Annual Report March 31, 2016- 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 Registrar 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 Registrar 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 both cases. There were no outstanding requests under the Customs Act 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 granting or denying extensions of time under the Excise Tax Act. There were no outstanding requests under the Excise Tax Act at the end of the fiscal year.

Appeals Received and Heard

During the fiscal year, the Tribunal received 40 appeals, excluding 2 appeals that were received on remand from the Federal Court of Appeal.

The Tribunal heard 29 appeals, 27 under the Customs Act and 2 under SIMA. It issued decisions on 28 appeals, which consisted of 26 appeals under the Customs Act and 2 under SIMA.

Forty appeal cases were outstanding at the end of the fiscal year, including four that are remand cases.

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. These summaries have been prepared for general information purposes only.

AP-2014-026—The Home Depot Canada v. President of the Canada Border Services Agency

This appeal concerned the tariff classification of 24-inch Eurostone bases with sinks (vanities), which are referred to in this summary as the “goods in issue”. They consisted of a sink of imitation porcelain, as well as a small two-door wooden cabinet.

The CBSA had originally determined that the goods in issue were properly classified under tariff item No. 9403.60.10 of the schedule to the Customs Tariff as other wooden furniture for domestic purposes. Home Depot argued that the goods in issue should be classified under tariff item No. 6910.90.00 as other ceramic sinks and similar sanitary fixtures.

In concert with the Explanatory Notes to the Harmonized Commodity Description and Coding System, the Customs Tariff defines furniture as either movable articles designed for placing on the ground, or as articles designed to be hung, to be fixed to the wall or to stand one on the other or side by side, for holding various objects or articles. In comparison, ceramic sinks and similar sanitary fixtures are defined as fittings designed to be permanently fixed in place, normally by connection to the water or sewage system.

As required by the Customs Tariff, the Tribunal undertook its analysis pursuant to the General Rules for the Interpretation of the Harmonized System (the General Rules). The General Rules provide for the sequential application of rules as deemed necessary, commencing with Rule 1 and proceeding to Rule 6. With regard to the possible classification of the goods in issue as furniture, the Tribunal found that, pursuant to Rule 1, the goods are neither movable nor for holding various objects or articles and, thus, do not fit the definition of furniture. With regard to the possible classification of the goods in issue as ceramic sinks and similar sanitary fixtures, the Tribunal noted that, once again, pursuant to Rule 1, the goods are designed to be permanently fixed in place.

However, as the goods include a small wooden cabinet capable of being used for storage, the Tribunal considered the applicability of Rule 2 (b) of the General Rules. That rule provides that “[a]ny reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of goods of such material or substance” and, further, that “[t]he classification of goods consisting of more than one material or substance shall be in accordance with the principles of Rule 3.”

In order to determine the proper basis for applying the instruction in Rule 2 (b) that goods consisting of more than one material be classified in accordance with Rule 3, the Tribunal considered the explanatory notes to Rule 2 (b). Those explanatory notes provide in part that Rule 2 (b) cannot, in essence, be used to “widen” a heading so that, pursuant to the continued application of Rule 1, it covers goods that would not normally fit within the heading. Thus, rather than continue with a forced application of Rule 1, such that a heading is widened, recourse is instead to be had to Rule 3. The converse is that if Rule 1 can be applied in the classification of goods consisting of more than one substance, without the widening of a heading, that rule suffices for classification and Rule 3 need not be applied.

For the facts in this appeal, the operation of the explanatory notes to Rule 2 (b) means that Rule 1 cannot be used to classify the goods in issue under the heading for ceramic sinks and similar sanitary fixtures unless the included wooden cabinet does not widen the description in that heading. Considering its size and functionality, the Tribunal found that, as the principal purpose of the wooden cabinet is to provide necessary support to the sink, it does not widen the description in the heading for ceramic sinks and similar sanitary fixtures. The goods in issue were thus conclusively classified as ceramic sinks and similar sanitary fixtures pursuant to Rule 1.

The appeal provided a rare opportunity for the consideration of Rule 2 of the General Rules, inclusive of its ambit, as well as its role in delimiting and enabling the consideration of Rule 3.

AP-2013-021, AP-2013-022, AP-2013-023 and AP-2013-024—Stylus Sofas Inc., Stylus Atlantic, Stylus Ltd. and Terravest (SF Subco) Limited Partnership v. President of the Canada Border Services Agency

These appeals dealt with the question of whether certain sofas, accent chairs, dining chairs, and ottomans, which are referred to in this summary as the “goods in issue”, were properly classified under tariff item Nos. 9401.61.10 and 9401.71.10 of the schedule to the Customs Tariff as other upholstered seats, with wooden or metal frames, for domestic purposes, as determined by the CBSA, or should instead be classified under tariff item Nos. 9401.61.90 and 9401.71.90 as other upholstered seats, with wooden or metal frames, other than for domestic purposes, as claimed by the appellant, Stylus Sofas Inc., Stylus Atlantic, Stylus Ltd. and Terravest (SF Subco) Limited Partnership (together, Stylus).

While the goods in issue had been classified as being “for domestic purposes” at the time of importation, Stylus later asserted that the goods were for non-domestic purposes, specifically hotel use, and should thus be re-classified.

The parties agreed, and the Tribunal accepted, that the goods are properly classified under heading 94.01 as “[s]eats . . . and parts thereof”, as well as under subheadings 9401.61 and 9401.71 as upholstered seats with wooden or metal frames. Thus, the disagreement between the parties was limited to classification at the tariff item level.

As is the case in appeals of this kind, the onus was on the appellant, Stylus, to demonstrate that the classification determined by the CBSA was incorrect. To discharge this onus, it was incumbent on Stylus to show that the intended use of the goods in issue, as opposed to their actual use, is non-domestic in nature.

To discharge its onus, Stylus contended that the wording of tariff item Nos. 9401.61.10 and 9401.71.10—”for domestic purposes”—creates an end-use provision, such that the Tribunal must look to the intended use of the goods in issue rather than the actual usage of the goods by purchasers. Stylus asserted that the goods may be used in domestic settings, but that this usage would not contradict their primary intended purpose. Stylus then went on to provide evidence supportive of the conclusion that the goods in issue are “contract furniture” for the hospitality industry and that such furniture is typically more robust and has greater durability than furniture meant for domestic settings.

Utilizing the evidence placed on the record, and considering factors such as the design, characteristics, marketing and pricing of the goods in issue, inclusive of considerations such as durability, flammability, and the use of bycast leather, the Tribunal concluded that Stylus had discharged its onus and, thus, allowed the appeals.

The CBSA, by way of a secondary contention, argued that hotels are actually domestic settings since persons and families treat hotels as “homes away from home” and, therefore, goods intended for use in hotels are properly classified as being “for domestic purposes”. However, Stylus remarked, and the Tribunal concluded, that such a line of reasoning, if accepted, would strip the tariff classifications for non-domestic or “other” purposes of any meaning whatsoever. The Tribunal instead noted that hotels are in fact businesses as opposed to homes.

These appeals assisted in the clarification of the Customs Act treatment of hospitality establishments for the purposes of the tariff classification of certain imported goods intended for use in such establishments.