In 2001, the U.S. government began imposing countervailing and anti-dumping duties ("CADD") on the export of softwood lumber products from Canada, including by the Corporation, and required that the duties be paid - or that a bond be posted equivalent to such duties, which the Corporation did. Under its agreements with its lumber suppliers, the price it paid was reduced according to the applicable CADD rate that was being imposed, but it was further agreed that if the CADD was reversed, that amount would be refunded to the suppliers.
After a finding by the International Trade Tribunal that there was not a current material injury to the US lumber producers, the Corporation was released by the US government from its potential obligations regarding the CADD for the years 2001 and 2002, in 2002, it repaid an amount corresponding to the CADD in question to its suppliers.
In finding that the Corporation was not entitled to a deduction in 2001 for the CADD amounts pursuant to s. 20(1)(vv), and before going on to find that s. 18(1)(e) denied a s. 9 deduction, the Directorate stated:
Paragraph 20(1)(vv) … allows for the deduction of such duties as long as they are paid. … In the current context, [“paid’] … means "to discharge a debt". However, we understand that in this case, the guarantee offered to the US Government is more of a surety bond in which the Corporation has acquired term deposits to secure the performance of its obligations. Consequently, we are of the view that the provisions of paragraph 20(1)(vv) do not apply … .