Annual Report March 31, 2018 - 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 (where in-person or by way of video conference) 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. A decision and its reasons are usually issued much sooner.

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 2 orders under the Customs Act, granting an extension of time in 1 case. 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 68 appeals. Fifty-either appeal cases were outstanding at the end of the fiscal year. Several of these appeals were in abeyance at the request of the parties.The Tribunal heard 24 appeals under the Customs Act. It issued decisions on 28 appeals under the Customs Act.

For a listing of all appeals and received by the Tribunal and their status, please consult the Tribunal’s website.

Sample of Noteworthy Decisions

Of the many appeals heard by the Tribunal, several that were decided 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-2016-038 Alliance Mercantile Inc.

This appeal concerned the tariff classification of parts of footwear, namely boot bottoms consisting of an outer sole affixed to an incomplete and unfinished upper. In deciding whether the goods should be classified as parts of footwear or complete (but unfinished) footwear, the Tribunal was presented with the issue of how to interpret divergent English and French versions of an Explanatory Note adopted by the World Customs Organization (WCO). The English version provided that the goods would be footwear (as opposed to parts) if they “may be finished simply by trimming their top edge with a border and adding a fastening device”, while the French version used the language “mais pouvant être fini…”

The Tribunal applied the shared meaning rule of bilingual statutory interpretation, whereby the ordinary meaning shared by both the English and French versions of a statutory instrument is presumed to be the meaning intended by Parliament. Here, the shared meaning (as revealed by comparing the more imperative French wording to the more open-ended English wording) was that the goods must be finished in the manner specified (and not any other) to be footwear as opposed to parts. The goods were not finished in the manner specified and, as such, were properly classified as parts and not footwear.

The appeal was allowed.

AP-2017-013 Apple Canada Inc.

Apple Canada Inc. (Apple) argued that an iPad Smart Case (Smart Case) is “for use in” an ADP machine  and therefore eligible for a preferential duty rate under tariff item No. 9948.00.00. The “for use in” requirement would be met only if the Smart Case was “functionally joined” to the ADP machine.

The Smart Case docked magnetically to the iPad, triggering the iPad’s sleep function when placed over the screen and activating the iPad’s wake function when removed. The CBSA argued that this interaction pertained to battery life only, not to an iPad’s main functions such as Internet browsing, video playback, etc. Apple argued that battery life and cordless autonomy are essential functional attributes of portable tablets.

The Tribunal found that a Smart Case is functionally joined to an iPad when the two are used together. It reasoned that there is a “a fundamental difference between [a Smart Case], whose magnets interface directly with several components of the iPad to efficiently regulate power use, and a regular carrying case that simply protects and positions an electronic device without engaging its programs through electromagnetic components.”

Accordingly, the appeal was allowed.

AP-2014-023 Dealers Ingredients

At issue was the tariff classification of several varieties of powdered enzyme-modified cheese and butter flavourings. The parties agreed that the goods were “preparations” of subheading No. 2106.90, but disagreed on whether they had at least 50 percent of dairy content.

The Tribunal found each party’s evidence to be lacking and underscored how this had complicated the proceedings. The Tribunal stated, for the future, that parties with similar cases should appear before it with a reliable ingredient list setting out the proportions of the dairy and other ingredients in the final formulation. The Tribunal also stated that, when presented with flawed submissions by the parties, the Tribunal’s role is not “limited to a binary choice” dictated by the burden of proof; rather, it may exercise its recognized expertise in tariff classification to make a decision on the merits.

The appeal was allowed in part and dismissed in part.

AP-2016-020 Sonos

At issue was whether wireless speaker systems were properly classified as mounted loudspeakers under tariff item No. 8518.22.00, as determined by the CBSA, or machines for the reception, conversion and transmission or regeneration of voice, images or other data, under tariff item No. 8517.62.00, as claimed by Sonos. Also in issue was whether the goods qualified for duty-free tariff treatment as articles “for use in” automatic data processing (ADP) machines under tariff item No. 9948.00.00.

The goods were combination loudspeaker/data networking components designed to continuously stream music over a household Wi-Fi network via Sonos’ proprietary software (the “controller app”) installed on a network-connected mobile or computing device.  The arguments turned on whether the loudspeaker component or the data networking component gave the goods their primary function.

The Tribunal found that the goods could not be considered machines under tariff item No. 8517.62.00 unless they could be classified as ADP machines under heading No. 84.71. The Tribunal determined that the goods could not be so classified because note 5(E) to Chapter 84 provided that machines incorporating or working in conjunction with ADP machines that perform a specific function other than data processing are to be classified according to that specific function. Based on witness testimony and marketing materials, the Tribunal found the primary function of the goods to be that of loudspeakers of heading No. 85.18; the data networking component merely facilitated and enhanced that function.

The Tribunal found that the goods were eligible for the benefit of tariff item No. 9948.00.00 as articles for use in ADP machines under the three-part test established in Best Buy.  The goods were, without dispute, “articles”. They were “for use in” a host good because they were “functionally joined” to them via a wireless link. Finally, those host goods (computers, smart phones, etc.) were ADP machines.

Therefore, the appeal was allowed in part and dismissed in part.

AP-2017-003 Costco

The goods in this case were two decorative snowmen packaged together for retail sale. The CBSA classified them as made-up articles of textiles under tariff item No. 6307.90.99, while Costco argued that they were articles for Christmas festivities under tariff item No. 9505.10.00.

The key question before the Tribunal was whether the goods were “festive”. Costco argued that the goods were indeed festive given that they tend to be associated with Christmas and are sold and marketed alongside other Christmas wares. The CBSA argued that the goods in issue were associated with winter, but not with a particular holiday or festivity.

The Tribunal held that the goods do not need to be “specifically and exclusively” associated with a particular festivity in order to be classified under heading No. 95.05. The goods were designed alongside other Christmas products, sold in the Christmas aisle, possessed clothing colours commonly associated with Christmas (red and green), and were not sold for the entire winter, but rather only up to and including the month of December. The way an importer chooses to display and sell an item is not the sole determinant of how it should be classified under the Tariff. However, in this case, these facts, along with testimony on the goods’ design, best use, and marketing, demonstrated the articles were “festive”.

Accordingly, the appeal was allowed.

Judicial Review of Appeals Cases