CIT Sustains Commerce Decisions in Canadian Wind Tower CVD Investigation

The Court of International Trade sustained all of the Commerce Department's positions in a countervailing duty investigation on wind towers from Canada, spurning a slew of litigants in the case ranging from the Canadian government to a U.S. wind tower trade group. In the March 18 opinion made public March 23, Judge Gary Katzmann sided with Commerce on all five issues under contention.

Katzmann said that Commerce permissibly excluded a foreign currency adjustment from plaintiff Marmen Energie's auditor from the total sales denominator as unreliable, reasonably found the Quebec Local Content Requirement provided a recurring benefit, and acted within its authority to find that the Quebec On-the-Job Training Tax Credit was a de facto subsidy. Commerce also legally excluded some increased tax liabilities in computing the benefit conferred by a Canadian tax credit and acted lawfully when finding the financial benefit from additional depreciation for buildings used in manufacturing.

The consolidated case includes challenges to the investigation from Marmen, which was the mandatory respondent; the governments of Canada, Quebec and Ontario; and the Wind Tower Trade Coalition (WTTC). In the investigation, Commerce found that 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 Canda'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 WTTC, in particular, took issue with Commerce's position that the Quebec Local Content Requirement program constituted a recurring benefit (allocating it to the year it was received), making it not countervailable during the investigation period. WTTC said that Commerce erred when applying its three-part test to determine if a program provided a recurring benefit since the agency failed to take into account certain evidence. For instance, WTTC says that Marmen could not have expected to receive subsidies on a regular basis since it made sales contingent on its ability to meet the local content requirements in each of the government's calls for tender.

Katzmann said that while this analysis is muddled by how the Government of Quebec "effectuates the serial transactions which relay the benefit from [utility provider] Hydro-Quebec to Marmen," there's evidence that Commerce considered the nature of the transactions before finding that the subsidies were regular. Thus, the court ruled that WTTC failed to show that Commerce's consideration was unreasonable.

“Although the court ultimately didn’t agree with the domestic industry’s argument that Quebec’s local content requirements were countervailable, the court also disagreed with the arguments raised by the Canadian plaintiffs," said Maureen Thorson, counsel to WTTC. "Today’s decision leaves the countervailing duty order on Canadian wind towers intact, allowing it to continue to provide much-needed relief to U.S. producers.”

Katzmann disagreed with the Canadian government's positions as well. For instance, the governments of Quebec and Canada challenged Commerce's decision that the Quebec job training tax credit is de facto specific. In particular, the governments said that the agency used a faulty methodology to come to this conclusion since the comparison of credit recipients to total tax filers is a misuse of the law. However, Katzmann ruled that this was legal since the agency found that the actual number of recipients relative to the total number of tax filers is limited in number on an enterprise basis. "Commerce’s approach neither fails to comply with the statutory language nor contravenes the underlying aims set out in the [Statement of Administrative Action accompanying the Uruguay Round Agreements Act]," the opinion said.

The Government of Quebec and Marmen also challenged Commerce's exclusion of increased tax liabilities to calculate the total benefit of the GASPETC program. "It is true that Commerce may not disregard an existing policy determination manifest in the regulations without amending the regulations," the opinion said. "However, the court is not persuaded that the regulations require that Commerce consider increased tax liabilities in determining tax benefits."

(The Government of Quebec v. United States, Slip Op. 22-21, CIT Consol.. #20-00168, dated 03/18/22, Judge Gary Katzmann. Attorneys: Nancy Noonan of ArentFox for plaintiff Government of Quebec; Jay Campell of White & Case for consolidated plaintiffs Marmen, Marmen Energie and Marmen Energy Co.; Alan Kashdan of McDermott Will for plaintiff-intervenor Government of Canada; Joshua Kurland for defendant U.S. government; Maureen Thorson of Wiley Rein for defendant-intervneor Wind Tower Trade Coalition; H. Deen Kaplan of Hogan Lovells for defendant-intervenor Government of Ontario)