombardier's CSeries sale to Delta Air Lines harmed Boeing.

The 118-page document written by the ITC's staff provides no recommendations, but rather compiles information the ITC gathered during its months-long trade investigation.

That information came from legal submissions, public briefings and questionnaires submitted by a range of companies in the commercial aviation industry, including Airbus, Boeing and Bombardier, all major US airlines, many regional airlines and banks and aircraft leasing companies.

The report now moves to the desks of the ITC's four commissions, who on 25 January will cast votes that will determine whether CSeries imports will be subject to a 292% import tax.

Under US statute, a tie vote equates to an "affirmative" determination in Boeing's favour, the ITC confirms.

Boeing declines to comment on the report and Bombardier did not respond to a request for comment.

The report makes clear that the commission faces complex trade questions related to aircraft demand, production availability, sale prices, the volume and significance of potential imports and the potential effect of imports on Boeing's sales and prices, according to the report.

Mixed into the debate are questions about how – or if – CS100s compete with Boeing's 737-700 or 737-700, and, if so, to what degree.

The report brings US trade officials close to concluding a dispute started in April when Boeing asserted in a petition that a heavily-subsidised Bombardier violated US trade law by "dumping" CS100s to Delta Air Lines in 2016.

Referencing figures in Bombardier's financial reports, Boeing estimated Bombardier sold the aircraft for $19.6 million each – well below Bombardier's cost, which Boeing estimates at $33.2 million.

Boeing has alleged that pressure from Bombardier forced it to sell 737-700s at discounted prices to United, resulting in lost revenue (United has since converted those orders to larger 737 variants).

Boeing likewise says it lost the Delta sale due to Bombardier's pricing.

Bombardier denies the allegations, insisting Boeing suffered no harm because it does not produce any aircraft that compete with the roughly 110-seat CS100.

Bombardier says United initially sought a smaller aircraft but signed with Boeing only after receiving a "sweetheart deal", the ITC's staff report notes.

Delta has said Boeing "simply was not in the mix" because it offered no competing product other than used Embraer 190s, says the report.

The US Department of Commerce already sided with Boeing and slapped CSeries imports with the 292% import tariff, but the tax only takes effect if the ITC determines Boeing suffered harm.

Meanwhile, Bombardier continues to move forward with a plan to transfer majority CSeries ownership to Airbus and, to open a CSeries final assembly plant with Airbus in Alabama.

Bombardier and Airbus say that deal, which they hope to finalise in the second half of this year, would enable them to avoid import duties – a point Boeing also disputes.

The ITC's staff report, heavily redacted to exclude proprietary information, delves into the US market for commercial aircraft with 100 to 150 seats and range of 2,900nm (5,371km) – the segment around which the trade dispute revolves.

CS100s, CS300s, Airbus A319s, A319neos, 737-700s and 737 Max 7s fit within that segment, trade officials have determined.

The report reviews aircraft distribution channels, production processes and production cycles, aircraft characteristics, similarities, differences and factors that guide airlines' purchase decisions.

It also describes the degree to which the CSeries compete with Boeing 737-700s and Max 7s.

A majority of aircraft purchasers who completed questionnaires said the CSeries had better availability, price, lifetime costs, fuel efficiency and technology than the Boeing models, the report notes.

But a majority also gave Boeing an edge for fleet commonality, performance and range.

"Based on available data, staff believes that there is moderate-to-high degree of substitutability between domestically produced 100- to 150-seat [aircraft] and Canadian-produced 100- to 150-seat [aircraft]," says the report.

The staff report also reviews two previous ITC commercial aircraft investigations.

In May 1982, the commission shot down a petition in which Ohio-based Commuter Aircraft Corporation claimed harm from imports of aircraft allegedly subsidised by France and Italy.

Then in August 1982, the commission likewise rejected a petition from Texas-based Fairchild Swearingen Corporation against aircraft allegedly subsidised by Brazil.

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