The Commerce Department said yesterday that it will investigate a dispute over a New York subway car contract involving Bombardier Corp. of Quebec and Budd Co. of Troy, Mich., which lost the lucrative deal to Bombardier. The announcement came on the heels of the Treasury Department's decision not to intervene.
The Commerce Department's investigation could lead to millions of dollars of duties being levied against Bombardier if Canada is found to have given the Quebec firm unfair subsidies to win the $659 million contract.
On Tuesday, Treasury Secretary Donald T. Regan said the administration would not match a low-interest loan to New York City, which the Canadian government provided to help Bombardier win the contract for 825 subway cars. The administration had angrily criticized the Canadians for providing the loan at an interest rate well below the minimum level formally agreed to by major industrial nations.
Some members of Congress and organized labor had criticized Regan's decision, saying it allowed foreign countries to flout international trade agreements and to take away jobs from American firms.
However, Regan said that, although the Canadian financing was improper, it wasn't a deciding factor in the New York Transit Authority's award to Bombardier, and thus the administration legally couldn't authorize a matching subsidy from the Export-Import Bank.
Regan said that Bombardier's product and delivery were superior to that proposed by Budd and that those factors helped the Canadian firm win the contract, not necessarily the Canadian government's financing package.
The Commerce Department, acting under U.S. countervailing-duty laws, yesterday determined that Budd presented enough evidence in a petition against Bombardier to proceed with an investigation. The U.S. International Trade Commission now must make a preliminary decision by Aug. 9 on whether the subsidy threatens to injure the domestic subway car industry.
If injury is found, the Commerce Department must make a preliminary determination by Sept. 17 that the subway cars had been subsidized unfairly. At that point, the United States may require the car importer to post bonds equal to the amount of the subsidy. Then the Commerce Department and the ITC must make final decisions in the case.
In a related action, Rep. Jim Blanchard (D-Mich.) and 15 cosponsors introduced legislation requiring the federal government to provide financing for a domestic company when foreign financing violates international trade agreements and is not withdrawn at the request of the Treasury Department.