2024 annual report - Customs and excise appeals

The Tribunal hears and decides appeals of decisions of the President of the Canada Border Services Agency (CBSA) and the Minister of National Revenue.

1)    Appeals filed under the Customs Act (AP)

Appeals filed under the Customs Act relate to a range of issues:

• appropriate classification of imports according to the Customs Tariff;
• appropriate manner in which to calculate the value for duty of imports;
• determination of where imports originated before they entered Canada; and
• importation of prohibited goods (such as certain pocketknives and weapons).

There were 26 appeals filed under the Customs Act in 2023-24.

2)    Appeals filed under the Special Import Measures Act (EA)

Appeals filed under the Special Import Measures Act (SIMA) relate to two key issues:

• whether certain goods fall within the scope of trade remedy measures; and
• whether the CBSA properly calculated the margin of dumping or amount of subsidy for certain imports.

Eight appeals were filed under SIMA in 2023-24.

3)    Appeals filed under the Excise Tax Act (AP)

Appeals filed under the Excise Tax Act relate to an assessment or a determination of excise tax. One appeal was filed under this act in 2023-24.

4)    Extensions of time (EP)

Under the Customs Act, a person may apply to the Tribunal for an extension of time to file a request for a re-determination or a further re-determination with the CBSA. The Tribunal may grant such an application after the CBSA has refused an application or when 90 days have elapsed after the application was made and the person has not been notified of the CBSA’s decision. A person may also apply to the Tribunal for an extension of time within which to file a notice of appeal. 

There were two requests for extensions of time filed before the Tribunal in 2023-24.

Appeals received, heard and scheduled

To ensure timely access to justice, the Tribunal schedules hearings immediately upon receipt of an appeal.

During the fiscal year, the Tribunal received 35 appeals. Seventy-nine appeal cases were outstanding at the end of the fiscal year. Of that number, 36 were in abeyance at the request of the parties, often because parties were attempting to negotiate a settlement or were awaiting the outcome of another related appeal before the Tribunal. The remaining 43 matters were all progressing.

Sample of noteworthy decisions under the customs and excise appeals mandate

Value for duty

The Tribunal issued three decisions this fiscal year under the Customs Act about the value for duty of imported goods. The value for duty is the base figure on which the customs duties and taxes on imported goods are calculated. The Customs Act and its regulations set out a detailed series of technical rules for determining the value for duty of imported goods. The highlighted decisions considered different legal questions in applying these rules to the facts of the importations at issue, in the context of a variety of complex cross-border business transactions, including within groups of companies.

In Bestseller Wholesale Canada Inc. (AP-2020-015) and H&M Hennes & Mauritz GBC AB (AP-2022-007), the value for duty of the imported goods was determined using the transaction value method of valuation. This method applies if there is a sale for export to Canada, to a purchaser in Canada, and requires determining the price paid or payable for the goods, following the Customs Act and the Valuation for Duty Regulations.

In Bestseller Wholesale Canada Inc., the Tribunal had to identify the sale for export to Canada for customs valuation purposes and determine whether various payments the purchaser made to its parent company must be included or added to the price paid or payable of the imported goods. The Tribunal allowed this appeal in part. Bestseller Canada argued that it purchased the imported goods from unrelated foreign manufacturers, whereas the Canada Border Services Agency (CBSA) determined that the true vendor of the goods was Bestseller Canada’s parent company, Bestseller A/S. The Tribunal determined that Bestseller Canada had purchased the goods in issue directly from the unrelated foreign manufacturers and that, since Bestseller A/S never owned the goods, it could not have been the vendor. The Tribunal further found that payments that Bestseller Canada made to Bestseller A/S for the use of an ordering system and payments that Bestseller Canada made to Bestseller A/S that were referred to as buying commissions could not be added to the price paid or payable under the Customs Act because they were not paid to or for the vendors’ benefit. However, the Tribunal found that fees that Bestseller Canada paid to Bestseller A/S for designing the goods were to be added to the price paid or payable under the Customs Act.

In H&M Hennes & Mauritz GBC AB, the Tribunal examined whether the appellant (H&M Sweden), a Swedish company, qualified as a “purchaser in Canada” as defined in the Valuation for Duty Regulations. This question depended in part on whether H&M Sweden had entered into an agreement to sell to a “resident” of Canada, namely, H&M Canada. The Valuation for Duty Regulations define “resident” as a corporation whose management and control are in Canada. The Tribunal determined that H&M Canada’s management and control were conducted outside Canada by its only shareholder, which was based in the Netherlands. This shareholder was under the management and control of H&M Sweden’s corporate head office in Sweden. Therefore, since H&M Canada did not qualify as a “resident” of Canada, H&M Sweden could not have entered into an agreement to sell to a resident of Canada. As the Tribunal determined that H&M Sweden qualified as a purchaser in Canada, the Tribunal allowed the appeal.

Centric Brands (AP-2021-004) was about the deductive value method of appraisal, which is an alternative method of appraisal that may apply when the transaction value method does not apply. The deductive value method estimates the value of the goods at the time they were imported by deducting from their selling price after importation certain costs incurred after importation, as well as a profit amount in connection with sales in Canada. The main issue before the Tribunal was whether, in determining the deductive value of the goods, certain profits could be deducted from the unit price of the goods as profit “in connection with sales in Canada”. Centric Brands (Centric), the appellant, was a U.S. corporation that imported goods and then sold them to Costco Canada, a Canadian customer. Centric sent the invoices for these sales in Canada to Costco USA, Costco Canada’s U.S. parent. Costco USA paid Centric in U.S. dollars, and Centric accounted for these transactions, and their related profits were taxable in the U.S. The CBSA argued that Centric’s profits on these sales to Costco Canada could not be deducted when determining the deductive value of the goods. It argued that these profits were “foreign profit” because they were earned, invoiced, accounted for and paid for outside Canada. The Tribunal determined that such profits do not become nondeductible because they are invoiced and accounted for outside Canada. However, the Tribunal also rejected Centric’s argument that any connection between sales in Canada and profits recorded outside Canada necessarily allows all of those profits to be deducted. The Tribunal found that at least a portion of Centric’s profit was connected to sales in Canada, as required by the Customs Act. It allowed the appeal and directed the CBSA to reappraise the value for duty of the goods in a manner consistent with the Tribunal’s decision.

Appeals of value for duty decisions are generally among the most complex cases coming before the Tribunal, and generally require a much greater amount of analysis by members of the Tribunal and its secretariat. This continues to have an impact on the ability of the Tribunal to maintain its service standard with respect to the timing of issuance of its appeals mandate decisions.

Hawthorne Canada Ltd. and SLS Runout Holdings ULC (AP-2019-023)

This appeal was the lead case of a number of cases awaiting a Tribunal decision and involving a large number of similar goods. The first issue in the appeal concerned the tariff classification of 243 models of agricultural and horticultural products used in greenhouses or grow tents. During the protracted proceedings, the parties agreed on the classification of 239 of these models. This left the Tribunal with the task of classifying three models of mechanical timers and one lamp and reflector kit.

The second issue was whether 217 of the 243 models of the agricultural and horticultural products could benefit from duty-free treatment under tariff item 9903.00.00 as articles that enter into the cost of manufacture or repair of certain agricultural or horticultural machines. In this case, the Tribunal determined that the agricultural or horticultural machines specified under tariff item 9903.00.00 had to be for commercial use. These appellants didn’t provide sufficient evidence to show that 207 of the models actually entered into the cost of manufacture or repair of such machines. The Tribunal allowed the appeal for the remaining 10 models, as the evidence showed that they were specifically designed for commercial growing operations or integrated greenhouse systems.

This case is illustrative of the broad scope of tariff classification issues the Tribunal may have to consider in a single appeal. These types of appeals make it increasingly difficult for the Tribunal to maintain its ability to issue these decisions within a reasonable timeline following hearings.

Access to justice

Every year, the Tribunal sees multiple appeals filed by individuals who import goods and have difficulty understanding why they must pay duties and taxes. They also question why they can’t import certain knives and other similar devices, even though they may be sold in retail stores in Canada. These types of cases illustrate the access to justice challenges these individuals face when attempting to interpret Canadian customs regulations and access the appropriate forum to have their views heard.

For example, in Loran Thompson (AP-2022-033), an Indigenous Akwesasne appellant sought remission of duties payable on imported poultry. Akwesasne residents can be exempted from the payment of duties under a special remission order if they meet certain conditions. The CBSA determined that the appellant had to pay duties because the poultry was not brought through the Cornwall border crossing, as the remission order required. The appellant first tried to resolve this issue at the Tax Court of Canada and later at the Federal Court of Canada before filing his appeal with the Tribunal. In the end, the Tribunal found that it did not have jurisdiction to hear an appeal about the application of a remission order. This appeal offered a concrete illustration of how complex it is for individuals to exercise their right to appeal administrative decisions when it is not clear which decision-maker or court has jurisdiction.

In the appeals of J. Hyde (AP-2022-038) and B. Hayward (AP-2022-040), the appellants asked for a refund of the duties and taxes they had paid on the importation of, respectively, aluminum cans and a motor vehicle. The Tribunal found in both cases that it could not order a refund because the CBSA had properly calculated the amounts owing at the time of importation of the goods and events that took place after their importation did not affect those amounts. These cases show that it can be particularly difficult for self-represented individuals to make arguments on the application of the complex laws that govern the importation of goods and the payment of duties and taxes on those goods. Parties are also often unaware that the Tribunal must apply the law as written and that it does not have the power to grant equitable relief as a result of appellants’ personal circumstances.

Filing an appeal with the Tribunal can be an overwhelming task for an individual. The Tribunal recognizes this and therefore tries to facilitate access to justice by being accommodating. The Tribunal’s registry, to the extent that it can, provides these individuals with guidance and information on the appeals process.