Date: 20000511
Docket: A-854-97
EVANS J.A.
MALONE J.A.
BETWEEN:
CONTINUOUS COLOUR COAT LIMITED
Appellant
- and -
THE DEPUTY MINISTER OF NATIONAL REVENUE
FOR CUSTOMS AND EXCISE
Respondent
REASONS FOR JUDGMENT
MALONE J.A.
[1] This is an appeal pursuant to subsection 27(1) of the Federal Court Act from a decision of the Federal Court Trial Division, which had affirmed a ruling of the Canadian International Trade Tribunal ("the CITT" or "the Tribunal") dealing with the classification of imported goods under the Customs Tariff.1
[2] The Appellant imports various plastic sheets used as coating for steel or aluminum products. The sheets are made by laminating a film of dyed polyethylene terephthalate (PET) together with a polyvinyl chloride plastic backing (PVC). These polymer sheets also contain some vacuum-deposited aluminum molecules. The PVC is by far the heaviest polymer component by weight (roughly 85%), and the PET is next (just over 10%).
[3] Under the scheme of the Customs Tariff, the classification of imported goods is to be determined pursuant to general interpretive rules entitled "General Rules for the Interpretation of the Harmonized System" ("the General Rules") adopted by Parliament in section 10:
| 10. The Classification of imported goods under a tariff item in Schedule I shall, unless otherwise provided, be determined in accordance with the General Rules for the Interpretation of the Harmonized System and the Canadian Rules set out in that Schedule. |
[4] Imported plastics are categorized under Chapter 39 of Schedule I by headings, subheadings, and tariff item designations. The General Rules direct that the Tribunal must first consider the wording of the headings and any relevant section or chapter notes thereunder. If the goods are as described in the heading they are classified there. Where the rules, sections and chapter notes are not sufficient to classify the goods exclusively under one of the proposed headings then one must go on to consider rules 1 to 6 in sequence. Once the proper heading classification is settled, rule 1 reapplies these General Rules to the subheading level and the tariff item level mutatis mutandis.
[5] Following the General Rules, the CITT upheld two decisions of the Deputy Minister of National Revenue ("the Deputy Minister") under the Customs Tariff . In its decision, the Tribunal classified the plastic sheets imported by the appellant as "Other...sheets, film...of plastics, non-cellular...Of polymers of vinyl chloride...Flexible" (Tariff item # 3920.42.00) as opposed to "Other ... sheets, film... of plastics, non-cellular...Of polyethylene terephthalate" (tariff item # 3920.62.00).
[6] The Appellant appealed the CITT classification ruling to the Federal Court Trial Division. The Appellant submitted that such an interpretation constituted an error of law, maintaining that the two separate and distinct layers of polymers are composite goods which ought to be classified as such, according to the General Rules.
[7] Various recent decisions of this Court have concluded that the standard of review for CITT tariff classification cases is reasonableness simpliciter.2 That standard has been articulated by the Supreme Court of Canada in Canada (Director of Investigation and Research) v. Southam Inc.3 as follows:
| An unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. Accordingly, a court reviewing a conclusion on the reasonableness standard must look to see whether any reasons support it. The defect, if there is one, could presumably be in the evidentiary foundation itself or in the logical process by which conclusions are sought to be drawn from it. An example of the former kind of defect would be an assumption that had no basis in the evidence, or that was contrary to the overwhelming weight of the evidence. An example of the latter kind of defect would be a contradiction in the premises or an invalid inference.4 |
[8] In assessing whether there is an adequate basis to support the Tribunal"s decision, I must question whether the CITT decisions to classify the goods under heading 39.20 instead of 39.21, and under sub-heading 3920.42 instead of 3920.62 were both reasonable.5
[9] I am of the view that the CITT decision to classify the imported goods under heading 39.20 instead of 39.21 was readily supported by the evidence. The Tribunal considered the wording of the heading and the evidence of the appellant"s expert, Mr. Gillespie, who had agreed that the imported goods were 99 percent plastic. It concluded that although the two plastic sheets were laminated together, because they were "not laminated with other materials", they fit under 39.20. The ruling that the imported goods are sheets or films of plastic under 39.20 is reasonable and should not be set aside.
[10] The Tribunal faced a much more difficult task in reaching a decision as to whether the polymers should be further classified as polymers of vinyl chloride under subheading 3920.42 or as polythene terephthalate under 3920.62. Referring to the General Rules and supporting interpretation notes, the following special directive exists for plastics and articles thereof.6
| Note 4. For the purpose of this Chapter, except where the context otherwise requires, copolymers (including co-polycondensates, co-polyaddition products, block copolymers and graft copolymers) and polymer blends are to be classified in the heading covering polymers of that comonomer which predominates by weight over every other single comonomer, comonomers whose polymers fall in the same heading being regarded as constituting a single comonomer. |
| If no single comonomer predominates, copolymers or polymer blends, as the case may be, are to be classified in the heading which occurs last in numerical order among those which equally merit consideration. |
| The expression "copolymers" covers all polymers in which no single monomer contributes 95% or more by weight to the total polymer content. ["Emphasis added"]. |
[11] The issue here raises both a question of science and statutory interpretation: how to define two polymers that are laminated together. Does the total product create a copolymer or a polymer blend? If so, then Note 4 applies and the goods are to be classified according to the heaviest comonomer. However, if laminating two polymers does not create a copolymer, or a polymer blend, then Note 4 does not apply and some other method of classification must be used.
[12] In finding that the subject goods were properly classified as copolymers of PVC, the Tribunal was persuaded by Note 4, which offers a definition of the term "copolymer" that is broader than the standard dictionary definition. The definition in the third paragraph of Note 4 provides that, "The expression "copolymers" covers all polymers in which no single monomer constitutes 95 % or more by weight to the total polymer content". Note 4 also states that where one comonomer predominates by weight, the goods in issue should be classified in the subheading covering that comonomer. Therefore, the CITT concluded that the goods in issue were copolymers which were polymers of vinyl chloride because neither the PET nor the PVC polymers contribute 95% or more by weight to the total polymer content of the product and PVC predominates by weight. Finally, since the goods are flexible, the CITT decided they properly fit under tariff item 3920.42.00.
[13] The CITT"s analysis essentially determined that when a sheet of polymer of vinyl chloride is laminated with a sheet of polyethylene terephthalate it creates a copolymer; each polymer contributing less than 95% by weight to the whole. However, in my view, this is a misinterpretation of Note 4 which refers to the relative weight of the monomers, not polymers. In addition, counsel for both parties conceded there was no evidence on the record of the relative weight of the monomers. It would follow, in my opinion, that there is no basis to conclude that the laminated sheets are copolymers.
[14] Moreover, Note 4 provides classification directions for "co-polymers" and for "polymer blends". It presupposes that once the subject goods have been determined to be either "co-polymers" or "polymer blends", then the weight of the comonomer is to be used in determining the appropriate classification of the goods. There is nothing in the CITT decision indicating that the experts found the total laminated product to be either a "co-polymer" or a "polymer blend". Dr. Taymaz, for the respondent, said the total product is a "compound of polymers" or "polymeric product"; Mr. Gillespie, for the appellant, said the total product was not a copolymer but a "laminate". Yet, the CITT concluded that the goods in issue should be considered copolymers, which for the purposes of classification are polymers of vinyl chloride.
[15] It may be possible that a compound of polymers or polymeric product constitutes a co-polymer in the sense of Note 4; however, this is not in the evidence on the record and with no indication of how the CITT would have reached such a conclusion, it is difficult to conclude that the CITT decision is a reasonable one.
[16] Referring again to Southam7 and the types of defect or defects necessary to offend the reasonableness standard, I am of the view that the CITT analysis suffers both from an inadequate evidentiary basis and an apparent misinterpretation of Note 4 that does not stand up to probing examination.
[17] With respect, the learned Trial Judge fell into a similar trap when he stated:
| In this instance, I am not convinced that the Tribunal"s interpretation was in any way unreasonable. Faced with contradictory evidence as to the definition of polymer, the Tribunal opted for the broader interpretation given by the Act , instead of a more restrictive "scientific" one. This conclusion respects the established rules of interpretation and is by no means less reasonable than the one submitted by the Appellant.8 |
[18] I would allow the appeal in part with costs to the appellant both here and below, set aside the judgment of the Trial Division dated October 27, 1997 and remit the matter to the Trial Division for reconsideration on the basis that it allow the appeal from the decision of the CITT and that it refer the matter back to the CITT for redetermination in a manner consistent with these reasons for judgment.
(B. Malone)
J.A.
I agree
A.J. Stone
J.A.
I agree
John M. Evans
J.A.
Date: 20000511
Docket: A-854-97
EVANS J.A.
MALONE J.A.
BETWEEN:
CONTINUOUS COLOUR COAT LIMITED
Appellant
- and -
THE DEPUTY MINISTER OF NATIONAL REVENUE
FOR CUSTOMS AND EXCISE
Respondent
Heard at Toronto, Ontario, on Wednesday, May 3, 2000.
Judgment delivered from Ottawa, Ontario, on Thursday, May 11, 2000.
REASONS FOR JUDGMENT BY: MALONE J.A.
CONCURRED IN BY: STONE J.A.
and EVANS J.A.
Date: 20000511
Docket: A-854-97
DATED AT OTTAWA, ONTARIO, ON THURSDAY, MAY 11, 2000
EVANS J.A.
MALONE J.A.
BETWEEN:
CONTINUOUS COLOUR COAT LIMITED
Appellant
- and -
THE DEPUTY MINISTER OF NATIONAL REVENUE
FOR CUSTOMS AND EXCISE
Respondent
JUDGMENT
[1] The appeal is allowed in part with costs to the appellant both here and below, the judgment of the Trial Division dated October 27, 1997 is set aside and the matter is remitted to the Trial Division for reconsideration on the basis that it allow the appeal from the decision of the CITT and that it refer the matter back to the CITT for redetermination in a manner consistent with the reasons for judgment of Malone J.A. herein.
(A.J. Stone)
J.A.
__________________
1Customs Tariff R.S.C. 1985, c. 41 (3rd Supp.).
2Canada (Deputy Minister of National Revenue, Customs and Excise -M.N.R.) v. Schrader Automotive Inc. (1999) 240 N.R. 381 (F.C.A.) at paras. 3-5; Rollins Machinery Ltd. v. Canada (1999) 247. N.R.399 (F.C.A.) at para. 3.
3[1997] 1 S.C.R. 748 [hereinafter Southam ].
4Southam, ibid. at para. 56.
5The Customs Tariff Schedule I heading (four digits), subheadings (six digits) and tariff items (eight digits) in issue are as follows: 39.20 Other plates, sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials. - Of polymers of vinyl chloride: 3920.41.00 - - Rigid 3920.42.00 - - Flexible - Of polycarbonates, alkyd resins, polyallyl esters or other polyesters: 3920.62.00 - -Of polyethlene terephthalate 39.21 Other plates, sheets, film, foil and strip, of plastics. 3921.90 - Other 3921.90.90 - - - Other
6Schedule I, Chapter 39.
7Southam, supra note 3 and accompanying text.
8Appeal Book, page 11.
Email this Content