Annual report March 31, 2023 - 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, the most common of which include the:

• 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 weapons).

There were 43 appeals filed under the Customs Act in 2022-23.

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.

Four appeals were filed under SIMA in 2022-23.

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. There were no appeals filed under this act in 2022-23.

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. 

Under 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 or file a notice of appeal with the Tribunal. A request for an extension of time under this act has to be considered by a panel of three Tribunal members.

There were four requests for extensions of time filed before the Tribunal in 2022-23, two of which were under the Excise Tax Act.

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 47 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

Scentsy Canada Enterprises ULC (AP-2019-021), G-III Apparel Canada ULC (AP-2020-028) and GBG Spyder Canada Holdings ULC (AP-2019-033)

These three appeals related to decisions concerning the value for duty of imports of various consumer goods. The three cases involved the applicability of the transaction value method and, specifically, the notions of sale for export to Canada and purchaser in Canada in the context of import transactions involving related companies. 

The Customs Act provides that the value for duty of goods is the transaction value of the goods if, among other things, the goods are sold for export to Canada to a purchaser in Canada. The Valuation for Duty Regulations further provide that a non-resident importer can be considered a purchaser in Canada if it has a permanent establishment in Canada, defined as “a fixed place of business … through which the person carries on business.”

The Tribunal allowed the appeals in both G-III Apparel Canada ULC and Scentsy Canada Enterprises ULC. In G-III Apparel Canada ULC, the first issue was the identification of the relevant sale for export to Canada. The Tribunal applied the Supreme Court of Canada’s decision in Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc., 2001 SCC 36, finding that the relevant sale for export is the sale by which title to the goods passes to the importer. The importer is the party who has title to the goods at the time they are transported into Canada. 

On the issue of the purchaser in Canada, the Tribunal found that the appellant—a non-resident importer—carried on business through its offices in British Columbia because at least some activity in respect of the goods in issue was performed by its employees there, even though much of the work was outsourced to a related company in the United States. Having considered the entirety of the relevant facts and the business model of the G-III Group, the Tribunal was satisfied that the appellant met the conditions to qualify as a purchaser in Canada. The Tribunal made a similar finding in Scentsy Canada Enterprises ULC. It found that the appellant, which operated without direct employees, but had subcontracted employees performing certain activities in support of its business in Canada through its Canadian office, was carrying on business in Canada through a fixed place of business. Noting that the Customs Act and Valuation for Duty Regulations impose no minimum threshold for the volume or type of activity required to be conducted in Canada for a person to be carrying on business through a fixed place of business, the Tribunal found that the appellant had demonstrated that it had a permanent establishment in Canada and was a purchaser in Canada.

In GBG Spyder Canada Holdings ULC, the Tribunal allowed the appeal in part. In this case, the Tribunal determined that there was no sale for export to Canada between the appellant’s foreign affiliate (Spyder USA) and Canadian customers, as there was no evidence that the title transferred between the affiliate and those customers upon importation. The Tribunal further found that there was no sale for export to Canada between Spyder USA and the appellant (Spyder Canada) because of the agency relationship between the two companies. As there was no sale for export to Canada within the meaning of the Customs Act, the Tribunal found that the transaction value method was not applicable and sent the matter back to the CBSA to determine the value for duty based on a different valuation method.