US Urges Acceptance of Commerce's Positions in Wind Towers CVD Investigation at CAFC
Each one of the Commerce Department's four findings challenged in a countervailing duty case challenge is legal and should be sustained, the U.S. argued in a Dec. 9 reply brief at the U.S. Court of Appeals for the Federal Circuit. The government claimed Commerce's decision not to rely on respondent Marmen Energie's auditor's adjustment was reasonable; the agency reasonably found the additional depreciation for various Class 1 assets conferred a countervailable benefit to Marmen; Commerce's calculation of Marmen's benefit for a tax credit program legally did not include the income tax effects of benefits under the program for past years; and the agency reasonably said that Quebec's on-the-job tax credit program is de facto specific (Quebec v. United States, Fed. Cir. #22-1807).
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The consolidated case concerns the countervailing duty investigation on wind towers from Canada, and includes challenges to the investigation from mandatory respondent Marmen; the governments of Canada, Quebec and Ontario; and the Wind Tower Trade Coalition. In the investigation, Commerce found Marmen received benefits through eight programs or credits, among them a tax credit from Quebec for on-the-job training, another tax credit from Quebec to promote employment in Gaspesie and other maritime regions (GASPETC), and Canada's and Quebec's treatment of depreciation for the taxation of certain buildings used in manufacturing. The result was a 1.18% CVD rate for Marmen and all other exporters.
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." While the program has many users, "there are vastly more companies that are not recipients," the brief said. Further, the appellants "failed to exhaust and waived their argument that the statute requires the 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.
"Additionally, Commerce’s approach of comparing the subsidy recipients to the overall number of tax filers is reasonable, given the [Statement of Administrative Action's] authoritative guidance stating that the specificity test is meant to screen-out only those programs that 'truly are broadly available and widely used throughout an economy,'" the brief said.
Addressing the appellants' arguments over the additional depreciation for certain assets, namely buildings used mainly for manufacturing, the U.S. said it conferred a countervailable benefit because it let Marmen claim more depreciation on its buildings than it otherwise could have. "Because the base depreciation rate for Class 1 assets for tax purposes is four percent, Commerce’s determination that the additional six percent depreciation available for certain buildings used in manufacturing conferred a countervailable benefit is reasonable," the brief said. "Additionally, whether the actual depreciation rate for such buildings corresponds to their depreciation rates for tax purposes is immaterial to the fact that the program results in additional depreciation above the base rate, thereby providing a financial contribution from forgone revenue."