Date: 20090521
Docket: T-1376-08
Citation: 2009 FC 528
Ottawa, Ontario, May 21, 2009
PRESENT: The Honourable Sean J. Harrington
BETWEEN:
C.B.
POWELL LTD.
Applicant
and
THE PRESIDENT OF THE CANADA
BORDER SERVICES AGENCY AND
THE ATTORNEY GENERAL
OF CANADA
Respondents
REASONS FOR ORDER AND ORDER
[1]
Is
a refusal to make a decision a decision? That is the access to justice question
in this judicial review which also brings into issue the jurisdiction of the
Federal Court.
[2]
Although
it did not realize it at the time, C.B. Powell’s Customs declarations with
respect to bacon bits imported from the United States in 2005 fell
short of the mark in two respects. It cited the broad tariff classification
item and the Most Favoured Nation tariff treatment. If the declaration had been
correct, no duty was payable. However, a subsequent audit by the Canada Border
Services Agency (CBSA) revealed that the bacon bits did not fall within that classification.
They were imported in glass jars to which a more specific tariff classification
item applied, and which carried a Most Favoured Nation duty of 12.5%. C.B.
Powell acknowledged its error but also submitted that it possessed a “certificate
of origin” which would have allowed it to import the bacon bits under the
United States (NAFTA) tariff. Had it been aware of its tariff classification error,
it would have produced the certificate of origin. In that case, there still
would have been no duty to pay.
[3]
CBSA
took the position that it had only re-determined the tariff classification, and
not the origin (sometimes called tariff treatment). C.B. Powell paid the duty
under protest and appealed to the president of the CBSA as contemplated by s.
60 of the Customs Act. It received what is called a “B2-Reject
Notification” which said: “Your request is rejected as there was no previous
re-determination of origin under section 59 of the Customs Act.
Therefore there can be no appeal of origin under section 60.”
[4]
C.B.
Powell seeks a declaration from this Court that the Reject Notification was a
decision of the President of the CBSA, which may be appealed to the Canadian
International Trade Tribunal (CITT) or, in the alternative, an order requiring him
to make such a decision.
[5]
Although
the jurisdiction of the Federal Court to entertain this application is
primordial, to better understand that issue it is first necessary to set out
the facts in more detail as they fit within the scheme of the Customs Act.
THE FACTS
[6]
C.B.
Powell is a long-time importer, primarily of foodstuffs. It employs a Customs
broker who makes declarations on its behalf. In 2005, it had a multitude of
importations.
[7]
Generally
speaking, an importer of goods is required to report and declare, and pay such
duty and general sales tax as may be owing. The forms it submits set out what
is imported, its value, its tariff treatment, i.e. origin, and the applicable
tariff classification item number.
[8]
In
2008, the CBSA decided to carry out a customs compliance verification of C.B.
Powell’s imports for the year 2005. It had a four-year window of opportunity to
do so under the Act. It bears mentioning that there is nothing in the record,
and the respondents’ do not suggest, that its activities were in any way
suspect. Indeed, C.B. Powell fared very well in the report. It is a daunting
task to select the correct classification item as illustrated by the decision
of the Federal Court of Appeal in Canada Customs and Revenue Agency, et al v. Produits Laitiers Advidia Inc., 2006 FCA 41, 346 N.R. 309, as well as
by the more recent decision of the Supreme Court in United Parcel Service
Canada Ltd. v. Canada, 2009 SCC 20. The purpose of the verification was,
among other things, to assess the level of compliance with the Customs Act,
the Customs Tariff and other Acts so as to provide client assistance and
advice on correct accounting of goods, to enable self-adjustment, if necessary,
and to identify areas of potential concern. The review covered a number of
areas relating to Customs activities, including tariff classification and
tariff treatment. Twenty-five importations were randomly selected for analysis.
[9]
As
regards tariff classification, the bacon bits were entered under classification
item number 16.02.49.90.00. It was confirmed that the product met the requirements
for the 16.02 heading. However, at the individual tariff item level there is a
distinction between prepared or preserved meat of swine which is packaged in
cans or glass jars versus other methods. It was determined that the sample was
more appropriately classified under 16.02.49.10.19.
[10]
With
respect to tariff treatment or country of origin, 11 of the samples were
imported under the United States tariff treatment (NAFTA) and the remaining
14 under the Most Favoured Nation tariff. Both were considered preferential
tariffs as the report states: “no other preferential tariff treatments were
utilized”. The report also stated that the importer must have proof of origin
and present same on request for all goods imported under a preferential tariff
treatment.
[11]
Of
the 25 samples, one was held to be imported under an incorrect tariff
treatment. T-shirts were fabricated from cotton grown and processed in the United
States
and imported under the United States’ tariff. However, as
they had been assembled into t-shirts in Mexico, the country
of origin was entered incorrectly as the goods should have been entered under
the Mexican tariff. This did not result in a change of duty.
[12]
C.B.
Powell had asserted the Most Favoured Nation tariff treatment for the bacon
bits. This is not incorrect as the United States is a Most Favoured
Nation. However, assuming it had an appropriate certificate of origin, importation
under the United
States
tariff would have been more precise and, as it turns out, more beneficial for
the importer, i.e. no duty as opposed to duty of 12.5%.
[13]
A
draft of the verification report was sent to C.B. Powell for comment before it
was formally issued. The company acknowledged the error in the tariff
classification but went on to say “when the product was imported, a free-trade
certificate was available and on-hand, as verified by your audit”. The company
alleged hardship as the goods had already been sold with no profit margin
included to cover the cost of duty, and as non-revenue amendments of tariff
treatment with respect to NAFTA certificates are limited to one year.
[14]
The
Agency responded that a preferential NAFTA tariff treatment had not been
claimed at the time of the accounting of the goods. Indeed, the accompanying
Detailed Adjustment Statement (DAS) claims to be a decision under s. 59(1) of
the Customs Act. More particularly: “This decision represents a
re-determination of the tariff classification only. The tariff treatment has
not been reviewed and is not being re-determined on this detailed adjustment
statement” (my emphasis).
[15]
C.B.
Powell, through its broker, sought what it called “further re-determination”
pursuant to s. 60(1) of the Customs Act on the basis that the goods
qualify for NAFTA origin treatment. Section 60 contemplates an appeal from a
CBSA officer to its President. The Notice of Appeal concluded: “The taxpayer
asks that a decision be made by the president under Section 60 as soon as
possible so that, if necessary, the taxpayer may appeal the section 60 decision
by the President to the CITT.”
[16]
As
aforesaid, C.B. Powell’s request, through its broker, was rejected. In a
document titled “B-2 Reject Notification,” the President took the position that
since there had been no previous re-determination of tariff treatment by a CBSA
officer under s. 59 of the Customs Act, he had no jurisdiction to
initiate a further re-determination. Therefore there could be no appeal of
origin under s. 60.
[17]
Rather
than appeal that rejection to the CITT, C.B. Powell seeks judicial review from
this Court.
THE CUSTOMS ACT
[18]
This
application deals with two particular aspects of the Act. Apart from a
re-determination initiated by the CBSA, the importer may voluntarily make
corrections when it has reason to believe it erred. The CBSA verification
report specifically states that it constitutes C.B. Powell’s “reason to
believe” under s. 32.2 of the Act. However, there are time limits. On the facts
of this case the CBSA had four years to re-determine, while C.B. Powell had
less time to self-correct. Had the verification taken place earlier, no duty
would have been payable.
[19]
The
second aspect of the Customs Act under consideration is the recourse
mechanism available to the taxpayer. The Act does not formally contemplate
judicial review by the Federal Court. Rather, the re-determination by a CBSA
officer may, in turn, be further re-determined by the President, from whom an
appeal lies to the CITT, from there to the Federal Court of Appeal on a point
of law, and from there, with leave, to the Supreme Court. Furthermore, in any
event, the CITT is one of the federal tribunals over which the Federal Court of
Appeal, rather than the Federal Court, has original judicial review
jurisdiction (Federal Courts Act, ss. 18, 18.1 and 28).
[20]
Section
58(2) of the Customs Act is a default provision. Unless determined by an
officer, or corrected by the importer, the origin, tariff classification and
value for duty of the imported goods are deemed to be determined as first
declared by the importer.
[21]
Section
32.2 deals with corrections by the importer. If preferential tariff treatment
under a free trade agreement is claimed, the importer has 90 days after having
“reason to believe” that the declaration was incorrect to make a correction.
When the goods were imported, C.B. Powell did not claim U.S. treatment
(NAFTA). Otherwise an incorrect declaration of origin, leaving aside free trade
agreements, may be made within four years. The goods were declared as
originating in the United States, and the Most Favoured Nation tariff treatment
was claimed. This was not incorrect. This brings us to s. 73 and following
which deal with abatements and refunds. Section 74(1)(c.1) permits a party to
apply for a refund if the goods were imported from a NAFTA country but no claim
for preferential tariff treatment thereunder was made when they were accounted
for. Section 74(3)(b)(ii) requires that the application be made within
one year from import.
[22]
As
mentioned above, the recourse mechanism under the Customs Act, being a
series of re-determinations and appeals, is one in which the Federal Court
plays no part. The process was recently reviewed by Madam Justice Sharlow in
another factual context in the Federal Court of Appeal’s decision in Her
Majesty the Queen v. Fritz Marketing Inc., 2009 FCA 62.
[23]
The
respondents treat the B-2 Reject Notification notice as a “non-decision”. The
President was of the view that the re-determination had been limited to tariff
classification, and not tariff treatment. Since the CBSA did not contest C.B.
Powell’s original determination of the tariff treatment, an appeal did not lie
to him under s. 60 of the Act. One cannot request a re-determination or a
further re-determination of origin, if there had been no determination by CBSA
in the first place. The determination was the determination made by C.B. Powell
itself in its Customs declaration forms, and it is out of time to make a
correction.
JURISDICTION OF THE
FEDERAL COURT AND ANALYSIS
[24]
Without
the benefit of precedent, I would have tended to the view that this Court does
not have jurisdiction to entertain C.B. Powell’s claim. In my opinion, the
Rejection Notice on behalf of the President of the CBSA was in fact and in law a
decision under s. 60 of the Customs Act, and the only available recourse
would be an appeal to the CITT. If it, in turn, like the President of the CBSA,
were of the view that the rejection was not a decision which could be appealed
to it, the recourse would be an appeal to the Federal Court of Appeal, as an
issue of jurisdiction is a point of law.
[25]
The
DAS which stated that the tariff treatment had not been reviewed and was not
being re-determined is not, on its face, in accord with the Verification Report
which clearly stated that both tariff classification and tariff treatment for
25 importations were being reviewed. By segregating the tariff classification
and the tariff treatment for the bacon bits, the CBSA created a “jurisdictional
fact”, which in turn led to the President’s position that he did not have
jurisdiction to re-determine tariff treatment because it was a condition
precedent thereto that there have been a previous determination or
re-determination by a Customs official.
[26]
Furthermore,
based on past decisions, C.B. Powell had every reason to believe that an appeal
to the CITT would be a wasted effort as it would hold it had no jurisdiction to
declare a “non-decision” a decision or to order
the President to make one.
[27]
Given
the elaborate recourse mechanism set out in the Act, I do not consider that
Parliament intended that a taxpayer could be denied access to justice by the
artificial creation of jurisdictional facts.
[28]
Courts
themselves have often used “jurisdictional facts” to engage in what is now
considered premature interference with the activities of federal boards and
tribunals. A prime example is the decision of the Supreme Court in Bell v.
Ontario Human Rights Commission, [1971] S.C.R. 756. The Human Rights
Code (Ontario) provided
that no person be denied occupancy of any self-contained dwelling unit because
of race, creed, colour, nationality, ancestry or place of origin. The Court
held that the premises in question were not a self-contained dwelling unit and
so the Board had no power to deal with the alleged discrimination. With the
subsequent development of the pragmatic and functional approach to judicial
review, the concept of jurisdictional facts has more or less fallen by the
wayside. As Mr. Justice Evans said in Air Canada v. Lorenz, [2000] 1
F.C. 494 at paragraph 13:
As a general rule it is much more difficult nowadays for a
litigant to persuade a court to intervene before the applicant has exhausted
the available administrative remedies than it was when Bell v. Ontario Human Rights Commission, [1971] S.C.R. 756
was decided.
[29]
That
case followed on the heels of his decision in Zündel v. Canada (Attorney
General), [1999] 4 F.C. 289 in which he stated at paragraph 44: “…the
authoritativeness of Bell has been severely eroded, if not totally
destroyed, by the revolution in the law of judicial review of administrative action that started
with the decision of the Supreme Court of Canada in Canadian Union of Public
Employees, Local 963 v. New Brunswick Liquor Corporation, [1979] 2 S.C.R. 227.”
See also Canada (Citizenship and
Immigration) v. Khosa,
2009 SCC 12, 82 Admin. L.R. (4th) 1, at paragraph 45.
[30]
The
decision of the Supreme Court in Vaughan v. Canada, 2005 SCC 11, [2005]
1 S.C.R. 146, stands for the proposition that the power of a Superior Court to
intervene before the recourse provisions in a statute have run their course is
not completely ousted if the recourse is not to an independent decision-maker. Even
if that could be said of the appeal to the president of the CBSA, the same does
not hold true on an appeal to the CITT, which has the added advantage of being
far more specialized in this domain than the courts themselves. Furthermore, if
there is recourse, that recourse is to the Federal Court of Appeal either on a
point of law in accordance with the Customs Act or by way of judicial
review in accordance with s. 28 of the Federal Courts Act.
[31]
By
way of analogy, the notion of “jurisdictional facts” has plagued the review
mechanism set out in the Canada Pension Plan, particularly appeals from
the Review Tribunal to the Pension Appeals Board, contingent on whether or not
there were “new facts”. It had been held by the Court of Appeal in a number of
cases, including Kent v. Canada (Attorney General), 2004 FCA 420, 328
N.R. 161, that the Pension Appeals Board could not consider an appeal from a
decision of the Review Tribunal that there were no “new facts”, as its jurisdiction
was limited to appeals on the merits. Consequently, by default the challenge
had to be by way of an application to this Court pursuant to ss. 18 and 18.1 of
the Federal Courts Act.
[32]
However,
in Mazzotta v. Canada (Attorney General), 2007 FCA 297, 368 N.R. 306,
the Court, speaking through Mr. Justice Létourneau, held that cases such as Kent were no
longer good law. As I understand it, paragraph 20 of Mazzotta stands for
the proposition that a refusal is in itself a decision subject to the review
mechanism set out in the governing statute:
With respect, I think that this conclusion does not reflect both
the factual and legal reality. When a Review Tribunal, or for that matter the
Minister, dismisses a demand under subsection 84(2) to rescind an earlier decision,
it both legally and factually renders a decision. There is in such a case no
less a decision rendered than if it decides to allow the demand and proceeds to
rescind or vary its earlier decision. The decision to dismiss the demand to
rescind or vary is a decision made under subsection 84(2). Subsection 83(1)
clearly gives in this case a right of appeal to the PAB when it states that a
party, dissatisfied with a decision of a Review
Tribunal made under subsection 84(2), may apply for leave to appeal that decision to the PAB. It does not matter whether
the Review Tribunal accepts the demand for reconsideration and proceeds to
rescind its earlier decision on the basis that there is new material evidence,
or refuses the demand for reconsideration because there is no new evidence or
there is new evidence which is not material and maintains its earlier decision.
In both cases, a decision is rendered under subsection 84(2) and, I believe, is
appealable.
Nevertheless, Madam Justice Layden-Stevenson
found on the vagaries of that statute that the jurisdiction of this Court was
not completely ousted (Kiefer v. Canada (Attorney
General),
2008 FC 786, 330 F.T.R. 242, at paragraph 10).
[33]
The
more recent decision of the Federal Court of Appeal in Fritz Marketing Inc.,
above, deals with this Court’s jurisdiction under the Customs Act,
but not on jurisdictional facts. The issue was whether the Federal Court had
jurisdiction to set aside a Detailed Adjustment Statement. After setting out
the facts of that particular case, the privative clauses and the recourse
mechanisms under the Customs Act, Madam Justice Sharlow stated at
paragraph 33 that s. 59(6) of the Customs Act deprives the Federal Court
of jurisdiction to set aside such a statement for any reason. The fundamental
issue was the admissibility of evidence which had been impugned. The CITT has
jurisdiction to exclude evidence on Charter grounds, if appropriate.
[34]
However,
the parties were unable to draw my attention to any decision of the Federal
Court of Appeal specifically dealing with the aftermath of a decision of the
President of the CBSA to reject a request for re-determination on
jurisdictional grounds. On the other hand, there is a 1993 decision of this
Court directly on point – Mueller Canada Inc. v. Canada (Minister of
National Revenue – M.N.R.), 70 F.T.R. 197. In that case, the Deputy
Minister, who then had had the functions of the President of the CBSA, refused
a further re-determination on the grounds that the original request had been
rejected “…without decision and cannot be further processed.” Mr. Justice
Rouleau stated the issue as follows:
This latter decision effectively precluded further recourse by the
applicant to the CITT or the Federal Court of Appeal, accordingly a motion was
brought in this Court seeking a declaration that the section 63 rejection was a
decision and therefore subject to the appeal provisions of the Act; or, in the
alternative, an order in the nature of mandamus compelling the Deputy Minister
to issue such a decision […]
[35]
He
held that the rejection was a disguised decision on the merits:
Furthermore, by characterizing these decisions as "no
decisions" rather than negative decisions, the respondents have thwarted
the applicant's rights of appeal under sections 60 and 63, rights which are
specifically conferred in section 72.1 and the applicant's only recourse was to
this Court. Again
I do not think that this is what Parliament intended given the fact that the
CITT is specifically empowered to deal with these technical matters.
Consequently, he declared the non-decision was
a decision which could be appealed to the CITT.
[36]
The
CITT seems, however, to have taken the position, based on Mueller,
above, that it is only the Federal Court which has jurisdiction to hold that a
“non-decision” is in law a decision, or if no decision was rendered, to compel
the President to render one. (In the Matter of a Preliminary Issue of Jurisdiction
in various appeals filed under s. 67 of the Customs Act”, including Vilico
Optical Inc., (7 May 1996), AP-94-365, rendered in 1996 and Chicago
Rawhide Products Canada Ltd. v. The Deputy Minister of National Revenue, (21
December 2000), AP-97-133.)
[37]
The
one case which does not quite fit in is Editions Gallery Ltd. v. President
of the Canada Border Service Agency, (26 July 2006), AP-2005-017. In
that case the Tribunal considered that the DAS in question included a
re-determination of origin which confirmed the original Most Favoured Nation
determination. In this case, however, the DAS goes out of its way to purport to
say that there was no such re-determination, contrary to what is suggested in
the Verification Report.
[38]
Judicial
comity dictates that I should follow Mueller. Although the principle of stare decisis is commonly thought of as
requiring a trial judge to follow decisions of the Court of Appeal and the
Supreme Court, since the very purpose of rendering public decisions is to
provide for certainty and predictability in the law, it is also preferable that
a judge of the same court follow what has been previously decided by another
judge of that same court. Nevertheless, one is not bound by such a decision if
one cannot agree with the reasoning. Even though stare decisis was
probably more deeply entrenched in 1947 than it is today, I consider the
following words of Lord Goddard C.J. in Police Authority for Huddersfield v.
Watson, [1947] 1 K.B. 842 at 848 to be most helpful:
.… I think the modern practice, and the modern
view of the subject, is that a judge of first instance, though he would always
follow the decision of another judge of first instance, unless he is convinced
the judgment is wrong, would follow it as a matter of judicial comity. He
certainly is not bound to follow the decision of a judge of equal jurisdiction.
He is only bound to follow the decisions which are binding on him, which, in
the case of a judge of first instance, are the decisions of the Court of
Appeal, the House of Lords and the Divisional Court.
[39]
In
Baron v. Canada (Minister of Public Safety and Emergency
Preparedness), 2008 FC 341, 324 F.T.R. 133, Madam Justice Dawson set out
circumstances which would justify a refusal to follow a prior decision of the
same court:
A judge of this Court, as a matter of judicial comity, should
follow a prior decision made by another judge of this Court unless satisfied
that: (a) subsequent decisions have affected the validity of the prior
decision; (b) the prior decision failed to consider some binding precedent or
relevant statute; or (c) the prior decision was unconsidered; that is, made
without an opportunity to fully consult authority. If any of those
circumstances are found to exist, a judge may depart from the prior decision,
provided that clear reasons are given for the departure and, in the immigration
context, an opportunity to settle the law is afforded to the Federal Court of Appeal by way of
a certified question. See: Re Hansard Spruce Mills Ltd.,
[1954] 4 D.L.R. 590
at page 591 (B.C.C.A.), and Ziyadah v. Canada (Minister of
Citizenship and Immigration), [1999] 4 F.C. 152
(T.D.).
[40]
Mr.
Justice Rouleau’s decision was completely in line with the law as it was in
1993, and I am not certain that the subsequent decisions which I have cited
have affected its validity. It has now served for many years as the basis of
this Court’s jurisdiction. Furthermore, as this is not an immigration case in
which leave is required by way of a serious question of general importance, the
respondents may appeal as of right.
[41]
C.B.
Powell also submits that in a request pursuant to s. 60, it was entitled to
offer security rather than pay the duty. It provided a bond which was
rejected, not on the basis of insufficiency, but rather that since s. 60 did
not apply, the CBSA was unable to accept security in lieu of payment. It argues
that there is an important distinction between payment and security in that s.
73 and following, which deal with abatements and refunds, have no application
to security. It should not be in the position of seeking a refund. It should be
seeking a surrender of security. This is an interesting point which the CITT
may wish to consider.
ORDER
IT IS HEREBY
DECLARED THAT:
- The Canada Border
Services Agency “B-2 Reject Notification”, dated 7 August 2008, is a
negative decision of the President of the Canadian Border Services Agency
under ss. 60(4) and (5) of the Customs Act to which an application
lies to the Canadian International Trade Tribunal pursuant to s. 60.2 of
the said Act.
- The applicant shall
have its costs.
“Sean Harrington”
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