Date: 20100413
Docket: T-524-09
Citation: 2010 FC 396
Ottawa, Ontario, April 13, 2010
PRESENT: The Honourable Mr. Justice Mandamin
BETWEEN:
JOCKEY
CANADA COMPANY LIMITED
Applicant
and
MINISTER OF PUBLIC SAFETY AND
EMERGENCY PREPAREDNESS
Respondent
REASONS FOR JUDGMENT AND
JUDGMENT
[1]
This
is an application for judicial review by Jockey Canada Company Limited (JCC)
pursuant to section 18.1 of the Federal Courts Act of a decision
rendered by the Canada Border Services Agency (CBSA) on March 3, 2009. That
decision was in response to a JCC request an earlier October 20, 2008 CBSA
instruction letter be rescinded.
[2]
The
Applicant seeks a writ of certiorari quashing the decision, particularly
in regard to the finding that, pursuant to section 32.2 of the Customs Act, R.S.C. 1985 c. 1 (2nd
Supp.) (the
Act), JCC had “reason to believe” that its valuation method of imported
goods in 2005 was incorrect.
[3]
I
am dismissing this application for judicial review because I conclude the Federal
Court does not have jurisdiction to hear this matter for the reasons that
follow.
BACKGROUND
[4]
JCC
is an importer and distributor of Jockey brand apparel in Canada and is
located in London, Ontario. Its
parent company is Jockey International Inc. (JII) based in Wisconsin, U.S.A.
[5]
In the past Jockey
International Inc. (JII) sold Jockey brand apparel in Canada by shipping
goods to warehouses in Canada then redistributing to
retailers. JII paid duties on goods in accordance with a 1991 ruling by CBSA’s
predecessor agency instructing JII to use the deductive valuation method for
determining the value of duty on its imports.
[6]
JCC
was incorporated in 1996 as a wholly owned subsidiary of JII. JCC imported
Jockey brand apparel pursuant to a sales and distribution agreement (the Sales
Agreement) with JII. This Sales Agreement provides that JII would sell JCC
garments bearing the Jockey Marks manufactured by and for JII, U.S.A. for which
JCC would pay JII a specified price.
[7]
JCC,
as importer to Canada, now paid duty on Jockey imports but continued using the
deductive valuation method for determining the value for duty on the imports. At some time prior to
2000, JCC began purchasing goods from JII manufactured by its subsidiaries in
Jamaica, Honduras and Costa Rica. JCC paid JII for these Caribbean goods and paid duty
using a computed value method. At
some time prior to 2005, JCC also began importing goods from JII that were
manufactured in Asia. JCC paid the duty for these goods using a transaction
method for determining the value for duty on the Asian goods.
[8]
On
April 18, 2005, the London office of the CBSA
informed JCC that it was commencing a value for duty review of JCC under
authority of the Act and that it required the production of documents for
the review of the 2005 duty valuations. This began a process lasting 42 months
leading up to the impugned March 3, 2009 CBSA letter that is the subject of
this judicial review application.
[9]
On
October 20, 2008 CBSA issued an instruction letter (the Instruction Letter) and
valuation report. The Instruction Letter concluded the three methods used by
JCC for the purpose of calculating the value for duty of its imports from the
three different sources were incorrect. It added JCC has had “reason to
believe” this was the case since 2005. It also stated the letter was a National Customs
Ruling binding on JCC unless rescinded. Under the Instruction Letter’s “General
Recommendations” the following was written:
“Section
32.2 of the Customs Act requires importers to make adjustments to errors made
on declarations in respect of the tariff classification, value for duty, or
origin of the goods. Under section 32.2, you are responsible for making
corrections to the declarations filed from the date that you have “reason to
believe” that the declaration is incorrect. Section 32.2 provides you with
90 days within which to file the appropriate corrections. Additional
information for the “self-adjustment process” can be found in Memorandum
D11-6-6. Please note this section does not apply to require or allow a
correction that would result in a claim for a refund of duties.”
(emphasis added)
DECISION UNDER REVIEW
[10]
On
November 21, 2008 JCC wrote to the CBSA and requested the Instruction Letter be
rescinded submitting among other things that:
a.
the value
for duty review was conducted in an unfair and prejudicial manner;
b.
JCC had
“no reason to believe” that any of the methods used to calculated its value for
duty were incorrect; and
c.
the
Instruction Letter was replete with errors.
[11]
Following
the November 21, 2008 JCC letter, three JCC representatives met on December 16,
2008 in Ottawa with four
CBSA officials representing the Trade Programs Directorate. The CBSA undertook
to conduct a review. Ms. Kline, Director, Origin and Valuation Division CBSA sent
a response on March 3, 2009 advising the Instruction Letter would not be
modified.
[12]
I
paraphrase and emphasize the relevant part of the CBSA’s March 3, 2009 response:
a.
Lack of
Fairness: On review of the length of time it took for verification of goods
imported in 2005, the CBSA acknowledged a 19 month period of inactivity by CBSA
officials and, as a result, the CBSA was prepared to waive or cancel interest
for that period.
b.
Reassessment:
CBSA’s reassessment policy was based on section 59 of the Act which
provides that CBSA may reassess incorrect declarations and an importer will
make corrections in any remaining incorrect declarations not already reassessed
pursuant to section 32.2 of the Act.
c.
Reason to
Believe: The CBSA asserts JCC had reason to believe its value for duty
declarations were incorrect. It used the transaction value method for an export
sale between JCC and its parent company. The Detailed Adjustment Statements
that JCC subsequently provided relate to a computed method in a prior period
and do not reflect the valuation method applicable to the operating practices
that were found to be in place during the review period and therefore are not
relevant. The reason to believe was used to reassess to a maximum four years
prior and in all other cases a result of a CBSA verification is that the
importer would be required to correct for the prior twelve month fiscal period.
d.
Factual
Errors or Omissions: The CBSA did not consider there to be any material errors
that would affect the ruling.
LEGISLATION
[13]
The Federal
Courts Act provides:
|
18.5
Despite sections 18 and 18.1, if an Act of Parliament expressly
provides for an appeal to the Federal Court, the Federal Court of Appeal, the
Supreme Court of Canada, the Court Martial Appeal Court, the Tax Court of
Canada, the Governor in Council or the Treasury Board from a decision or an
order of a federal board, commission or other tribunal made by or in the
course of proceedings before that board, commission or tribunal, that
decision or order is not, to the extent that it may be so appealed, subject
to review or to be restrained, prohibited, removed, set aside or otherwise
dealt with, except in accordance with that Act.
|
18.5
Par dérogation aux articles 18 et 18.1, lorsqu’une loi fédérale prévoit expressément
qu’il peut être interjeté appel, devant la Cour fédérale, la Cour d’appel
fédérale, la Cour suprême du Canada, la Cour d’appel de la cour martiale, la
Cour canadienne de l’impôt, le gouverneur en conseil ou le Conseil du Trésor,
d’une décision ou d’une ordonnance d’un office fédéral, rendue à tout stade
des procédures, cette décision ou cette ordonnance ne peut, dans la mesure où
elle est susceptible d’un tel appel, faire l’objet de contrôle, de
restriction, de prohibition, d’évocation, d’annulation ni d’aucune autre
intervention, sauf en conformité avec cette loi.
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[14]
The Customs
Act provides:
|
32.2 (1) An importer or owner of goods for which preferential tariff
treatment under a free trade agreement has been claimed or any person
authorized to account for those goods under paragraph 32(6)(a) or subsection
32(7) shall, within ninety days after the importer, owner or person has
reason to believe that a declaration of origin for those goods made under
this Act is incorrect,
(a) make a correction to the declaration of origin in the prescribed
manner and in the prescribed form containing the prescribed information; and
(b) pay any amount owing as duties as a result of the correction to the
declaration of origin and any interest owing or that may become owing on that
amount.
(2) Subject to regulations made under subsection (7), an importer or
owner of goods or a person who is within a prescribed class of persons in
relation to goods or is authorized under paragraph 32(6)(a) or subsection
32(7) to account for goods shall, within ninety days after the importer,
owner or person has reason to believe that the declaration of origin
(other than a declaration of origin referred to in subsection (1)),
declaration of tariff classification or declaration of value for duty made
under this Act for any of those goods is incorrect,
(a) make a correction to the declaration in the prescribed form and
manner, with the prescribed information; and
(b) pay any amount owing as duties as a result of the correction to the
declaration and any interest owing or that may become owing on that amount.
(3) A correction made under this section is to be treated for the
purposes of this Act as if it were a re-determination under paragraph
59(1)(a).
(4) The obligation under this section to make a correction in respect of
imported goods ends four years after the goods are accounted for under
subsection 32(1), (3) or (5).
…
59. (1) An officer, or any officer within a class of officers,
designated by the President for the purposes of this section may
(a) in the case of a determination under section 57.01 or 58,
re-determine the origin, tariff classification, value for duty or marking
determination of any imported goods at any time within
(i) four years after the date of the determination, on the basis of an
audit or examination under section 42, a verification under section 42.01 or
a verification of origin under section 42.1, or
(ii) four years after the date of the determination, if the Minister
considers it advisable to make the re-determination; and
(b) further re-determine the origin, tariff classification or value
for duty of imported goods, within four years after the date of the
determination or, if the Minister deems it advisable, within such further
time as may be prescribed, on the basis of an audit or examination
under section 42, a verification under section 42.01 or a verification of
origin under section 42.1 that is conducted after the granting of a refund
under paragraphs 74(1)(c.1), (c.11), (e), (f) or (g) that is treated by
subsection 74(1.1) as a re-determination under paragraph (a) or the making of
a correction under section 32.2 that is treated by subsection 32.2(3) as a
re-determination under paragraph (a).
…
(6) A re-determination or further re-determination made under this
section is not subject to be restrained, prohibited, removed, set aside or
otherwise dealt with except to the extent and in the manner provided by
subsection 59(1) and sections 60 and 61.
(emphasis added)
|
32.2 (1) L’importateur ou le propriétaire de
marchandises ayant fait l’objet d’une demande de traitement tarifaire
préférentiel découlant d’un accord de libre-échange, ou encore la personne
autorisée, sous le régime de l’alinéa 32(6)a) ou du paragraphe 32(7), à
effectuer la déclaration en détail ou provisoire des marchandises, qui a des
motifs de croire que la déclaration de l’origine de ces marchandises
effectuée en application de la présente loi est inexacte doit, dans les
quatre-vingt-dix jours suivant sa constatation :
a) effectuer une déclaration corrigée conformément aux
modalités de présentation et de temps réglementaires et comportant les
renseignements réglementaires;
b) verser tout complément de droits résultant de la
déclaration corrigée et les intérêts échus ou à échoir sur ce complément.
(2) Sous réserve des règlements pris en vertu du
paragraphe (7), l’importateur ou le propriétaire de marchandises ou une
personne qui appartient à une catégorie réglementaire de personnes
relativement à celles-ci, ou qui est autorisée en application de l’alinéa
32(6)a) ou du paragraphe 32(7) à effectuer la déclaration en détail ou
provisoire des marchandises, ayant des motifs de croire que la déclaration de
l’origine de ces marchandises, autre que celle visée au paragraphe (1), la
déclaration du classement tarifaire ou celle de la valeur en douane effectuée
à l’égard d’une de ces marchandises en application de la présente loi est
inexacte est tenue, dans les quatre-vingt-dix jours suivant sa constatation :
a) d’effectuer une correction à la déclaration en la
forme et selon les modalités réglementaires et comportant les renseignements
réglementaires;
b) de verser tout complément de droits résultant de la
déclaration corrigée et les intérêts échus ou à échoir sur ce complément.
(3) Pour l’application de la présente loi, la correction
de la déclaration faite en application du présent article est assimilée à la
révision prévue à l’alinéa 59(1)a).
(4) L’obligation de corriger une déclaration, prévue au
présent article, à l’égard de marchandises importées prend fin quatre ans
après leur déclaration en détail au titre des paragraphes 32(1), (3) ou (5).
…
59. (1) L’agent chargé par le président,
individuellement ou au titre de son appartenance à une catégorie d’agents, de
l’application du présent article peut :
a) dans le cas d’une décision prévue à l’article 57.01 ou
d’une détermination prévue à l’article 58, réviser l’origine, le classement
tarifaire ou la valeur en douane des marchandises importées, ou procéder à la
révision de la décision sur la conformité des marques de ces marchandises,
dans les délais suivants :
(i) dans les quatre années suivant la date de la
détermination, d’après les résultats de la vérification ou de l’examen visé à
l’article 42, de la vérification prévue à l’article 42.01 ou de la vérification
de l’origine prévue à l’article 42.1,
(ii) dans les quatre années suivant la date de la
détermination, si le ministre l’estime indiqué;
b) réexaminer l’origine, le classement tarifaire ou la
valeur en douane dans les quatre années suivant la date de la détermination
ou, si le ministre l’estime indiqué, dans le délai réglementaire d’après les
résultats de la vérification ou de l’examen visé à l’article 42, de la
vérification prévue à l’article 42.01 ou de la vérification de l’origine
prévue à l’article 42.1 effectuée à la suite soit d’un remboursement accordé
en application des alinéas 74(1) c.1), c.11), e), f) ou g) qui est assimilé,
conformément au paragraphe 74(1.1), à une révision au titre de l’alinéa a),
soit d’une correction effectuée en application de l’article 32.2 qui est
assimilée, conformément au paragraphe 32.2(3), à une révision au titre de
l’alinéa a).
…
(6) La révision ou le réexamen fait en vertu du présent
article ne sont susceptibles de restriction, d’interdiction, d’annulation, de
rejet ou de toute autre forme d’intervention que dans la mesure et selon les
modalités prévues au paragraphe 59(1) ou aux articles 60 ou 61.
|
ISSUES
[15]
The
Applicant and Respondent present a variety of issues to be considered in this
application. I see the issues on a more fundamental plane. In my view the
substantive issues in this judicial review are better characterized as:
a.
Is the
Applicant precluded from applying for judicial review either by section 18.5 of
the Federal Courts Act or by the alternative mechanism for a remedy in
the Act?
b.
Is there a
basis for the CBSA to conclude the Applicant had “reason to believe” in 2005
that its valuations for duty were erroneous?
c.
Did the
delay in the review of the duty on the 2005 imports occasion a breach of natural
justice or procedural fairness?
ANALYSIS
[16]
The
Applicant seeks an order quashing the CBSA’s finding JCC had “reason to
believe” it was improperly valuing its imported goods since 2005 as well as
other remedies in conjunction with or in alternative to quashing that decision.
[17]
Section
18(1) of the Federal Courts Act provides the Federal Court has exclusive
jurisdiction to hear any application for relief of the kind the Applicant seeks
against any federal board, commission or other tribunal. Section 18.1 provides
that an application for judicial review may be made by anyone directly affected
by the matter in respect of which relief is sought. Section 18.5 limits the
scope of these two sections. It reads:
18.5 Despite sections
18 and 18.1, if an Act of Parliament expressly provides for an appeal to the…Federal
Court of Appeal…from a decision or an order of a federal board,
commission or other tribunal made by or in the course of proceedings before
that board, commission or tribunal, that decision or order is not,
to the extent that it may be so appealed, subject to review or to be
restrained, prohibited, removed, set aside or otherwise dealt with, except
in accordance with that Act.
(emphasis added)
[18]
Turning
to the Customs Act, section 32.2 requires the importer to correct its declaration
of origin and declaration of value for duty where the importer “has reason to
believe” the declaration is incorrect. Subsection 32.2(3) deems that
corrections under this section are to be treated as re-determination under paragraph
59(1)(a).
[19]
Section
59(1)(a) of the Act provides for re-determination of the valuation for
duty by CBSA officers.
[20]
Where
the officer’s re-determination is disputed, the Act provides for re-determination
by the President of the CBSA (sections 60, 61), for an appeal of the
President’s decision to the CITT (subsection 67(1)), and, finally, an appeal of
the CITT decision on a question of law to the Federal Court of Appeal
(subsection 68). This process is protected by three privative clauses, namely
sections 62, 67(3), and 72.1.
[21]
In
Abbott Laboratories, Limited and Abbot Laboratories International v. Canada (Minister of
National Revenue) 2004 FC 140 (Abbot Laboratories) Justice
François Lemieux held:
I cannot think how Parliament's intention, by enacting this
structure, could have been expressed in clearer terms. Parliament wanted the
administrative, quasi-judicial and judicial review system to be followed to the
exclusion of any other paths of review or appeal. This structure includes
bodies with recognized expertise in the subject matter with the Commissioner
and the CITT. Moreover, it is the Federal Court of Appeal and not the Federal
Court which supervises the CITT in judicial review matters pursuant to
paragraph 28(1)(b) of the Federal Court Act.
As I see it, Parliament's clear
intention ousts judicial review by the Federal Court under section 18.1 of the
Federal Court Act and this intention also removes the necessity for this Court
to test whether the prescribed review route provides for an adequate alternative
remedy.
I agree with Justice
Lemieux.
[22]
In
1099065 Ontario Inc. (c.o.b. Outer Space Sports) v. Canada (Minister of
Public Safety and Emergency Preparedness) (Outer Space Sports), 2006 FC
1263, aff’d 2008 FCA 47, Madam Justice Anne Mactavish also agreed with Justice
Lemieux’s finding in Abbot Laboratories that the comprehensive review
mechanism in the Act deprived the Federal Court of jurisdiction and
similarly ruled in the application before her.
[23]
Justice
Mactavish went on to consider in the alternative whether the review scheme in
the Act provided the applicant with an adequate alternative remedy such
that the Court ought to decline the application for judicial review. She noted
Justice Lemeiux found the complexities of the review under the Act did
not mean an adequate alternate remedy was not provided. She took note that the
applicant had initiated review under the Act. In result she further
declined to exercise jurisdiction on the basis that an adequate alternative
remedy existed. On appeal, the Federal Court of Appeal affirmed Justice
Mactavish’s findings on both points.
[24]
Finally,
the Federal Court of Appeal considered the effect of section 32.2 of the Act
in Fritz Marketing Inc. v. Canada (Fritz Marketing Inc.) 2009 FCA 62.
Justice Karen Sharlow first reviewed the same statutory provisions that are relevant
in this case. Her review is comprehensive and bears repeating:
5. The Agency has the
authority under subsection 58(1) of the Customs Act to determine the value for
duty of imported goods. However, if that determination is not made by the
Agency, the determination is deemed by subsection 58(2) to be as declared by
the importer. Thus, in the absence of an initial determination by the Agency of
the value for duty of imported goods, the importer's declaration is treated as
the Agency's determination.
6. Pursuant to
subsection 32.2(2) of the Customs Act, an importer who has reason to believe
that its declaration of the value for duty is incorrect must submit a
correction within a specified time and pay any resulting deficiency in the
duties payable. Subsection 32(3) provides that, for the purposes of the Customs
Act, such a correction is treated as a re-determination by the Agency under
paragraph 59(1)(a) of the Customs Act. The duty to make corrections expires
after four years (subsection 32.2(4) of the Customs Act).
7. Pursuant to
paragraph 59(1)(a) of the Customs Act, the Agency may make a re-determination
of the value for duty of imported goods, but it must do so within four years
after the date of the initial determination. Further re-determinations are
permitted under paragraph 59(1)(b), subject in some cases to further time
limits.
…
9. An importer
who receives a Detailed Adjustment Statement may request the President of
the Agency to make a further determination pursuant to section 60. The
request must be made within a stipulated time limit, which may be extended by
the President or, in certain circumstances, by the Canadian International Trade
Tribunal ("CITT") (sections 60.1 and 60.2). Pursuant to section 61 of
the Customs Act, the President of the Agency has the authority to make a
further re-determination, subject to certain conditions that are not relevant
to this appeal.
10. Pursuant to
section 67 of the Customs Act, an appeal lies to the CITT from a decision of
the President on a section 60 request, or a re-determination by the President
under section 60 or section 61. A further appeal lies to the Federal Court of
Appeal pursuant to section 68 of the Customs Act.
(emphasis added)
[25]
Justice
Sharlow considered the issue of the Federal Court’s jurisdiction to set aside a
CBSA Detailed Adjustment Statement. The question arose because, in issuing the
Detailed Adjustment Statement, the CBSA relied on information obtained as a
result of a breach of section 8 of the Charter of Rights and Freedoms.
The issue was framed by the parties and the Federal Court as a challenge to the
CBSA decision refusing to cancel the Detailed Adjustment Statement when asked
to do so.
[26]
Justice
Sharlow held the issue in Fritz Marketing Inc. had been
mischaracterized. She stated at para. 36:
In my view, the fundamental issue in this
case is and should be the admissibility of the impugned evidence in the
proceedings before the CITT, which is the tribunal that has the mandate to
determine the validity and correctness of the Detailed Adjustment Statements.
[27]
Keeping
in mind the forgoing jurisprudence, I turn to the matter before me.
[28]
The
Applicant has proceeded with this application because the CBSA has refused to
rescind the Instruction Letter which arose after a re-determination by an
officer under section 59. The officer’s re-determination of the duty valuations
engages, in my view, section 32.2.
[29]
The
issue in this proceeding is the differing views the CBSA and the Applicant have
on whether there is “reason to believe” the Applicant knew in 2005 the methods
of valuation of duty it was using were incorrect. If so, it would need to
revise its duty valuations in compliance with section 32.2 of the Act.
This, in turn, engages section 59(1)(a) and the re-determination and appeal
mechanisms set forth in sections 59 – 68. This issue falls in line with the
characterization applied by the Federal Court of Appeal in Fritz Marketing
Inc.
[30]
I
am of the view this is a matter for the President of the CBSA and if unresolved
for appeal to the CITT, the specialized tribunal designated by Parliament to resolve
such issues. Judicial review from the CITT is only to the Federal Court of
Appeal as provided in section 28(1)(e) of the Federal Courts Acts. Since
there is a right of appeal of a decision of the CITT to the Federal Court of
Appeal, section 18.5 of the Federal Courts Act is engaged.
CONCLUSION
[31]
I
conclude the Federal Court does not have jurisdiction to hear this matter. In
the alternative, I would follow Justice Mactavish in Outer Space Sports and
decline to entertain the application for judicial review because the review
process in the Act constitutes an adequate alternate remedy.
[32]
Having
come to above conclusion, I need not address the remaining issues.
[33]
I
dismiss the application for judicial review.
[34]
Costs
are awarded to the Respondent.
JUDGMENT
THIS COURT ORDERS AND
ADJUDGES that
1.
This
application for judicial review is dismissed.
2.
Costs
are awarded to the Respondent.
“Leonard
S. Mandamin”
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