Canada (Minister of National Revenue) v. Schrader Automotive Inc., docket T-799-95

     T-799-95

Between:

     THE DEPUTY MINISTER OF

     NATIONAL REVENUE FOR

     CUSTOMS AND EXCISE,

     Appellant,

     - and -

     SCHRADER AUTOMOTIVE INC.,

     Respondent.

     REASONS FOR JUDGMENT

Muldoon, J.

     This is a statutory appeal from a decision of the Canadian International Trade Tribunal (the tribunal, or CITT hereinafter). The respondent, then the Deputy Minister, had brought an application pursuant to subsection 68(1) of the Customs Act, R.S.C. 1985, Chap 1 (2nd Supp.) for leave to appeal the decision of the CITT, rendered in appeal no. AP-94-005 in the appeal of Schrader v. the DMNR (Customs & Excise). The tribunal had heard the appeal on September 9, 1994, and rendered its decision on January 24, 1995.

     The respondent had imported into Canada between November, 1991 and October, 1992, ten shipments of tire valves and air chucks, exemplified in the tribunal's exhibits A-1 to A-3 and A-5 to A-8. At that time, those valves were accounted for by the importer under tariff item 8481.30.10 as "check-valves - hand operated or hand activated", and the air chucks were classified under tariff item 8414.90.50, as "parts of air or vacuum pumps, air or other gas compressors and fans: or tariff item 8414.80.00, as check-valves - other".

     Here is what the CITT said in its decision, record in the Appeal Book (AB):

* * * The issue in this appeal is whether tire valves and air chucks are properly classified under tariff item No. 8481.80.91 of Schedule I to the Customs Tariff2 as hand-operated or hand-activated appliances for pipes, boiler shells, tanks, vats or the like, as determined by the respondent, or should be classified under tariff item No. 8481.30.90 as other check valves, as claimed by the appellant.

The following is the relevant tariff nomenclature from Schedule I to the Customs Tariff:

84.81          Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves.

8481.30          -Check valves

8481.30.10      -Hand operated or hand activated (excluding multiple gear, pulley or chain valves, connective couplings equipped with valves)

8481.30.90      -Other

8481.80          -Other appliances

-Other

8481.80.91      -Hand operated or hand activated (excluding multiple gear, pulley or chain valves, connective couplings equipped with valves)

8481.80.99      -Other

___________________

* * *

2. R.S.C. 1985, c.41 (3rd Supp.).

(AB vol. II, p. 298)

     At the hearing of this appeal on June 30, 1997, in Toronto, the appellant's counsel said, as recorded in the transcript (TR):

The issue * * * is whether the * * * (t)ribunal erred in law in finding that the subject goods, the tire values and the air chucks, are properly classified as check valves other than hand-operated or hand-activated.

It is the appellant's submission that the tribunal erred in misconstruing the tariff classification by holding that these goods were included within the tariff item, namely, check valves.

(Tr: pp. 4 & 5)

     Here is what the respondent's counsel said:

The contest * * * is between check valves of 8481.30 and other appliances or other valves, 8481.80.

The tariff, of course is hierarchical. * * * one must consider the headings before one goes to the sub-headings. Here heading is not an issue.

The contest, then, is between the appellant who is urging a residual item, other valves, and the respondent who is saying that these are check valves.

At the tariff item level, just to be confusing, it becomes "other check valves" for the respondent - that is to say, goods of 8481.30.90 - or, in the case of the appellant, "other operated appliances" of 8481.80.91, which is "hand operated other other appliances", or 8481.80.99 which are "other other other appliances".

(Tr: pp. 53 & 54)

     Whoever composes, drafts or dreams up these tariff items must just love generating litigation. Why could one not designate "pneumatic tire valves" and "air chuck valves for inflating tires from pneumatic pressure hoses"? That would save everyone much money and time, and the great proliferation of words.

     Here is what the CITT had to say in disposing of the present respondent's appeal before it:

In accordance with Rule 1 of the General Rules, the Tribunal reviewed the terms of the subheadings and any relative Section or Chapter Notes. After having examined the tire valve and air chuck introduced as exhibits at the hearing and having considered the evidence and submissions of both parties, the Tribunal is persuaded that the tire valves and air chucks in issue should be classified in subheading No. 8481.30 as check valves.

The Tribunal accepts Mr. Bogdanowicz's definition of a check valve as a valve that automatically limits the flow of a medium in one direction and prevents the flow in the other direction. However, the Tribunal does not agree with the conclusions drawn by Mr. Bogdanowicz and is of the view that the tire valves and said chucks meet this general definition. The tire valves and the air chucks are designed to permit the flow of air through them into a vessel, such as a tire. Once the air pressure within the vessel has reached the desired level, the tire valves and air chucks automatically close, and the air is held within the vessel. The tire valves and air chucks permit the flow of air into the vessel and the spring mechanism within them prevents the air from flowing out of the vessel unless it is overridden by depressing the plunger pin head. In the Tribunal's opinion, in so doing, they permit the flow of air in one direction and prevent the flow in the other direction.

The tire valve functions in such a way that air may only pass through it when it is opened by depressing the plunger pin head. The Tribunal is of the view that, when the plunger pin head is released and the spring mechanism in the tire valve is keeping the tire valve closed to prevent air from escaping, the spring mechanism is functioning automatically and is not hand-operated or hand-activated. This view is supported by the Explanatory Notes to the Harmonized Commodity Description and Coding System to heading No. 84.81 which contemplate that goods in that heading may be operated by "an automatic device such as a spring". Furthermore, the Tribunal concludes that, since an instrument is normally required to depress the plunger pin head in the tire valve, the tire valve is actually activated by the application of an instrument against the plunger pin head.

The Tribunal need [sic] not determine whether the air chucks are hand-operated or hand-activated since, in the Tribunal's view, they are connective couplings which are specifically excluded from being classified under tariff item No. 84.81.30.10. The Tribunal accepts the plain and ordinary meaning of a connective coupling as a device for joining two things, as was suggested by the appellant's representative. The Tribunal is persuaded from the descriptions given by the witnesses as to the use of the air chucks and its own examination of the air chucks that they are used to join two things and, in particular, they are most often used to join a tire valve and an air line attached to a container of pressurized air.

Accordingly, the appeal is allowed.

(AB pp. 302-03)

     For this Court to intervene in the ordinary way, it must be established that the tribunal came to a conclusion which was contrary to (or distortive of) the evidence before the tribunal, thereby perpetrating a reviewable error. Mr. Justice Marceau stated in Deputy M.N.R. v. Hydro-Québec

A final determination by a specialized tribunal like the one in issue here may only be set aside by this Court on the basis that its assessment of the facts on which it based its decision was unreasonable, * * * in the manner in which the tribunal here understood and analyzed the evidence presented to it.

(1994) 172 N.R. 247 at p. 257 (F.C/A)

     An earlier statement of the appropriate principle of law was articulated by the late Mr. Justice Kellock for the unanimous Supreme Court of Canada in Canadian Lift Truck Co. Ltd. v. Dep. M.N.R. for Customs and Excise (1955) 1 D.L.R. (2d) 497. He wrote:

While the construction of a statutory enactment is a question of law, and the question as to whether a particular matter or thing is of such a nature or kind as to fall within the legal definition is a question of fact, nevertheless if it appears to the appellate Court that the tribunal of fact had acted either without any evidence or that no person, properly instructed as to the law and acting judicially, could have reached the particular determination, the Court may proceed on the assumption that a misconception of law has been responsible for the determination: Edwards v. Bairstow, [1955] 3 All E.R. 48.

(p. 498)

     This is exactly the kind of error into which the CITT fell. The two puisne members of that tribunal knew much and were most familiar with the imported goods, especially the tire valves which were exhibited before them, but they knew nothing of check valves and did not heed the evidence which they received. They both related their personal experiences as can be seen in the hearing transcript (HTr.) - G on pp. 35 et seq., and C on pp. 39 et seq.. Member G had something firmly fixed in his mind, but he was not really listening as seen in HTr. pp. 68 et seq.

     The Deputy Minister's expert witness, Andrzej Bogdanowicz, testified most clearly in-chief, before being confronted by the two puisne members' idée fixe which was not to be shaken. Here is Mr. Bogdanowicz's testimony:

A.      A check valve is a valve that permits the flow in one direction and prevents the flow to the other direction. It is a commonly used term in the trade.

Q.      In your opinion, do the tire valves and the air check valves allow for flow in only one direction?

A.      The tire valve allows the flow in both directions, depending on the pressure. A typical check valve would prevent the flow in one direction. It would only permit the flow in one direction.

Q.      And how about the air chucks?

A.      Air chuck has a similar principle as the tire valve in the sense that it also permits the flow, depending on the actual pressure condition. If the pressure in the line is greater, the chuck is furnished with a disc of a certain size that blocks the air passage. However, if it is depressurized and the pressure is greater on the outside of the hose, it will not prevent the air from entering the hose. As a result, I don't believe it could be considered as a check valve.

Q.      You said for the definition of check valve that these devices act automatically. Do you feel that the tire valves and the air chucks act automatically?

A.      No. I believe there is a manual valve. And in the case of a tire valve, it is a spring action that makes it close. But there is a human intervention required to operate this valve.

(HTr. pp. 54 & 55)

Of course, that commonly used term and the device it describes are in complete accord with the meaning of the word "check". In the U.S.A. that word almost inevitably serves as a noun, meaning the bill of exchange: cheque. It also serves as a verb in that country meaning "verify", as in "speed checked by radar" - if only it were so! These usages do creep into Canada in all of informal, or specialized (i.e. "check-off") or even ignorant, but mainly subordinate usage, whose criteria are not those of this Court, except in some cases of specialized evidence or issues, or vernacular testimony. Here, the trade has taken an ordinary term without fancy usage: check valve - stops the flow of a liquid or a gas automatically without human intervention.

     The first four definitions of "check" in Gage Canadian Dictionary, 1997 Canada Publishing Corp'n., are these:

check v., n., interj. - 1 stop suddenly: They checked their steps. 2 hold back; control; restrain: to check one's anger. 3 rebuff; repulse; reverse: to check an enemy attack. 4 Hockey. a impede the progress of (the puck-carrier), using either the stick or the body. b force or drive in this way: to check a person into the boards * * * [subordinate meanings connote "verify".]

This notion of stopping the passage of a person, a liquid or gas, is predominant, too, in the Oxford English Dictionary, 2nd ed., Clarendon Press - Oxford 1989:

check * * *

1. Chess.

2. In early use, fig. and transf., in various shades of meaning, referring in some way to the 'check' in chess. Obs.

3. A taunting call; a bitter reproach. Obs.

4. a. A reproof, reprimand, rebuke. Obs. exc. dial.

5.a A sudden arrest given to the career or onward course of anything by some obstruction or opposition; a rebuff, repulse, reverse.

6. Hawking. a A false stoop, when a hawk forsakes her proper game, and pursues some baser game that crosses her flight. Obs. or Hist.

7. a. A sharp stoppage of motion; an interruption in a course, a sudden stoppage or pause.

8. A stoppage of wages or a fine for non-fulfilment of duties or transgression of rules, inflicted upon servants of the royal household, etc.; the amount stopped.

9. a. Restraint upon action or conduct by a supervising or controlling power.

b. in check: under restriction of freedom of movement or action, under control.

10. a. Any person or thing that checks, or acts as a stop or restraint.

e. Phr. checks and balances: means of limiting or counteracting the wrongful use of administrative power.

f. A form of catch on a rein; ellipt a check-rein. U.S.

check-, in comb.[from the stem of CHECK v.] Used attrib. 'that serves to "check" or control' , as check-block, -ligament, -thong, -ticket, -valve, -weight, -wheel, etc.

check-valve, a valve to prevent backward flow (spec. of water in a supply pipe).

(pp. 68 to 70)

The New Shorter Oxford Dictionary Clarendon Press, 1993, gives most of the same connotations and meanings for "check" and so, as well for the combined forms, including

check-valve a valve preventing backward flow of liquid in a pipe etc.

(p. 379)

The principal meanings of "check" also correspond to the foregoing meanings, in the Living Webster Encyclopedic Dictionary of the English Language [the venerable] first edition; The English Language Institute of America, Inc., MCMLXXI [1971] (p. 171), including on p. 172, "check valve, n. A one-way valve that automatically prevents a reverse flow of fluid."

     The pertinent passage of the McGraw-Hill Dictionary of Scientific And Technical Terms, Third Edition, p. 283, was considered by the CITT. It states: "check valve [Eng.] A device for automatically limiting flow in a piping system to a single direction."

     Now, are not those exactly the meanings expertly sworn to by Mr. Bogdanowicz? There is nothing about the meaning of "check valve" to connote any manual overriding of the closed valve to permit the liquid or gas to flow back or out in the opposite direction. No. Once the liquid or gas is stopped, it stays stopped because it is prevented from reversing its flow. Why then did the CITT persist in trying to cram the representative exhibited goods into the meaning of a "check valve"?

     A check valve is among the very last types of valve one would want affixed to a pneumatic tire, for one could not decrease the air pressure if the tire were over-inflated, and one could not release any pressure for the purpose of dismounting the tire from the rim, by any manual means, because a check valve would prevent such a reverse flow. It is an essential characteristic of a tire valve that it be not a check valve, which would be the height of inutility and, of course, inconvenience. Mr. Bogdanowicz was absolutely correct, but the CITT was just not listening. Indeed, member C exhibited bias and introducing the subject of toilet valves (HTr. p. 72), then wondering why they were even talking about toilet valves (HTr. p,. 73), and then accusing Mr. Bogdanowicz of splitting hairs (p. 73)! Member C was not in a judicial frame of mind.

     Now if anyone thinks that Parliament really did mean a two-function (inflate and deflate) pneumatic tire valve, then it was and still is open to Parliament to express some term different from "check valve" for such purpose. However, one must not ascribe such an intention to Parliament simply because the tire valves and air chucks happen to be the goods under consideration, for there is nothing in evidence to indicate any such specific intention.

     The air chuck is always mounted on the business end of a pressurized air hose. The chuck is a valve which prevents the escape of pressurized air until the air chuck valve is operated by pushing in the pressure plate to allow the air to escape, but that very operational feature demonstrates that the air chuck is also not a check valve. It may be difficult to image the outside ambient air being in a state of much higher pressure than the air in the air hose, but if it were then operating the air chuck's valve would permit the outside air to flow into the air hose. Such a condition could conceivably occur if the air pressure machine were dead, and the tire valve to which the air chuck were pressed, were holding an over-inflation in the tire.

     This Court concludes that the tribunal acted in a manner such that no one, "properly instructed as to the law and acting judicially could have reached the particular determination" that the subject goods are check valves, according to the tribunal's misconception in the Lift Truck judgment of the Supreme Court. The CITT's "assessment of the facts on which it based its decision was unreasonable" as stated by this Court's Appeal Division in Deputy M.N.R. v. Hydro Québec. The Court concludes that the subject goods are not check valves, and that the CITT erred in law in so holding.

     The parties' respective counsel argued the issue of finer classification. They agree, of course, that the heading of tariff item 84.81 is applicable, thus:

Taps, cocks, valves and similar appliances for pipes, boiler shells, taps, vats or the like, including pressure-reducing valves and thermostatically controlled valves.

Further the respondent submits that item 8481.30 is applicable, but this Court now finds that the CITT's support for that is erroneous. Then, continuing the error, the CITT found that item 8481.30.90, "--- Other", is the specific item which is applicable. It continues the error because it refers to "other" check valves.

     On the other hand, and in avoidance of the tribunal's error, the appellant submits that under item 8481.80 "other appliances", item 8481.80.91 ". . . Hand operated or hand activated (excluding * * * connective couplings equipped with valves)" is the tariff item applicable to the pneumatic tire valves. (If a big tire would take several minutes or even hours to inflate, a fixed connective coupling might be engaged to keep the air chuck and the tire valve coupled, but that would be an example, rather, of valves equipped with connective couplings and not as stated in the exclusion under item 8481.80.91.

     The appellant argues that since the air chuck is not a check valve, then it ought to be classified under item 8481.80.99, "--- Other". This is a concession to the respondent and was, indeed, the respondent's alternative argument. It is obvious that, while neither the tire valve nor the air chuck is a check valve, they are still not quite the same in that the tire valve habitually permits the passage of pressurized air in both directions, and the air chuck rarely, if ever, does so although it is capable of doing so.

     There is a similarity in that both devices are hand operated - whether it be the hand generated pressure of their respective plunger pins being pushed together, or the pressure of a hand held ball point pen, or key, or directly by finger or thumb nail pressure. The jurisprudence to be applied here is surely well known to the respondent's counsel: Praher Canada Products Ltd. & al. v. Deputy M.N.R. for Customs and Excise, A-476-95, April 25, 1996 (F.C./A). Mr. Justice Hugessen, writing for the Court, ever so briefly held:

The only issue in this appeal is whether certain bare stemmed rotary ball valves, for which the subject goods are parts, should be classified under Tariff Item 8481-80-91 a "Hand operated or hand activated" or Item 8481-80-99 "Other".

The appellants concede that the valves in question can, with the use of a key or other such tool, be operated by hand and that they are in fact designed to be so operated. In our view, that is decisive of the question and the fact that they may also be motor operated (and are also so designed) cannot help the appellants. The valves are certainly prima facie hand operated, and if there were the slightest doubt that they might also be properly classified as "other" the application of Rule 3(a) of the General Rules [General Rules for the Interpretation of the Harmonized System, being part of Schedule I to the Customs Tariff Act, R.S.C. 1985, c.C-54.01. 3. When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description . . .], as was done by the Tribunal, gives the same result.

The appeal will be dismissed with costs.

     The CITT held that, because the tire valve is armed with a spring to help keep it closed, it is functioning automatically and is not hand operated. (AB II, p. 302, 3rd para.). The tribunal erred in two ways. First, the valve is used, or functions for the passage of air only when it is open, and it is opened by manual pressure, overriding the spring (and internal tire pressure). That makes it hand operated. Second, it is principally the internal tire pressure, and the internal hose pressure which normally keep each device's valve closed. Yes, absent much or any internal pressure, their respective springs keep them lightly closed. Indeed, the air chuck, exhibit AP-94-005 A-3, has no spring to be overridden; it can be opened manually without any resistance, or even by blowing into it against the direction of the air pressure if it were not connected to a compressor's air line.

     Both devices are opened, when in use, principally by manual pressure and they are each prima facie hand operated.

     The foregoing findings lead to the conclusion that both devices can be classified under tariff item 8481.80.91. The Court is in no doubt that the tire valves are to be so classified, but the appellant presses the same "concession" as at the CITT hearing (Tr. p. 52), that the air chuck is to be classified under 8481.80.99. So be it.

     The appeal is allowed with costs.

     The appellant, pursuant to rule 337(2)(b), may prepare a draft of an appropriate judgment to implement the Court's conclusions herein, and after submitting it to the respondent's solicitors for comment or correction, may then submit it to the Court for settlement of terms and pronouncement of judgment.

    

Judge

Ottawa, Ontario

September 8, 1997