Annual Report March 31, 2014 - Chapter V

Introduction

The Tribunal hears appeals from decisions of the CBSA under the Customs Act and SIMA or of the Minister of National Revenue under the Excise Tax Act. Appeals under the Customs Act relate to the origin, tariff classification, value for duty or marking of goods imported into Canada. Appeals under SIMA concern the application, to imported goods, of a Tribunal finding or order concerning dumping or subsidizing and the normal value, export price or subsidy of imported goods. Under the Excise Tax Act, a person may appeal the Minister of National Revenue’s decision on an assessment or determination of federal sales tax or excise tax.

The appeal process is set in motion when a written notice of appeal is filed with the Secretary of the Tribunal within the time limit specified in the act under which the appeal is made. Certain procedures and time constraints are imposed by law and by the Rules; however, at the same time, the Tribunal strives to encourage a relatively informal, accessible, transparent and fair proceeding.

Under the Rules, the person launching the appeal (the appellant) has 60 days to submit to the Tribunal a document called a “brief”. Generally, the brief states under which act the appeal is launched, gives a description of the goods in issue and an indication of the points at issue between the appellant and the Minister of National Revenue or the CBSA (the respondent), and states why the appellant believes that the respondent’s decision is incorrect. A copy of the brief must also be given to the respondent.

The respondent must also comply with time limits and procedural requirements. Ordinarily, within 60 days after having received the appellant’s brief, the respondent must file with the Tribunal a brief setting forth the respondent’s position and provide a copy to the appellant. The Secretary of the Tribunal, when acknowledging receipt of the appeal, schedules a hearing date. Hearings are generally conducted in public. The Tribunal publishes a notice of the hearing in the Canada Gazette to allow other interested persons to attend. Depending on the act under which the appeal is filed, the complexity and potential significance of the matter at issue, appeals will be heard by a panel of one or three members. Persons may intervene in an appeal by filing a notice stating the nature of their interest in the appeal and indicating the reason for intervening and how they would assist the Tribunal in the resolution of the appeal.

Hearings

An individual may present a case before the Tribunal in person or be represented by counsel. The respondent is generally represented by counsel from the Department of Justice. In accordance with rule 25 of the Rules, appeals can be heard by way of a hearing at which the parties or their counsel appear before the Tribunal or by way of written submissions (file hearing).

Hearing procedures are designed to ensure that the appellant and the respondent are given a full opportunity to make their cases. They also enable the Tribunal to have the best information possible to make a decision. As in a court, the appellant and the respondent can call witnesses, and these witnesses are questioned under oath or affirmation by the opposing parties, as well as by Tribunal members. When all the evidence is gathered, parties may present arguments in support of their respective positions.

The Tribunal, on its own initiative or at the request of the appellant or the respondent, may decide to hold a hearing by way of written submissions. In that case, it publishes a notice in the Canada Gazette to allow other interested persons to participate.

Within 120 days of the hearing, the Tribunal endeavours to issue a decision on the matters in dispute, including the reasons for the decision.

If the appellant, the respondent or an intervener disagrees with the Tribunal’s decision, the decision can be appealed on a question of law to the Federal Court of Appeal or, in the case of the Excise Tax Act, the Federal Court (where the case will be heard de novo by the court).

Extensions of Time

Under section 60.2 of 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 under section 60.1 or when 90 days have elapsed after the application was made and the person has not been notified of the CBSA’s decision. Under section 67.1, a person may apply to the Tribunal for an extension of time within which to file a notice of appeal with the Tribunal. During the fiscal year, the Tribunal issued two orders under the Customs Act, denying the applications for extension of time. Four applications were withdrawn, and there were no requests under the Customs Act outstanding at the end of the fiscal year.

Under section 81.32 of the Excise Tax Act, a person may apply to the Tribunal for an extension of time in which to serve a notice of objection with the Minister of National Revenue under section 81.15 or 81.17 or file a notice of appeal with the Tribunal under section 81.19. During the fiscal year, the Tribunal issued one order under the Excise Tax Act granting an extension of time. There were no requests under the Excise Tax Act outstanding at the end of the fiscal year.

Appeals Received and Heard

During the fiscal year, the Tribunal received 61 appeals.

The Tribunal heard 45 appeals, 34 under the Customs Act, 1 under the Excise Tax Act and 10 under SIMA. It issued decisions on 42 appeals, which consisted of 33 appeals under the Customs Act, 1 under the Excise Tax Act and 8 under SIMA. All these decisions were issued within 120 days of the hearing, up from 90 percent the year before, despite an increase in the number of decisions.

Sixty-nine appeal cases were outstanding at the end of the fiscal year.

Appeals Before the Tribunal in Fiscal Year 2013-2014

Summary of Selected Decisions

Of the many cases heard by the Tribunal, several decisions issued during the fiscal year stand out, either because of the particular nature of the product in issue or because of the legal significance of the case. Brief summaries of a representative sample of such decisions follow, including two appeals heard pursuant to the Customs Act, one appeal pursuant to SIMA and one appeal pursuant to the Excise Tax Act. These summaries have been prepared for general information purposes only.

AP-2012-073—Skechers USA Canada, Inc. v. President of the Canada Border Services Agency

This appeal was filed by Skechers USA Canada, Inc. (Skechers Canada) pursuant to subsection 67(1) of the Customs Act from decisions by the CBSA made pursuant to subsection 60(4), concerning the value for duty of footwear of various styles imported by Skechers Canada. The main issue was whether, applying the transaction value of the goods method of section 48, certain periodic payments made by Skechers Canada to the vendor, Skechers USA Inc., for research, development and design expenses must be included in the price paid or payable for the imported goods and, accordingly, their value for duty for the purposes of the Act. Skechers Canada argued that the payments were not part of the price paid or payable for the goods pursuant to subsections 45(1) and 48(4) because they are not in respect of the goods, but rather, in respect of intangibles, namely, developing the Skechers brand. On the evidence, the Tribunal determined that the imported goods could not have been produced without the research and design process in respect of which the payments were made and that the quantum of the payments was affected by the imported goods. Accordingly, the Tribunal found that the payments were made in respect of the imported goods and must be included in their price and their value for duty. The appeal was therefore dismissed.

AP-2012-036—BalanceCo v. President of the Canada Border Services Agency

This appeal was filed pursuant to section 67(1) of the Customs Act from a decision by the CBSA made pursuant to subsection 60(4). The decision affirmed an advance ruling under paragraph 43.1(1)(c) of the Customs Act in respect of the tariff classification of shredded Mozzarella cheese and sliced pepperoni, packaged together, imported by a third party, as a result of which classification the shredded Mozzarella cheese was not subject to Canada’s tariff rate quotas on dairy imports. BalanceCo, a not-for-profit corporation whose members are Canada’s 10 provincial milk marketing boards, acknowledged having requested the advance ruling for the purpose of ensuring the effective enforcement of the tariff rate quotas.

As paragraph 43.1(1)(c) of the Customs Act and the Tariff Classification Advance Rulings Regulations limit eligibility to apply for an advance ruling to members of prescribed classes of persons, including “importers of goods in Canada,” a preliminary issue arose as to whether BalanceCo was an “importer of goods in Canada” and, thus, an eligible applicant.

The Tribunal found that the legislative purpose of the advance ruling program was to assist persons interested in importing, by providing certainty and predictability as to how a given good would be treated on importation. However, the evidence indicated that BalanceCo had no interest in importing the goods that were the subject of its advance ruling request, with its application having been motivated by considerations extraneous to the purpose of the legislation. As such, BalanceCo was not an “importer of goods in Canada”. BalanceCo being a non-eligible applicant, the ruling issued to it under subsection 43.1(1) of the Customs Act and the decision made by the CBSA under subsection 60(4) were invalid. That being the case, the appeal was dismissed for want of jurisdiction.

AP-2012-039, AP-2012-050 and AP-2012-059—Universal Consumer Products, Inc., Liv Outdoor (International) Inc. and Maine Ornamental, LLC v. President of the Canada Border Services Agency

These appeals were filed under section 61 of the SIMA from 50 decisions of the CBSA made under section 59, affirming previous determinations made under section 57 that various imported aluminum products were of the same description as the goods subject to the Tribunal’s finding in Inquiry No. NQ‑2008-003, as amended in Inquiry No. NQ-2008-003R. The appellants argued that the imported products were kits exempted from the Tribunal’s finding or, alternatively, that they have been further worked to the point that they no longer shared the characteristics of the goods subject to the finding. The Tribunal found that the goods in issue were of the same description as the goods subject to the finding. Therefore, the appeals were dismissed.

AP-2009-024—Transnat Express Inc. v. Minister of National Revenue

This appeal was filed pursuant to section 81.19 of the Excise Tax Act from a decision made by the Minister of National Revenue (the Minister) with respect to a notice of objection pursuant to section 81.17. The dispute concerned the application by Transnat Express Inc. (Transnat) pursuant to paragraph 68.01(1)(b) for a payment equal to the amount of tax purportedly paid on diesel fuel used to generate electricity for purposes other than primarily in the operation of a vehicle. The issues before the Tribunal were the following: the period covered by Transnat’s application; whether diesel fuel used for refrigeration purposes qualifies for a payment under the Excise Tax Act; whether Transnat provided sufficient supporting documentation for its application; and whether certain receipts showing purchases of diesel fuel were in fact in respect of diesel fuel purchased and used by Transnat for qualified purposes.

The Tribunal found the following: the period covered by Transnat’s application is that period specified in the application; Transnat had the burden of proof and it failed to provide a basis upon which diesel fuel used for reefers qualifies for a payment under the Excise Tax Act; the only claims eligible for payment are those for which Transnat has met the record-keeping requirements of the Excise Tax Act, while the claims for which the documentary evidence had been destroyed are not eligible for payment; oral testimony provided by Transnat’s witnesses that certain invoices included in Transnat’s application relate to diesel fuel purchased and used by Transnat for qualified purposes warrants that the Minister make further attempts to verify these claims. Accordingly, the appeal was allowed in part.

Appeal Cases Before the Federal Court of Appeal or the Federal Court