Canadian Gov't Blasts US Defense of Specificity Finding for Canadian Tax Credit in CVD Case at CAFC

In the brief, the appellants further bolstered their challenges of Commerce's decision not to rely on respondent Marmen Energie's auditor's adjustment was unreasonable, as well as the agency finding that additional depreciation for various Class 1 assets conferred a countervailable benefit to Marmen. The appellants also challenge Commerce's calculation of Marmen's benefit for a tax credit program, arguing it should have included the income tax effects of benefits under the program for past years, as well as and the agency's finding that Quebec's on-the-job tax credit program is de facto specific.

The Court of International Trade in a March opinion upheld all of Commerce's decisions in the investigation (see 2203230064), prompting the Quebec and Canadian governments and Marmen to appeal to the Federal Circuit. In its reply to the appellants' arguments, the U.S. said Commerce reasonably found the on-the-job tax credit program is de facto specific because the number of recipients is limited "on an enterprise basis" (see 2212140020). While the program has many users, "there are vastly more companies that are not recipients," the U.S. said. The appellants also failed to exhaust their argument that the statute requires a separate de jure specificity analysis "to inform" the de facto specificity analysis, but even if they had not, the argument fails since the tests are distinct, the government said.

In their reply, the appellants said they did in fact exhaust their administrative remedies. The Canadian parties have always argued against the de facto specific finding for the on-the-job-training tax credit based on comparing the thousands of users of the credit with the number of tax filers in Quebec because it is unreasonable to assume every tax filer could claim the credit. Since the de jure specificity provision deals with when eligibility for the credit is not specific as a matter of law, the de jure analysis must inform the de facto analysis, the appellants claimed. "Québec fully exhausted its administrative remedy on this issue," the brief said. "At most, Québec’s arguments on appeal are mere extensions of those it had raised previously and are legal in nature."

The appellants further claimed that Commerce's interpretation of "limited in number" in the de facto provision as requiring a comparison to all tax filers cuts against the law regardless of whether the de jure part of the law is considered.

"Thus, Commerce erred in determining that the On-the-Job-Training Tax Credit is de facto specific because it did not conduct a proper analysis of whether the credit was 'limited in number,'" the brief said. "Under a proper legal analysis, Commerce would have determined that the On-the-Job-Training Tax Credit was not de facto specific, considering the number of actual users and industries, as well as the pool of eligible companies."