Docket: T-2126-13
Citation:
2015 FC 1243
Ottawa, Ontario, December 23, 2015
PRESENT: The
Honourable Madam Justice Heneghan
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BETWEEN:
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PRUDENTIAL
STEEL LTD. AND ALGOMA TUBES INC.
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Applicants
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and
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BELL SUPPLY
COMPANY
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Respondent
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and
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CANADA BORDER
SERVICES AGENCY
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Intervener
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PUBLIC JUDGMENT AND REASONS
(Confidential
Judgment and Reasons were issued on November 2, 2015)
I.
INTRODUCTION
[1]
Prudential Steel Ltd. and Algoma Tubes Inc. (the
“Applicants”) seek judicial review, pursuant to section 18.1 of the Federal
Courts Act, R.S.C. 1985, c. F-7 (the “Act”) of a decision by Senior Program
Officer Patrick Mulligan (the “Officer”) of the Canada Border Services Agency
(the “Agency” or “CBSA”), Anti-Dumping and Countervailing Directorate. In that
decision, dated December 9, 2013, the Officer determined that certain seamless
casing and tube products originating in China, but processed and finished in
Indonesia, and imported to Canada would not be subject to an anti-dumping and
countervailing duty because these goods were deemed to originate in Indonesia,
not China.
[2]
Prudential Steel Ltd. and Algoma Tubes Inc. form
part of the domestic Oil Country Tubular Goods (“OCTG”) industry, which
produces green tube and OCTG in Canada.
[3]
Bell Supply Co. (the “Respondent”) is an
American company based in Gainesville, Texas, which manufactures various
materials used in the oil, gas and mining industries. Its product inventory
includes OCTG.
[4]
The CBSA is an Intervenor pursuant to an Order
made on November 13, 2014. The CBSA is responsible for the administration of
the Special Import Measures Act, R.S.C., 1985, c. S-15 (“SIMA”), which
helps to protect Canadian industry from injury caused by the dumping and
subsidizing of imported goods. The CBSA imposes duties on dumped and subsidized
imports to offset the price advantage, allowing Canadian industry to compete
with the imported goods.
II.
BACKGROUND
[5]
On July 29, 2013, the Respondent made a request
that the CBSA provide an advanced ruling on whether Chinese green tube,
originating in China and processed and finished in Indonesia to form OCTG by
P.T. Citra Tubindo Tbk. (“Citra Tubindo”), was subject to anti-dumping and
countervailing duties when imported into Canada.
[6]
The Respondent buys the green tubes in China and
engages Citra Tubindo, an arm’s length publicly traded company in Indonesia, to
process and finish the tubes. This is done by heat-treatment, threading and
coupling of the tubes. The tubes are then certified before being imported into
Canada. The tubes fall under the category of OCTG. The Respondent retains title
to the goods during the processing.
[7]
The OCTG produced are American Petroleum
Institute (“API”) specification 5 CT, grade P110. Specifically, the goods at
issue are:
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2 3/8” 5.95 ft. P110 CT-K6 Tubing
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2 7/8” 7.90 ft. P110 CT-K6 Tubing
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4 1/2” 15.10 ft. HC P110 NSCC Casing
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5 1/2” 20.00 ft. HC P110 NSCC Casing
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5 1/2” 23.00 ft. HC P110 NSCC Casing
[8]
The Respondent’s request stated that the
heating, testing and certification of the OCTG will be carried out in
Indonesia, that the costs incurred in the transformation process are
substantial and that the costs exceed the cost of the green tubes semi-finished
input.
[9]
The Respondent took the position that the goods
are Indonesian OCTG and not the goods at issue in the Canadian
International Trade Tribunal’s (“CITT”) Memorandum D15-2-51 entitled Certain
Seamless Carbon or Alloy Steel Oil and Gas Well Casing Originating in or
Exported from the People’s Republic of China, and CITT’s OCTG findings in
Memorandum D15-2-56 entitled Certain Oil Country Tubular Goods Originating
in or Exported from the People’s Republic of China.
[10]
Memorandum D15-2-51 was issued on August 29,
2008 after a CITT injury findings decision was issued on March 10, 2008. That
decision described the subject goods as follows:
Seamless carbon or alloy steel oil and gas
well casing, whether plain end, beveled, threaded or threaded and coupled,
heat-treated or non-heat-treated, meeting American Petroleum Institute (API)
specification 5CT, with an outside diameter not exceeding 11.75 inches (298.5
mm), in all grades, including proprietary grades, originating in or exported
from the People’s Republic of China.
[11]
Memorandum D15-2-56 was issued on May 11, 2012,
after a CITT injury findings decision was issued on March 23, 2010. In that decision,
the subject goods were described as follows:
oil country tubular goods, made of carbon or
alloy steel, welded or seamless, heat treated or non-heat-treated, regardless
of end finish, having an outside diameter from 2 3/8 inches to 13 3/9 inches (60.3
mm to 339.7 mm), meeting or supplied to meet American Petroleum Institute (API)
specification 5CT or equivalent standard, in all grades, excluding drill pipe
and excluding seamless casing up to 11 ¾ inches (298.5 mm) in outside diameter,
originating in or exported from the People’s Republic of China.
[12]
The Respondent submitted more information
related to its request for an advanced ruling on September 12, 2013. By letter
dated October 4, 2013, the Officer asked for further information and the
Respondent replied by letter submitted on October 11, 2013.
[13]
The Respondent has been party to proceedings
involving the same parties and issues before the United States Department of
Commerce (DOC). The final decision of the DOC, issued February 7, 2014,
determined that seamless unfinished OCTG made in China, and finished in third
countries, were within the scope of two previously issued DOC Orders, which
found that OCTG from China were subject to anti-dumping and countervailing
duties.
III.
DECISION UNDER REVEW
[14]
In his decision, the Officer advised that, after
analysis of the information submitted in support of the request for an advanced
ruling, he concluded that the goods that were the subject of the request were
products originating in Indonesia and accordingly, were not subject to anti-
dumping and countervailing duty upon importation into Canada.
[15]
The Officer identified the goods in question as
Chinese green tube, shipped to Indonesia and converted into seamless casing and
tubing by a process of heat treatment, threading and coupling, and testing. The
CBSA stated that green to referred to unfinished pipe that had not undergone
the heat treatment and testing required to allow it to be certified as API 5 CT
casing or tubing.
[16]
The CBSA requested that before such products are
imported, the Respondent provide the Anti-Dumping and Countervailing
Directorate with more documents, including the following:
1) the purchase order, commercial invoice and mill certificate relating
to the sale of green tube between the Chinese supplier and Bell Supply;
2) the commercial invoice and mill certificate relating to the
processing of green tube into finished seamless casing and tubing products by
Citra Tubindo; and
3) the commercial invoice issued by Bell Supply to the importer in
Canada relating to the sale of finished seamless casing and tubing products.
[17]
As well, in his decision, the Officer advised
the Respondent that the CBSA reserved the right to contact Citra Tubindo as
well as visit its facilities. He advised that the CBSA may verify information
at the Respondent’s premises, including a review of the green tube purchased in
China and the processing of the tube.
[18]
The confidential memorandum written by the
Officer informs his decision. The Officer described the process used to
transform the green tube to OCTG, noting that many processes are involved. He
also considered the cost of transforming the green tube. For the seamless
casing imports, the cost of the green tube represented XX%, XX%, XX%
respectively, of the total manufacturing cost of the finished product. For
the tubing, the green tube cost XX% and XX% respectively.
[19]
The Officer outlined the guiding principles for
determining the rules of origin, specifically: change in tariff classification,
substantial information by ad valorem percentage, and substantial
information by manufacturing or processing operation.
[20]
The Officer found that the goods would be
classified under different harmonized system tariff classification levels after
processing and finishing. Under the ad valorem percentage criterion, XX%,
XX% and XX% of the total cost of the seamless casing manufacture went to
processing and shipping. For the tubing products, the processing and shipping
accounted for XX% and XX% of the total manufacture costs. The Officer concluded
that this constitutes a substantial transformation.
[21]
The Officer found that heat treatment and other
processes involved in transforming the green tubes into finished products was a
substantial transformation.
[22]
The Officer considered the definition of OCTG in
the CITT’s decision on seamless casing and noted that, unlike the CITT decision
on certain OCTG, green tubes were not included in the product definition. He
concluded that the Respondent’s seamless casing products did not fall under the
product definition in the CITT injury findings on seamless casing from China.
[23]
Finally, the Officer considered a past decision
of the Anti-Dumping and Countervailing Directorate, which found that green tube
purchased in China and processed in Indonesia would not be considered subject
goods when imported into Canada. He considered the Statement of Reasons dated
November 13, 1998, referred to by the Respondent in its request for the
advanced ruling. That decision held that green tubes imported into Canada and
processed in Canada would not fall within the definition of subject goods.
[24]
The memorandum concluded that the products would
be deemed to originate in Indonesia, and stated that the CBSA would take
reasonable steps to ensure that the products are of Indonesian origin.
IV.
DISCUSSION AND DISPOSITION
[25]
The first issue raised in this application is
the applicable standard of review.
[26]
The second is whether the advanced ruling is amenable
to judicial review. If so, did the CBSA commit a reviewable error by failing to
follow the previous findings of the CITT. Finally, if the decision is subject
to judicial review, did the CBSA breach of procedural fairness by failing to
provide notice to all interested parties.
[27]
Both the Applicants and the Respondent submit
that the decision is reviewable on the standard of reasonableness, relying
respectively, upon the decisions in Uniboard Surfaces Inc. v. Kronotex
Fussboden GMBH & Co. FG (F.C.A.), [2007] 4 F.C.R. 101 at paragraph 63
and Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190.
[28]
Breaches of procedural fairness are reviewable
on the standard of correctness; see the decision in Canada (Citizenship and
Immigration) v. Khosa, [2009] 1 S.C.R. 339 at paragraph 43.
[29]
I agree that the decision, upon the merits, is
reviewable on the standard of reasonableness, as applied by the Federal Court
of Appeal in Uniboard, supra; see paragraph 63.
[30]
However, in my opinion, the dispositive issues
in this application are matters of procedure, the first being whether the
decision in question is subject to judicial review. The second determinative
procedural issue is the statutory appeal process mandated by the SIMA.
[31]
This application was made pursuant to section
18.1 of the Act. Paragraph 18.1(3)(b) is relevant and provides as follows:
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18.1 (3) On an application for judicial review, the Federal Court
may
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18.1 (3) Sur présentation d’une demande de contrôle judiciaire, la
Cour fédérale peut :
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(b) declare invalid or unlawful, or quash, set aside or set aside
and refer back for determination in accordance with such directions as it
considers to be appropriate, prohibit or restrain, a decision, order, act or
proceeding of a federal board, commission or other tribunal.
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b) déclarer nul ou illégal, ou annuler, ou infirmer et renvoyer
pour jugement conformément aux instructions qu’elle estime appropriées, ou
prohiber ou encore restreindre toute décision, ordonnance, procédure ou tout
autre acte de l’office fédéral.
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[32]
In Larny Holdings Ltd. v. Canada (Minister of
Health)(T.D.), [2003] 1 F.C.R. 541 this Court emphasized that a broad range
of matters are subject to review pursuant to section 18 of the Act.
[33]
However, the Court was equally clear that the
scope of matters subject to judicial review under section 18 of the Act does
not extend to all decisions, orders, acts or proceedings by federal boards,
commissions and tribunals. Rather, it suggested that those decisions and orders
that “determine a party’s rights” will be subject to judicial review.
[34]
At paragraphs 24-25, the Court explains how the
decision at issue met that test, as follows:
The direction sent by the respondents is, in
my view, coercive, in that the purpose thereof is to threaten the applicant to
immediately stop selling the multi-packs, failing which a charge would be laid
and criminal prosecution might be commenced. I have no doubt that what the respondents
hoped for was what in fact happened, i.e. that the applicant would stop selling
multi-packs so as to avoid criminal prosecution. As I have already indicated,
the applicant’s decision to stop selling multi-packs has resulted in financial
loss.
I am therefore of the view that the letter
sent by Mr. Zawilinski is a ‘decision, order, act or proceeding’ and is
reviewable by this Court. I also have no hesitation in concluding that in
sending the direction, Mr. Zawilinski was a ‘federal board, commission or other
tribunal’ within the meaning of subsection 2(1) of the Act.
[35]
In Pieters v. Canada (Attorney General)
(2007), 313 F.T.R. 231 at paragraph 68, the Court found that a Final
Report and Recommendations of the Public Service Integrity Office did “not determine the Applicant’s substantive rights or carry
legal consequences as required by the jurisprudence, and are thus not matters
subject to judicial review” and dismissed an application for judicial
review.
[36]
This issue was discussed in Rothmans, Benson
& Hedges Inc. v. Minister of National Revenue (1998), 148 F.T.R. 3.
That case involved a motion to strike an originating notice of motion, which in
turn was seeking an order quashing an advance tax ruling issued by the
Department of Revenue. The Court expressed the opinion that the advance tax
ruling did not have any meaningful effect on the Applicant’s rights and said
the following at paragraph 28:
The advance ruling does not grant or deny a right, nor does it have
any legal consequences… It does not have the legal effect of settling the
matter or purport to do so. It is at the most a non-binding opinion. Moreover,
there is no evidence that any tax has been levied on a product corresponding to
the prototype of the product in the advance ruling.[references omitted]
[37]
At paragraph 29, the Court concluded “that the ruling in the letter from Revenue is not a
‘decision’ within the meaning of section 18.1 of the Federal Court Act”.
[38]
I see no basis to depart from the decision in Rothmans,
supra and find that the decision in the present case, that is the
advanced ruling, is not a “decision” that is subject to judicial review. This
conclusion is sufficient to dispose of the within application. However, a brief
comment is warranted about the interplay between the statutory appeal process
under the SIMA and the availability of judicial review relative to a decision
made under that statute.
[39]
The Applicants’ argument about a breach of
procedural fairness is based upon the failure of the CBSA to give them notice
of the proceeding giving rise to the advanced ruling. They claim that
they are an “interested party” under the SIMA and, as such, they are owed a
duty of fairness by an administrative decision-maker unless there is clear
statutory language to the contrary, relying on the decision in Canada
(Attorney General) v. Mavi, [2011] 2 S.C.R. 504 at paragraph 38-39.
[40]
The Respondent argues that the Applicants have
no standing at this stage of the proceeding and are not entitled to notice.
There is no requirement under the SIMA that notice be given to the Applicants
until the third stage of the SIMA appeals process which is set out in section
61.
[41]
In my view, the Applicants’ submissions ignore
the statutory scheme. Re-determinations and appeals under the SIMA are governed
by sections 56 through 62 of that statute. The statutory appeal process permits
the Applicants to be heard on appeal to the CITT, pursuant to section 61 of the
SIMA. The Applicants would also have an opportunity to participate in an appeal
to the Federal Court of Appeal, pursuant to section 62.
[42]
An appeal under the SIMA is not available until
a determination is made by a customs officer pursuant to section 56 of the
SIMA, which provides as follows:
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56. (1) Where, subsequent to the making of an order or finding of
the Tribunal or an order of the Governor in Council imposing a countervailing
duty under section 7, any goods are imported into Canada, a determination by
a customs Officer
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56. (1) Lorsque des marchandises sont importées après la date de
l’ordonnance ou des conclusions du Tribunal ou celle du décret imposant des
droits compensateurs, prévu à l’article 7, est définitive une décision rendue
par un agent des douanes dans les trente jours après déclaration en détail
des marchandises aux termes des paragraphes 32(1), (3) ou (5) de la Loi sur
les douanes et qui détermine :
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(a) as to whether the imported goods are goods of the same
description as goods to which the order or finding of the Tribunal or the
order of the Governor in Council applies,
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a) la question de savoir si les marchandises sont de même
description que des marchandises auxquelles s’applique l’ordonnance ou les
conclusions, ou le décret;
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(b) of the normal value of or the amount, if any, of the subsidy
on any imported goods that are of the same description as goods to which the
order or finding of the Tribunal or the order of the Governor in Council
applies, and
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b) la valeur normale des marchandises de même description que des
marchandises qui font l’objet de l’ordonnance ou des conclusions, ou du
décret, ou le montant de l’éventuelle subvention qui est octroyée pour elles;
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(c) of the export price of or the amount, if any, of the export
subsidy on any imported goods that are of the same description as goods to
which the order or finding of the Tribunal applies, made within thirty days
after they were accounted for under subsection 32(1), (3) or (5) of the
Customs Act is final and conclusive.
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c) le prix à l’exportation des marchandises de même description
que des marchandises qui font l’objet de l’ordonnance ou des conclusions ou
le montant de l’éventuelle subvention à l’exportation.
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[43]
That stage has not yet been reached, since no
determination has been made and the appeal process has not been triggered.
[44]
According to the decision of the Federal Court
of Appeal in C.B. Powell Limited v. Canada (Border Services Agency), [2011]
2 F.C.R. 332 (F.C.A.), a Court should allow a statutory appeal process to
proceed without interruption, unless there are exceptional circumstances.
[45]
The Federal Court of Appeal expressed the view
that allowing the Court to interfere in the administrative process would be
contrary to the intention of Parliament and that few situations would meet that
high threshold of “exceptional circumstances”.
[46]
Further, the Federal Court of Appeal recently
affirmed its decision in C.B. Powell, supra in Atomic Energy
of Canada Ltd. v. Wilson (2015), 467 N.R. 201 at paragraph 29-33.
[47]
No such determination had been made prior to the
commencement of this application.
[48]
In effect, the Applicants are seeking judicial
review of an interlocutory decision but, as discussed above, that decision is
not amenable to judicial review. Further, the statutory appeal process has not
yet been exhausted and the Court should not countenance an interruption of that
process. Access to this Court upon an application for judicial review would
depend upon the nature of the question decided in the statutory appeal process.
[49]
Since I have found the decision in issue here is
not one that is subject to judicial review, it follows that there was no duty
owed to the Applicants that would attract consideration of procedural fairness.
[50]
It is not necessary to address the parties’
arguments about the reasonableness of the advanced ruling and the application
will be dismissed with costs to the Respondent.
[51]
The Respondent seeks costs on the basis of
Column V of the Tariff B of the Federal Courts Rules, SOR/98-106.
[52]
The parties can make brief submissions on costs
within ten (10) days of this Order unless they otherwise agree on costs.
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