Words and Phrases - "contingency"

In 2001, the U.S. government began imposed 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 by virtue of s. 18(1)(e), the Directorate stated:

[T]he current case differs from these two judgments [in Samuel F. Investments and Dibro Investments], in that the eventuality at issue in the present case is far from certain. For example, the possibility that the CADDs would never be paid to the relevant US government authorities was real in the year in question since, in fact, all of the CADDs at issue in 2001 were found to be inappropriate on the basis that there had been no injury to the US lumber industry.

The answer to the question concerning the deduction of adjustments to purchases from suppliers that arose in XXXXXXXXXX 2002 as a result of the ITC's decision to cancel CADDs required prior to May 16, 2002 should be consistent with the tax treatment adopted for the CADDs discussed above.

Thus, we are of the view that this expense to the Corporation's suppliers could not have been incurred prior to the ITC's decision regarding the Corporation's requirement to pay CADD on lumber.