[00:00:01] Speaker 06:
The next case is the government of Quebec and the government of Canada versus the United States in the Wind Tower Trade Coalition and the government of Ontario, 2022, 1807.

[00:00:17] Speaker 06:
Mr. Campbell.

[00:00:21] Speaker 01:
May it please the Court?

[00:00:23] Speaker 01:
I will begin with the Gaspizzi Tax Credit Program.

[00:00:26] Speaker 01:
The issue here is the proper interpretation of Section 351.509A, which defines the benefit of a direct tax program.

[00:00:39] Speaker 01:
Here, the plain language of this provision defines the benefit as the tax savings to the company as a result of the program.

[00:00:48] Speaker 01:
With respect to the gas-feasing tax credit program, this means Marmon received both a tax credit and also paid additional taxes as a result of the program on the exact same tax return.

[00:01:02] Speaker 01:
Contrary to the plain instruction of the regulation, Commerce limited the benefit to the amount of the tax credit, which is not in accordance with law.

[00:01:11] Speaker 01:
Now Commerce offered two justifications for its decision.

[00:01:15] Speaker 01:
First we pointed to section 351.503e, the tax consequences provision.

[00:01:22] Speaker 01:
But this provision precludes commerce from considering the tax consequences of the benefit.

[00:01:29] Speaker 01:
And the benefit, again, is defined by section 351.509a.

[00:01:35] Speaker 01:
So the tax consequences provision is not reached in the first instance because that provision is only reached after the benefit itself is calculated.

[00:01:43] Speaker 01:
Similarly, Commerce points to the statute, 19 U.S.E.

[00:01:48] Speaker 05:
Section C. I'm not sure I'm clear on why you're saying it.

[00:01:50] Speaker 05:
It seems to me 503E is pretty clear.

[00:01:54] Speaker 05:
And it's applicable here.

[00:01:55] Speaker 05:
So what makes it inapplicable?

[00:02:00] Speaker 01:
It's not applicable because the plain language of 503E precludes Commerce from considering the tax consequences of the benefit.

[00:02:08] Speaker 01:
So before you even get to 503, you have to calculate the benefit.

[00:02:12] Speaker 01:
And the benefit for a tax credit program is governed by Section 3509A.

[00:02:19] Speaker 01:
So 503E is not reached in the first instance.

[00:02:22] Speaker 01:
A good way to illustrate this is by reference to grants.

[00:02:26] Speaker 01:
Section 351.504 defines the benefit of a grant as the amount of a grant.

[00:02:33] Speaker 01:
So then when you go to 503E, that concludes commerce from considering

[00:02:38] Speaker 01:
the tax consequences of the amount of the grant.

[00:02:42] Speaker 01:
But in stark contrast, section 351.509A

[00:02:47] Speaker 01:
defines, does not define the benefit as the amount of the tax credit or the amount of the tax remission.

[00:02:54] Speaker 01:
It defines the benefit as the tax savings to the firm as a result of the program, which necessarily requires Commerce to consider not only the tax credit, but also the additional taxes paid on the exact same tax return.

[00:03:08] Speaker 01:
Commerce also points to section, section 1677-6, which is the net counter-available subsidy provision.

[00:03:16] Speaker 01:
Similarly, this provision is not implicated because it does not apply until after the counter-available subsidy under Section 1677-5 is calculated, which necessarily includes calculation of the benefit.

[00:03:30] Speaker 01:
I will now turn to the auditor's exchange rate adjustment.

[00:03:34] Speaker 01:
The issue here is the Commerce's decision to reject an independent auditor's adjustment as unverifiable and... Sir, what happened in verification with respect to the audited numbers?

[00:03:46] Speaker 02:
There were some errors that were found, correct, in the data.

[00:03:50] Speaker 02:
Was it in data that was provided during the course of the verification itself or in the submissions, the questionnaires that were provided before verification?

[00:04:00] Speaker 01:
There was no error in Marmon's questionnaire responses.

[00:04:03] Speaker 01:
Marmon reported its sales and auditor's adjustment consistent with its record.

[00:04:10] Speaker 01:
There was an error in the

[00:04:13] Speaker 01:
calculation of the auditor's adjustment itself, but that error was isolated and immaterial.

[00:04:20] Speaker 01:
Marmon, in fact, prepared in advance detailed listings of all the US dollar sales included in the auditor's exchange rate adjustment to convert those sales to Canadian dollars.

[00:04:33] Speaker 01:
Marmon did so by account

[00:04:35] Speaker 01:
And the five sales that were coded in euro were clearly marked in these listings in euro.

[00:04:40] Speaker 01:
In fact, these listings were prepared by account.

[00:04:44] Speaker 01:
And one of the accounts was limited to four sales, each of which was recorded in euro.

[00:04:51] Speaker 02:
So these errors, they were discovered during verification?

[00:04:58] Speaker 01:
They were not just commerce again.

[00:05:00] Speaker 02:
I guess what I'm getting at was it was it based on new data presented at verification or on the data that had already been submitted.

[00:05:10] Speaker 01:
The five errors were identified by Marmon in the US dollar sales listings is prepared for commerce for verification.

[00:05:20] Speaker 01:
those sales were isolated and limited.

[00:05:23] Speaker 01:
After reviewing those sales and seeing that they were recorded in Euro, then Commerce conducted spot checking, selected 12 sales in the US dollar sales listings at random, and confirmed that each and every one was made and paid in US dollars.

[00:05:41] Speaker 01:
So this is important because in Commerce's final decision, it justified rejecting an independent auditors adjustment

[00:05:49] Speaker 01:
Based on a claim that it discovered the five errors through spot-checking and that's absolutely false the only spot-checking that commerce actually performed Confirmed the accuracy of the adjustment overall those five sales were limited Isolated immaterial they accounted for less than 0.2 percent of the auditors adjustment moving on from there based on those on those errors or the auditing Issues that came up

[00:06:19] Speaker 02:
Commerce made the determination that the entire database was tainted?

[00:06:27] Speaker 01:
In its final decision, Commerce made the decision that the auditor's adjustment was unverifiable and unreliable, and that essentially meant that Commerce rejected Marmon's audited sales revenue.

[00:06:42] Speaker 01:
Okay.

[00:06:43] Speaker 01:
Thank you.

[00:06:43] Speaker 01:
It's also very important that in the summary of findings of the verification report,

[00:06:48] Speaker 01:
Commerce's auditors did not indicate or even suggest that there was any question about the reliability of the auditor's adjustment.

[00:06:57] Speaker 01:
In fact, the opposite.

[00:06:59] Speaker 01:
The summary of findings states and indicates that the auditor that confirms commerce verified that Marmon in the normal course of business recorded US dollar sales

[00:07:10] Speaker 01:
in its general ledger in US dollars, and that the auditor's adjustment was required to express those sales in Canadian dollars.

[00:07:18] Speaker 01:
So Commerce's decision here is based on a false premise, which is contradicted by its own verification report, and that's why Commerce's decision cannot be sustained as supported by substantial evidence.

[00:07:34] Speaker 01:
I will now turn to the depreciation deduction for manufacturing buildings.

[00:07:39] Speaker 01:
The issue here is whether Canada's depreciation rate for manufacturing buildings is accelerated or preferential.

[00:07:46] Speaker 01:
The answer is no.

[00:07:48] Speaker 01:
Here in particular, Commerce ignored an undisputed Canadian government study that established that the normal actual depreciation rate of manufacturing buildings is 10%.

[00:08:00] Speaker 01:
This means that the 10% depreciation rate to manufacturing buildings is not accelerated.

[00:08:05] Speaker 01:
It's not preferential.

[00:08:06] Speaker 01:
Because of that, there's no financial contribution.

[00:08:10] Speaker 05:
What is your understanding about why commerce agreed to by the CIT said, no, no, no, this is preferential?

[00:08:20] Speaker 05:
What?

[00:08:22] Speaker 01:
Commerce engaged in a purely formalistic exercise.

[00:08:25] Speaker 05:
Well, they seemed to think that the 4% was okay.

[00:08:28] Speaker 05:
So the 4% is okay, but the 6% isn't.

[00:08:32] Speaker 05:
So what is your understanding of how they differentiated the 4 versus the 6%?

[00:08:37] Speaker 01:
All commerce did was this, because both manufacturing buildings and residential buildings, two different types of assets that have different depreciation rates, actual depreciation rates, because they have different useful lives.

[00:08:50] Speaker 01:
Manufacturing buildings have a shorter useful life than residential buildings, which is why manufacturing buildings are given a higher depreciation rate of 10%, while residential buildings are given a depreciation rate of 4%.

[00:09:03] Speaker 01:
Now, all commerce did was look at the 10% versus the 4% and say, because both of those assets, manufacturing buildings and residential buildings, are under class one, that means that 10% is an accelerated or additional or preferential depreciation rate over the 4% rate for residential buildings.

[00:09:23] Speaker 01:
But that completely fails to

[00:09:25] Speaker 01:
Address the substance of the argument.

[00:09:28] Speaker 01:
We were raised which is that no 10% is not an accelerated depreciation rate because in fact manufacturing buildings depreciate at a rate of 10%

[00:09:58] Speaker 04:
May it please the court?

[00:09:59] Speaker 04:
Nancy Noonan.

[00:10:00] Speaker 04:
Commerce misinterpreted the statute's de facto specificity provision as to Quebec's on-the-job training program when it compared approximately 5,000 users of the program to all taxpayers.

[00:10:13] Speaker 05:
So how many users?

[00:10:14] Speaker 05:
What is your alternative?

[00:10:16] Speaker 05:
I mean, they used all corporate filers, right?

[00:10:19] Speaker 05:
Yes, Your Honor.

[00:10:20] Speaker 05:
What number do you see?

[00:10:21] Speaker 05:
And we're talking about the number in the denominator, right?

[00:10:25] Speaker 05:
What number should they use?

[00:10:29] Speaker 04:
We're talking about a denominator just from the perspective of the statutory provision of whether there was a limited number of actual users of the program.

[00:10:41] Speaker 04:
So in that case, we believe the eligibility, who is eligible for the program,

[00:10:46] Speaker 04:
have to inform those potential users.

[00:10:51] Speaker 04:
Here, you could have a nonprofit entity as a taxpayer.

[00:10:54] Speaker 04:
They're not eligible for the program.

[00:10:56] Speaker 04:
You could have a holding company as a taxpayer.

[00:10:59] Speaker 04:
They're not eligible for the program.

[00:11:00] Speaker 05:
So just the program, whatever regulation, whatever sets up the program, do they

[00:11:05] Speaker 05:
do they identify these groups of people are eligible or these groups of people are ineligible?

[00:11:12] Speaker 04:
Is that ascertainable readily?

[00:11:14] Speaker 04:
Well, from the perspective that the program says, again, under the lawful objective criteria of eligibility for the program, there has to be a qualified training program

[00:11:24] Speaker 04:
You have to have a trainee or apprentice that's participating in the program.

[00:11:29] Speaker 04:
It cannot be a non-profit entity.

[00:11:31] Speaker 04:
It cannot be a government entity or related to a government entity.

[00:11:36] Speaker 04:
So our perspective is first just looking at the statement of administrative action.

[00:11:41] Speaker 04:
Is this widespread available and used?

[00:11:45] Speaker 04:
Just on these facts, yes, thousands and thousands of users in dozens of industries.

[00:11:50] Speaker 04:
That is not a subsidy that is narrowly focused on a discrete segment of the economy as an initial premise.

[00:11:58] Speaker 04:
In terms of what we would compare it to as potential users, we do have on the record, well, it shouldn't be all tax filers, because they can't all use the program.

[00:12:08] Speaker 04:
But on the record, we do have a figure of folks that apply for the program, but actually were denied the use of the program.

[00:12:18] Speaker 04:
Using that statistic, we've got a 97% users of the program.

[00:12:23] Speaker 06:
Go ahead.

[00:12:29] Speaker 06:
Council, you've limited yourself by agreement to two minutes.

[00:12:32] Speaker 06:
Yes, Your Honor.

[00:12:33] Speaker 06:
And the two minutes have only elapsed.

[00:12:37] Speaker 06:
So let's hear from Mr. Curland, the government.

[00:12:55] Speaker 00:
Good morning, Your Honor, and may it please the Court.

[00:12:57] Speaker 00:
This court should sustain each of Congress's four determinations on appeal in this case because each of them is supported by substantial evidence and otherwise in accordance with law.

[00:13:06] Speaker 00:
I'll start with the class one assets program.

[00:13:09] Speaker 00:
I think there are two key aspects to Congress's evidentiary determination here.

[00:13:15] Speaker 00:
The first is that

[00:13:16] Speaker 00:
Commerce determined in the records of course that the four percent rate is otherwise the default rate for these kind of assets They're all included in class one Canada could have set up the system differently, but it did not and so these assets kind of

[00:13:39] Speaker 00:
Sure.

[00:13:39] Speaker 00:
There are a lot of sites for that, Your Honor.

[00:13:42] Speaker 00:
So I'm going to try to remember.

[00:13:44] Speaker 05:
There's one thing I was looking at that defined the class model.

[00:13:48] Speaker 05:
It's OK.

[00:13:49] Speaker 00:
Sure.

[00:13:49] Speaker 00:
Well, my point is it's repeated, and I think it's important to get out all these sites.

[00:13:53] Speaker 00:
So let me do that.

[00:13:55] Speaker 00:
At page 8018 and 1905, that's the government of Canada and the government of Quebec respectively.

[00:14:02] Speaker 00:
Not in the chart, but in their questionnaire response.

[00:14:04] Speaker 00:
each explaining that the 4% rate is the so-called basic rate.

[00:14:08] Speaker 05:
They say basically... It may be a basic rate, but we're talking about two different things.

[00:14:14] Speaker 05:
We're talking about two different types of depreciation for two different categories of assets, right?

[00:14:21] Speaker 00:
Respectfully, Your Honor, I would disagree, because no, they're all in the same class, and that these assets have a basic rate of 4%, but you can qualify, and this is the second main point,

[00:14:34] Speaker 00:
At your option, you are eligible to request, or not request, but I guess step forth, a different rate of depreciation up to 10% if you have one of these assets.

[00:14:45] Speaker 05:
And that is particularly the chart that I think is most- I guess I'm really not, unless maybe it will help you to help Noah.

[00:14:52] Speaker 05:
I don't understand, if you let the 4% go, what the difference is between the 4% and the 6%.

[00:14:58] Speaker 05:
They're all dealing with depreciation.

[00:15:00] Speaker 05:
They're dealing with reasonable categories of depreciation for different types of assets.

[00:15:06] Speaker 05:
And I don't understand why one is in and one is out.

[00:15:10] Speaker 00:
There's a default rate of 4% for all Class 1 assets.

[00:15:14] Speaker 00:
Then if you meet certain qualifications, you can submit for an additional 6% for a total of 10%.

[00:15:22] Speaker 00:
for those assets, but they're still classified.

[00:15:24] Speaker 05:
What about different assets, though, aren't they?

[00:15:26] Speaker 00:
Well, I mean, everyone's building is a different building, but these are all classed on assets that are subject to a default rate of 4%.

[00:15:33] Speaker 00:
This is, again, a questionnaire response, and I have some charts to show you as well.

[00:15:36] Speaker 00:
But in Canada's circular on this issue, this is at page 9548 of the record.

[00:15:42] Speaker 00:
I think this is the most distinct way that they combine both of those points.

[00:15:46] Speaker 00:
It says, if you do not file an election to put it in a separate class,

[00:15:53] Speaker 00:
the 4% rate will apply.

[00:15:55] Speaker 00:
That's what they refer to as the basic rate at page 8018 in 1905.

[00:15:59] Speaker 00:
Then there are several places in the record where there are charts that show that for class one, these are all class one assets, the rate is 4%.

[00:16:08] Speaker 00:
I'm looking at page 8037.

[00:16:09] Speaker 05:
Well, don't you have to put in any kind of paperwork to get the 4%?

[00:16:16] Speaker 00:
The statements on the record are that if you do not do anything else, the 4% rate will apply.

[00:16:23] Speaker 00:
I think it is the case that you still have to submit your tax forms, and so you're going to submit the form that says we're claiming the 4%.

[00:16:29] Speaker 05:
So because there's a requirement that you submit an extra form to get this, this makes it a separate and different kind of benefit that's just differentiated from the 4%.

[00:16:39] Speaker 00:
Is that it?

[00:16:40] Speaker 00:
It's a combination of the fact that there's a default rate and that it's optional and elective to submit an additional form.

[00:16:47] Speaker 00:
In fact, at page 8038 of the record, the Canada's regulations itself, it discusses the fact that you don't even have to actually take the 10%.

[00:16:58] Speaker 00:
It says that if you elect, you may submit for additional depreciation up to 10%.

[00:17:06] Speaker 00:
And so I agree with your honor that there aren't deep in the weeds legalities to this.

[00:17:13] Speaker 02:
But what are the requirements to move from the 4% to the 10%?

[00:17:17] Speaker 02:
Are there requirements that you have to meet?

[00:17:20] Speaker 00:
Yes, there has to be.

[00:17:22] Speaker 00:
Again, they're all under class one, but to request the 10%, I think it has to be a building that was purchased after a certain time that has 90% of its floor space used for manufacturing purposes.

[00:17:33] Speaker 00:
Although, as the interveners appropriately point out in this commerce indicated at page 98 of the record in its issues and decision memo, it doesn't even apply to every industry.

[00:17:45] Speaker 00:
At page 28, 29 to 28, 30 of the record, one can see that there are certain industries

[00:17:51] Speaker 00:
even excluded, even if you have a manufacturing building, you don't get it for those purposes.

[00:17:57] Speaker 00:
So the point is that there's a default rate that absolutely applies to these buildings at page 95, 48.

[00:18:03] Speaker 00:
That's precisely what Canada says, and it's circular, and it refers to it as the basic rate.

[00:18:08] Speaker 00:
But then if you qualify, you can seek an additional rate.

[00:18:11] Speaker 00:
That also goes to what the trial court said at page 35.

[00:18:14] Speaker 02:
Let's go back.

[00:18:15] Speaker 02:
Does everybody qualify that wants to qualify, that wants to go from 4% to 10%?

[00:18:23] Speaker 02:
I'm concerned by your answers to Judge Kroos.

[00:18:27] Speaker 02:
I'm beginning not to see a difference between the 10 and the 4 percent.

[00:18:33] Speaker 00:
One has to file an election form to get... Is that it?

[00:18:37] Speaker 00:
Well, one has to have a building that meets the criteria.

[00:18:40] Speaker 02:
That's what I'm asking you.

[00:18:42] Speaker 02:
What's the eligibility criteria that applies?

[00:18:47] Speaker 02:
If not everybody can get from 4 to 10, those who get to 10

[00:18:51] Speaker 02:
have to meet certain criteria, right?

[00:18:54] Speaker 00:
Yes, that's right.

[00:18:54] Speaker 02:
What is that criteria?

[00:18:56] Speaker 00:
The criteria is having a non-residential building that was bought after a certain date for which I think it's 90% of the floor space is used for manufacturing purposes.

[00:19:06] Speaker 00:
If you own such a building, your basic depreciation rate will be 4%.

[00:19:10] Speaker 00:
But you can file an election to get essentially anywhere from 4% to 10% at your option

[00:19:16] Speaker 00:
under the regulation.

[00:19:18] Speaker 05:
But you say if you own a building you can get four percent.

[00:19:21] Speaker 05:
You have to do something to get the four percent right.

[00:19:25] Speaker 00:
I think what one has to do is simply file one taxes claiming the four percent depreciation.

[00:19:29] Speaker 05:
You have to claim the four percent.

[00:19:31] Speaker 05:
Right.

[00:19:31] Speaker 05:
Can you look at page appendix 35?

[00:19:34] Speaker 05:
This is where the trial court decision.

[00:19:37] Speaker 05:
is analyzing this.

[00:19:41] Speaker 05:
And he affirms, commerce reasonably concluded that we're a taxpayer can opt in to more favorable treatment.

[00:19:51] Speaker 05:
It is reasonable for commerce to confine its analysis to the comparisons provided for by law, even if the more favorable treatment better reflects economic reality.

[00:20:03] Speaker 05:
So all of this, I think everybody agrees, this reflects economic reality in terms of these deductions and this depreciation.

[00:20:11] Speaker 05:
So there's favorable treatment under your view, and then there's more favorable treatment.

[00:20:16] Speaker 05:
So the favorable treatment is okay, but the more favorable treatment is not okay.

[00:20:22] Speaker 00:
I respectfully would disagree on a couple of points, or at least clarify.

[00:20:26] Speaker 00:
I think we don't take a position about whether this better reflects economic reality.

[00:20:30] Speaker 05:
Well, I'm dealing with what the trial court concluded.

[00:20:32] Speaker 00:
Right, right.

[00:20:33] Speaker 05:
I think it has some meaningful.

[00:20:35] Speaker 00:
I think we can assume that for purposes of argument.

[00:20:38] Speaker 00:
But no, it's not between different levels of favorable treatment.

[00:20:41] Speaker 00:
4% is kind of the base depreciation rate, at least for this class under Canadian law, for all buildings.

[00:20:48] Speaker 00:
So it's not that, well, we're giving you some favorable treatment and then we're giving you some more favorable treatment.

[00:20:54] Speaker 00:
I mean, they say it's the basic rate for depreciation.

[00:20:58] Speaker 00:
But if you have a manufacturing building, they're giving you a benefit where you can claim additional depreciation up to an additional 6% for your manufacturing building.

[00:21:09] Speaker 06:
And that's the point.

[00:21:11] Speaker 06:
It's a benefit, right?

[00:21:13] Speaker 00:
Right.

[00:21:14] Speaker 00:
Right.

[00:21:14] Speaker 00:
That's how they set it up.

[00:21:15] Speaker 00:
They could have set it up a different way.

[00:21:17] Speaker 00:
They could have set all manufacturing buildings in this economy are subject to a 10% appreciation rate.

[00:21:22] Speaker 06:
They pay fewer taxes, and that's a benefit.

[00:21:24] Speaker 00:
Right.

[00:21:25] Speaker 00:
And a financial contribution.

[00:21:27] Speaker 05:
Wait.

[00:21:27] Speaker 05:
But your point, they could have set it up differently.

[00:21:29] Speaker 05:
So if they had set it up how?

[00:21:31] Speaker 05:
If they had said, OK, this is what you've got to do for 4%, and this is what you've got to do for 6%.

[00:21:36] Speaker 05:
Does that make it less of a benefit or less favorable?

[00:21:40] Speaker 00:
I think it would be a different case if it were simply the case that like all other non-residential, class one says essentially all non-residential buildings 4%.

[00:21:50] Speaker 00:
If they say all residential buildings 4% and all manufactured buildings 10% and it's not a matter of you at your option can seek an additional up to 10% and it's not that there's a default rate, that might be a different case, but that's not how Canada has set up its system.

[00:22:08] Speaker 00:
seemingly at their election up to 10%, and as the interviewees point out, at 28, 29, 28, 30, there are certain manufacturing industries that are excluded.

[00:22:20] Speaker 00:
I also wanted to clear up a couple of important points on the auditor's adjustment issue as a factor of matter, a few factor of matters.

[00:22:29] Speaker 00:
I want to make clear to the court that no, Congress absolutely did not throw out all of their stats.

[00:22:35] Speaker 00:
Throughout the questionnaire process,

[00:22:37] Speaker 00:
Marmon reported the sales figures that were in their general ledger, which is exactly what Commerce used.

[00:22:44] Speaker 00:
Commerce used the figure that was in their general ledger.

[00:22:46] Speaker 00:
Late in the questionnaire process, Congress has often asked for a reconciliation of the sales in the reporting database to the general ledger, because frequently they don't match up exactly.

[00:22:58] Speaker 00:
Marmon provided that reconciliation, but then added a line that they didn't really make much fanfare about and didn't really tell Congress about, saying there's one line in the reconciliation that has a millions of Canadian dollars adjustment, which is this auditor adjustment for exchange rate issues.

[00:23:16] Speaker 00:
In years past, not chosen to make such an adjustment, as the record reflects and commerce discussed, but in this year they did.

[00:23:23] Speaker 00:
Commerce found that it was too late to use that for its preliminary results and essentially said, we're going to check this adjustment of verification.

[00:23:30] Speaker 00:
It then asked Marmon to prepare a bunch of documentation for the verification.

[00:23:34] Speaker 00:
And this is the documentation that Marmon says, oh, we discovered it and provided it to commerce.

[00:23:39] Speaker 00:
We respectfully disagree with that characterization because it's essentially what commerce asked Marmon to provide for verification.

[00:23:46] Speaker 05:
Can I ask you about the online job training?

[00:23:48] Speaker 00:
Yes, of course.

[00:23:49] Speaker 05:
Okay.

[00:23:51] Speaker 05:
Why is it at least not correct that the denominator should not include if government entities are excluded from participating, if non-profit entities are excluded from participating?

[00:24:02] Speaker 05:
Were those included in your calculations that got you to the 0.2% or not?

[00:24:07] Speaker 00:
I'm not 100% sure, Your Honor, but my understanding is that this is corporate filers.

[00:24:12] Speaker 00:
And so I would think that government entities and nonprofits would not be included.

[00:24:15] Speaker 00:
And it's actually closer to 1% than 2%.

[00:24:18] Speaker 00:
But the point is the other side would be bad.

[00:24:22] Speaker 00:
I mean, tautological, right?

[00:24:24] Speaker 00:
If you're going to take the idea that we're going to compare the number of users of this program to the number of people who were eligible under the program,

[00:24:35] Speaker 00:
You know, we're going to compare the number of people who filed for this program to the number that's the number of people who are likely to use the program.

[00:24:42] Speaker 00:
It's always going to be a really high number.

[00:24:44] Speaker 00:
But what Commerce did here, which is a methodological issue and for which Commerce received great deference, matches up very closely with what the authoritative guidance at page 929 to 932 of the SAA.

[00:24:56] Speaker 00:
And I'll try to rattle off very quickly some of those options.

[00:25:03] Speaker 00:
says that the idea of the specificity test is an initial screen to winnow out only those subsidies that are truly broadly available and widely used throughout the economy.

[00:25:15] Speaker 00:
That's at 929.

[00:25:16] Speaker 00:
At 930, it says a similar thing.

[00:25:18] Speaker 00:
In fact, it's the own italics in the SAA that says because of the widespread availability and use of a subsidy, the benefit is spread throughout the economy.

[00:25:29] Speaker 00:
Commerce can take account of the number of industries in the economy in question, which suggests an industry-wide look, not this kind of tautological idea.

[00:25:41] Speaker 00:
And finally, and this is at 932, and I think an important aspect of this that may get overlooked, is it says, as under existing law and commerce practice, evidence of the government's intent to argue, I'm sorry,

[00:25:56] Speaker 00:
Government's intent to target or otherwise limit benefits, that's referring to the de jure provision of the statute, that's de jure, would be irrelevant to the de facto specificity analysis.

[00:26:08] Speaker 00:
And their hypothetical is actually a great example of this, right?

[00:26:12] Speaker 00:
I'm going to tweak it slightly.

[00:26:13] Speaker 06:
They talk about, well, what if the substance was given to anyone with disabilities?

[00:26:20] Speaker 06:
At the time, we've exceeded yours, and so will hear from Mr. Dawson.

[00:26:25] Speaker 00:
Thank you, Your Honor.

[00:26:36] Speaker 03:
Thank you, Your Honors.

[00:26:38] Speaker 03:
Three minutes.

[00:26:39] Speaker 03:
Thank you, sir.

[00:26:41] Speaker 03:
Because I believe Mr. Kurland has covered the basis with regard to the depreciation program,

[00:26:48] Speaker 03:
and the net sales denominator.

[00:26:51] Speaker 03:
I'll focus on the gas to sea tax credit, and Judge Prost, you had asked a question about the interpretation of Section 509 that the appellants are bringing forward, and I find their interpretation very strange, frankly.

[00:27:09] Speaker 03:
I think it relies on a very cramped and odd

[00:27:12] Speaker 03:
interpretation of the word program as used in that regulation that fails to take into account a few things.

[00:27:19] Speaker 03:
One, that the regulation regards a number of different kinds of tax subsidies and the word program to me seems most naturally to be read as simply referring to any of those particular types of subsidies and not indicating that program itself implicates both tax gains and tax losses considered collectively.

[00:27:42] Speaker 03:
The other thing is the direct tax regulation also specifically equates the benefit of a tax exemption or remission, rather than a program more broadly, with the taxes avoided by reason of an exemption claimed in a specific tax year.

[00:27:57] Speaker 03:
And that's 19 CFR 351.509B, which Commerce itself cited in its decision memo at Appendix 125.

[00:28:06] Speaker 03:
I think the fact that

[00:28:08] Speaker 03:
The definition of the benefit is related to the claim you make in a specific tax year as to an exemption or remission further undermines appellant's construction of the word program and indicates that the benefit of a tax credit is the amount saved by the claim to the credit as made as to that specific tax year and doesn't indicate any taxes you pay on claims you made as to prior years.

[00:28:34] Speaker 03:
Commerce's methodological choice to ignore the tax consequences of direct tax programs is also very long-standing and very consistent.

[00:28:44] Speaker 03:
Below, Judge Cashman, in preparation for oral arguments, asked the parties to identify any cases they could find in which commerce had taken the approach that appellants favor with respect to this regulation, and they could not find any.

[00:28:59] Speaker 03:
I am still not aware of any in which commerce had

[00:29:02] Speaker 03:
calculated a tax benefit in the way that appellants say is clear under the regulation.

[00:29:08] Speaker 03:
I think we find it not clear, and what Commerce did appears to be to be both consistent with their regulations and with their long-standing practice.

[00:29:19] Speaker 03:
Finally, I'll just make one point about the on-the-job tax credit, which is, you asked, what's the number, what's the denominator you want?

[00:29:32] Speaker 03:
The answer given to me is compare the users to the users.

[00:29:38] Speaker 03:
It's tautological, as Mr. Curlin pointed out, and I would say the appellant's approach has some particular difficulties in that it's probably in many cases very difficult to figure out who has

[00:29:50] Speaker 03:
who has technically done the things required to get a benefit but never made a claim as to it.

[00:29:57] Speaker 05:
Here it seems very reasonable to me for the agency to... But you do agree that it would be clear to cabinet, which I think commerce did, to those that are eligible.

[00:30:07] Speaker 03:
So it depends on how you define eligibility.

[00:30:10] Speaker 03:
Is eligibility everybody who actually performed the actions, or everyone who was able under law to perform the action?

[00:30:17] Speaker 03:
Well, it's the latter, I think.

[00:30:20] Speaker 03:
Yes, I agree with you.

[00:30:22] Speaker 03:
Everybody under the law able to perform the actions required to take the credit.

[00:30:27] Speaker 03:
And corporate tax filers is the nearest analog that we have to that here on this record.

[00:30:31] Speaker 03:
Thank you, Your Honors.

[00:30:32] Speaker 06:
Thank you, Counsel.

[00:30:34] Speaker 06:
Mr. Campbell has some new buttons on.

[00:30:38] Speaker 01:
Thank you, Your Honor.

[00:30:39] Speaker 01:
Regarding the depreciation rate for manufacturing buildings, it's important here to understand commerce's long-standing practice.

[00:30:48] Speaker 01:
Commerce does not simply countervail depreciation deductions.

[00:30:52] Speaker 01:
Those are taken by, you know, in the normal course of business under a multitude of tax regimes, including the United States' tax regime.

[00:30:59] Speaker 01:
Commerce only countervails a depreciation deduction for an asset

[00:31:03] Speaker 01:
if it is accelerated.

[00:31:05] Speaker 01:
And here, the undisputed record evidence, actually it's undisputed that 10% itself is the actual depreciation rate of manufacturing buildings.

[00:31:13] Speaker 01:
And below, commerce did not confront this argument.

[00:31:16] Speaker 01:
It paid lip service to it.

[00:31:18] Speaker 01:
It said it disagreed with it.

[00:31:19] Speaker 01:
But then it retreated to its formalistic analysis that 10% is accelerated simply because a different asset, a residential building, has a shorter use of life and a smaller depreciation rate of 4%.

[00:31:33] Speaker 01:
Also, it's incorrect that not every company can qualify for the 10% depreciation rate for manufacturing buildings.

[00:31:47] Speaker 01:
As long as that company owns a manufacturing building, it can claim the 10% rate, and this is at appendix 8037 to 8038.

[00:31:56] Speaker 01:
Regarding the auditor's adjustment,

[00:31:59] Speaker 01:
It's very important for the court to understand Commerce's long-standing practice here.

[00:32:05] Speaker 01:
Commerce's action, its decision to reject an independent auditor's opinion, is extreme and extraordinary.

[00:32:12] Speaker 01:
Commerce has indicated in butt-weld pipe fittings that it would require compelling evidence to do so.

[00:32:18] Speaker 01:
Here, commerce did not even have substantial evidence, let alone compelling evidence.

[00:32:22] Speaker 01:
Also, again, it's very important.

[00:32:25] Speaker 01:
Commerce relied on a false justification to reject the auditor's adjustment as unverifiable and unreliable.

[00:32:33] Speaker 01:
Commerce claimed that it identified the 5-euro coded sales through spot checking.

[00:32:38] Speaker 01:
Again, that's absolutely false.

[00:32:40] Speaker 01:
The only spot checking that commerce actually conducted

[00:32:43] Speaker 01:
Selecting 12 U.S.

[00:32:46] Speaker 01:
dollar sales at random confirms the accuracy of the auditor's adjustment overall.

[00:32:51] Speaker 01:
And in fact, Commerce had a full extra day.

[00:32:54] Speaker 01:
It could have continued.

[00:32:55] Speaker 01:
We would have appreciated it if Commerce had spent an entire day spot checking sales because the auditor's adjustment was accurate and Commerce lacked any evidentiary basis to infer that there were other errors when its spot checking showed the opposite.

[00:33:09] Speaker 01:
Instead, that's pure speculation on Commerce's point.

[00:33:12] Speaker 01:
which is not substantial evidence.

[00:33:14] Speaker 01:
Again, the summary of findings in the verification report states that the auditor's adjustment was required to express Marmon's sales denominator in Canadian dollars, which is necessary to calculate an accurate CBD rate for Marmon.

[00:33:28] Speaker 01:
Commerce knowingly relied on a distortion, which is to calculate Marmon's sales denominator, which is inconsistent with its statutory obligation to calculate CBD rates as accurately as possible.

[00:33:40] Speaker 01:
Lastly, regarding the GASBZ tax credit program,

[00:33:43] Speaker 01:
We are the only ones giving effect to the plain language of the regulation, which states that the benefit amount is the tax savings as a result of the program.

[00:33:56] Speaker 01:
And as far as specific tax year, we agree.

[00:33:59] Speaker 01:
We're asking commerce to measure the benefit as by taking into account both the tax credit claims

[00:34:06] Speaker 01:
on the tax return filed by Marmon during the period of investigation, as well as the additional taxes paid as a result of the program on the exact same tax return.

[00:34:15] Speaker 01:
Thank you very much, Your Honors.

[00:34:17] Speaker 06:
Thank you, Counsel.

[00:34:19] Speaker 06:
I appreciate it.