Annual Report March 31, 2015 - 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 amount of subsidy on 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, granting an extension of time in one case and denying the application in the other. 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 did not issue any orders under the Excise Tax Act granting or denying extensions 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 50 appeals, excluding 2 appeals that were received on remand from the Federal Court of Appeal.

The Tribunal heard 17 appeals, 15 under the Customs Act, 1 under the Excise Tax Act and 1 under SIMA. It issued decisions on 50 appeals, which consisted of 23 appeals under the Customs Act, 24 under the Excise Tax Act and 3 under SIMA. All these decisions were issued within 120 days of the hearing.

Fifty-one appeal cases were outstanding at the end of the fiscal year, including 2 that are remand cases.

Appeals Before the Tribunal in Fiscal Year 2014-2015

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 one appeal 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-2012-009—Volpak Inc. v. President of the Canada Border Services Agency

The appellant was a participant in the Import for Re-Export Program (IREP), which enables processers of certain products to apply for supplemental permits to import certain goods at a lower rate of duty than would normally apply, provided they are processed and re-exported within a certain amount of time.

The administration of IREP is divided between the Department of Foreign Affairs, Trade and Development (DFATD) (formerly the Department of Foreign Affairs and International Trade [DFAIT]) and the CBSA. Under the IREP, DFATD is responsible for issuing permits, in accordance with the Export and Import Permits Act (EIPA), to participants that are then entitled to import the goods, process them and re-export them.

The CBSA is responsible for the tariff classification of goods imported under the IREP, in accordance with subsection 10(2) of the Customs Tariff. Goods that are imported (1) under the authority of a valid permit issued under the EIPA and (2) in compliance with the terms of that permit are classified as “within access commitment” and are assessed the lower rate of duty. Imported goods that exceed the quantity set out in the permit are classified as “over access commitment” and are subject to a higher rate of duty.

On February 16, 2011, the Minister of Foreign Affairs and International Trade (the Minister) issued a permit to Volpak under the IREP, which authorized the importation of 17,781 kg of fresh, bone-in chicken breasts from the United States at a lower rate of duty, on the condition that the processed products be re-exported to the United States within 90 days of the importation (the initial permit). All 17,781 kg were initially classified by the CBSA as “within access commitment”.

However, on or about July 25, 2011, the Minister cancelled Volpak’s initial permit and issued another permit that authorized the importation of only 4,379 kg of fresh, bone-in chicken breasts (the new permit). Shortly thereafter, the CBSA was informed that the Minister had cancelled the initial permit and issued the new permit, which led to the CBSA reclassifying the 13,402 kg of chicken breasts that were not covered by the new permit as “over access commitment” and assessing Volpak the higher rate of duty.

Volpak appealed this decision on the basis that both conditions of subsection 10(2) of the Customs Tariff were in fact met. With respect to the first condition, it argued that the 13,402 kg of chicken breasts were imported under a permit (i.e. the initial permit) that was valid at the time of importation, which is the relevant time for the determination of tariff classification. With respect to the second condition, Volpak argued that it had met the conditions of the permit by re-exporting all the goods in issue after they had been further processed. Volpak also argued, with respect to this second condition, that the CBSA had fettered its discretion by relying on DFAIT’s determination that the goods had not in fact been re-exported, instead of performing its own independent examination.

The Tribunal first noted that it only has jurisdiction over the tariff classification portion of the IREP process. Decisions made by DFATD regarding the issuance and cancellation of IREP permits are not within the Tribunal’s jurisdiction.

The Tribunal then acknowledged that its own jurisprudence establishes that, in the vast majority of cases, the relevant period to be examined for the classification of goods is the time of importation. However, the Tribunal recognized that the IREP is unique, in that it involves the entire process of importing, processing and re-exporting, not a simple import transaction.

The Tribunal found that DFAIT, by cancelling Volpak’s initial permit, essentially determined that the goods in issue were no longer part of the process and, therefore, no longer qualified as “within access commitment” for the purposes of the IREP. As the goods in issue were excluded from the IREP and were not imported under the authority of a valid permit, the Tribunal agreed that the CBSA had no option but to classify the goods in issue as “over access commitment”.

Furthermore, since the CBSA’s authority under the program is limited to determining the tariff classification of the goods in issue, any independent verification of Volpak’s compliance with the terms of its permit would involve a review of DFAIT’s decision and would undermine the statutory authority granted to the Minister. The CBSA did not fetter its discretion but instead acted in accordance with its role under the statutory scheme.

AP-2012-035—Canadian Tire Corporation, Limited v. President of the Canada Border Services Agency

During the period from September 2010 to June 2011, Canadian Tire Corporation, Limited (Canadian Tire) imported a number of different models of thermoelectric containers from China that were subject to anti-dumping and countervailing duties. Canadian Tire completed self-assessments of the duties owing on these importations based on normal values established by the CBSA in 2010, which were given in Chinese renminbi. Canadian Tire converted these normal values into Canadian dollars on the basis of the prevailing rate of exchange on the date of sale, which it determined to be the purchase order (PO) dates for the thermoelectric containers.

The CBSA subsequently issued a re-determination of Canadian Tire’s self-assessments using the prevailing rate of exchange on the dates of shipment, as it did not have copies of the POs. Canadian Tire then filed blanket requests for further re-determinations using the PO dates and supplied the PO documentation.

Prior to issuing its decision with respect to Canadian Tire’s request, the CBSA issued new normal values for some of the models of thermoelectric containers imported by Canadian Tire on the basis of updated sales and cost data for 2011-2012. Some of these new normal values were significantly higher than they had been due to a change in the calculation methodology employed by the CBSA.

On June 12, 2012, the CBSA issued a notice of re-determination, under the purported authority of section 59 of SIMA. The CBSA used the PO date as the date of sale, as requested by Canadian Tire, but also used the updated normal values applicable to the thermoelectric containers imported during that period. Although Canadian Tire was credited a refund due to the changes made to the dates of sale, the use of updated normal values resulted in a net amount of anti-dumping duties owing.

Canadian Tire argued that the purpose of its request was not to seek a re-determination of the normal values under section 58 of SIMA. Rather, it argued that, instead of re-calculating the normal values using the updated information, the CBSA should have treated its request as a correction of a clerical or arithmetic error, as permitted by subsection 12(2), and issued it a refund on the basis of the changes to the exchange rate.

The Tribunal found that the evidence did not support Canadian Tire’s claim that it had not sought to invoke section 58 of SIMA, because the letter that it had sent with its request for correction had in fact made reference to that section of the act and not to subsection 12(2). Further, the Tribunal found that the failure to supply the required documentation did not meet the definition of “clerical error”, which the Federal Court established means an error in typewriting or transcription; nor was it an “arithmetic error”, as no mistake in the calculation process was involved.

Canadian Tire also argued that the calculation and retroactive administration of normal values by the CBSA were unreasonable, incorrect and punitive. It claimed that it had simply sought to correct the exchange rate used in the original reassessment and that the CBSA’s use of its request as the basis to initiate a re-determination of normal values was unlawful, as it breached principles of transparency, fairness and natural justice. It also claimed that the use of normal values that were not calculated until after it had made its request runs counter to Canada’s practice of administering and enforcing duties on a prospective basis.

The Tribunal found that the wording of the re-determination provisions in SIMA does not restrict the CBSA to issuing its re-determination only on the basis of the scope of the request. In this case, the CBSA was entitled to concurrently adjust the date of sale and to re-calculate the amount of anti-dumping duties owing on the basis of the new normal values. Further, the Tribunal found that this retrospective application of normal values was consistent with the legislation and the CBSA’s established practice.

Finally, the Tribunal found that the CBSA’s methodology was also consistent with the wording of SIMA and its regulations.

AP-2013-052—Montreal Gateway Terminals Partnership v. Minister of National Revenue

Under the terms of the Excise Tax Act (the Act), diesel fuel is subject to excise tax; however, the excise tax paid by a purchaser who uses the diesel fuel to generate electricity is refundable, except if the electricity so generated is used primarily in the operation of a vehicle.

In this case, Montreal Gateway Terminals Partnership (MGTP) applied for a refund of the excise tax paid on diesel fuel which it had used to generate electricity to power its wheeled gantry cranes at the Port of Montréal. The Minister of National Revenue refused to grant the refund on the grounds that the fuel had been used to power the gantry cranes, which it considered to be “vehicles” within the terms of the Act. MGTP disagreed that the gantry cranes were “vehicles” because they are designed exclusively for vertical lifting, not for the transportation of goods or passengers from place to place.

The Tribunal found that the wheeled gantries were “vehicles” within the terms of the Act. The Tribunal determined that the Federal Court has found that a vehicle is characterized by its ability to transport or move something from place to place, and adopted that definition as binding. According to the Federal Court’s interpretation, the transportation of goods is not limited to movement on the horizontal plane, but includes the lifting and lowering of goods. Therefore, the Tribunal found that the tasks performed by the gantry cranes used by MGTP amounted to the transportation of goods.

The Tribunal also noted that, although this is not their primary function, the gantry cranes are wheeled and can travel over short distances to move shipping containers from one place to another. It emphasized that the jurisprudence does not indicate that, to determine whether a device is a vehicle for the purposes of the Act, only its primary function must be examined and so considered that this secondary function could support its finding that the gantry cranes are “vehicles”.

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