Canada (Border Services) v. Outils Gladu inc., 2007 FCA 213

Date: 20070531

Docket: A-594-05

Citation: 2007 FCA 213

 

CORAM:       LÉTOURNEAU J.A.

                        NOËL J.A.

                        PELLETIER J.A.

 

BETWEEN:

THE PRESIDENT OF THE CANADA

BORDER SERVICES AGENCY

Appellant

and

OUTILS GLADU INC.

Respondent

 

 

 

 

Heard at Montréal, Quebec, on May 17, 2007.

Judgment delivered at Ottawa, Ontario, on May 31 2007.

 

 

REASONS FOR JUDGMENT:                                                                                         NOËL J.A.

CONCURRED IN BY:                                                                                       LÉTOURNEAU J.A.

PELLETIER J.A.

 

Date: 20070531

Docket:  A-594-05

Citation: 2007 FCA 213

 

CORAM:       LÉTOURNEAU J.A.

                        NOËL J.A.

                        PELLETIER J.A.

 

BETWEEN:

THE PRESIDENT OF THE CANADA

BORDER SERVICES AGENCY

Appellant

and

OUTILS GLADU INC.

Respondent

 

 

 

REASONS FOR JUDGMENT

 

NOËL J.A.

[1]               This is an appeal from the decision of the Canadian International Trade Tribunal (“CITT”) dated September 7, 2005 (AP-2004-018), allowing an appeal by Gladu Tools Inc. (“Gladu” or “the respondent”) from a decision made by the President of the Canada Border Services Agency (“CBSA” or “the appellant”) involving classification of two types of goods imported by Gladu.

 

[2]               The appellant originally challenged the CITT’s classification of both the device known as a “Spiramax” and its carbide knives under the Customs Tariff, S.C. 1997, c. 36.  However, two days before the hearing of the appeal, the appellant discontinued the portion of its appeal relating to the Spiramax device.  The lone remaining matter under appeal, therefore, is the CITT’s decision regarding the carbide knives imported by the respondent for use with the Spiramax device.

 

RELEVANT FACTS

[3]               The good in issue consists of disposable screw-on carbide knives for use with the Spiramax.  The Spiramax is used to make straight cuts in the secondary woodworking industry.  An issue arose as to the appropriate classification of the knives under the Customs Tariff schedule.

 

[4]               The nomenclature from the schedule to the Customs Tariff in effect during the period when the goods in issue were imported reads as follows:

 

 

[5]               The CBSA classified the Spiramax under tariff item No. 8207.90.10 of the schedule to the Customs Tariff.  The carbide knives were classified under tariff item No. 8209.00.92 00.

 

[6]               Gladu opposed the CBSA’s classification and sought to have the Spiramax classified either under tariff item No. 8207.90.90 or tariff item No. 8207.70.00, or under heading 84.66.  Gladu also sought to have the knives classified under tariff item No. 8208.20.00.  It applied to the CITT for determination.

 

DECISION OF THE CITT

[7]               The CITT relied extensively on the testimony of Gladu’s expert witnesses, Mr. Philippe Turcot and Mr. Yves Lemay.  Both experts explained that the Spiramax is a tool used solely in the secondary woodworking industry.  It is not a carbide-tipped tool since its knives are not brazed or cemented to the device.  Rather, the Spiramax’s knives are screwed onto the tool.  Relying on this testimony, the CITT found that the Spiramax is “a cutting tool with disposable carbide knives for woodworking, which is classified under tariff item No. 8207.90.90” (Reasons, at para. 28).  The CITT further held that a sufficient number of knives required to operate the assembled Spiramax follow the classification of the Spiramax when both goods are imported together.

 

[8]               Mr. Turcot also explained that the word “cermet” in subheading 8209.00, derived from the words ceramic and metal, is not used in the woodworking industry.  Although the CITT found that the knives met the generic definition of the word cermet (that is to say, they are made of a ceramic-metal alloy), it also found that the word is one that is used exclusively in the metal machining industry.  This led the CITT to conclude that the Explanatory Notes to heading 82.09 was to be construed as excluding wood from the description of “hard material” (Reasons, at para.33).

 

[9]               The CITT went on to hold that the knives are properly qualified under tariff item
No. 8208.20.00 because they are “[f]or woodworking” (Reasons, at para. 35).  It therefore classified knives in excess of the number required to assemble the Spiramax accordingly.

 

[10]           This is the decision that is now under appeal.

 

ISSUES AND RELIEF SOUGHT

[11]           The sole issue, as defined by the appellant, is whether the CITT erred in excluding the carbide plates from the ambit of subheading 8209.00 on the basis that wood is not a “hard material”.  If so, both heading 82.08 and subheading 8209.00 are prima facie applicable and the proper classification must be made in accordance with the General Rules for the Interpretation of the Harmonized System (“The General Rules”).

 

[12]           In the event that the appellant can establish that subheading 8209.00 could not be excluded on the basis that wood is not a hard material, it asks that the matter be referred back to the CITT so that it can determine the proper classification on the basis that both heading 82.08 and subheading 8209.00 are prima facie applicable to the goods in issue.

 

ANALYSIS

[13]           Decisions of the CITT regarding the classification of imported goods are reviewable using the standard of reasonableness simpliciter. In other words, the decision must stand up to a “somewhat probing examination” (Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, at para. 55; Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 56).

 

[14]           The CITT sets out the proper approach to the classification of imported goods at para. 22 of its Reasons:

Section 10 of the Customs Tariff provides that the classification of imported goods under a tariff item shall be determined in accordance with the General Rules and the Canadian Rules. Section 11 of the Customs Tariff provides that, in interpreting the headings and subheadings in the schedule, regard shall be had to the Compendium of Classification Opinions to the Harmonized Commodity Description and Coding System and the Explanatory Notes. In dealing with the General Rules, the Tribunal must seek to apply Rule 1 first, only moving on to the following rule if the preceding rule does not enable the goods in issue to be classified. Rule 1 requires that classification be determined according to the terms of the headings and any relative section or chapter notes. (Footnotes omitted)

 

[15]           The appellant’s sole contention is that the CITT could not exclude the application of tariff item No. 8209.00.92 on the basis that wood is not a hard material.

 

[16]           In holding that wood is not a hard material, the CITT relied on the Explanatory Notes relating to heading 82.09 which read as follows:

The products of this heading […] are characterized by great hardness, even when hot, and great rigidity.  In view of their special properties these plates, tips, etc., are welded, brazed or clamped on to lathe tools, milling tools, drills, dies, or other high-speed cutting tools used for working metals and other hard materials.

 

[Emphasis added]

 

According to the CITT “The approximation of “metals” and “hard materials” by means of the words “and other” prevents wood from being included as a hard material” (Reasons, at para.33).

 

[17]           Although this construction would be plausible if the Explanatory Notes were read in isolation, it becomes implausible when regard is had to the tariff items which they explain, and in particular tariff item 8209.00.91 00 which refers to sawmills. The full text of subheading 8209.00 provides:

8209.00                Plates, sticks, tips and the like for tools, unmounted, of cermets.

 

8209.00.10 00     - - -Tungsten carbide inserts for rock or coal drilling bits

 

 

                            - - -Other

 

8209.00.91 00     - - -The following, in metric sizes, for sawmills:

                            - - -Carbide tipped saw segments;

                            - - -Carbide tips coated with flux and silver solder

 

8209.00.92 00     - - -Other carbide inserts and bits

 

8200..00.99 00    - - -Other

 

[My underline]

 

[18]           As can be seen, included under subheading 8209.00 are carbide tipped saw segments and carbide tips coated with flux and silver solder, “for sawmills”. Given that the Explanatory Notes pertain to all items under subheading 8209.00, it was not open to the CITT to construe the last sentence of that note as excluding wood as a hard material.

 

[19]           Similarly, it was not open to the CITT to hold that although the knives are made of cermets, they do not come within subheading 8209.00 because “the knives used in the wood industry are never referred to as such” (CITT Reasons, at para. 33). As demonstrated, subheading 8209.00 comprises items intended for use in sawmills and there is no issue that knives made of cermets are used in the wood industry.  The fact that the term “cermets” is not one that is used in that industry is, in this context, irrelevant.

 

[20]           I would therefore allow the appeal and refer the matter back to the CITT so that it may determine the proper classification on the basis that both heading 82.08 and subheading 8209.00 are prima facie applicable to the goods in issue. Success being divided given the abandonment by the appellant of the portion of its appeal relating to the Spiramax, I would make no order as to costs.

 

 

“Marc Noël”

 

“I agree

        Gilles Létourneau J.A. »

 

“I agree

        J.D. Denis Pelletier J.A. »

 

 

FEDERAL COURT OF APPEAL

 

NAMES OF COUNSEL AND SOLICITORS OF RECORD

 

 

DOCKET:                                                                              A-594-05

 

(APPEAL OF THE DECISION OF THE CANADIAN INTERNATIONAL TRADE TRIBUNAL DATED SEPTEMBER 7, 2005 IN APPEAL NO. AP-2004-018)

 

STYLE OF CAUSE:                                                               THE PRESIDENT OF THE CANADA BORDER SERVICES AGENCY v.

                                                                                                OUTILS GLADU INC.

 

PLACE OF HEARING:                                                        Montréal

 

DATE OF HEARING:                                                          May 17, 2007

 

REASONS FOR JUDGMENT BY:                                     Noël J.A.

 

CONCURRED IN BY:                                                         Létourneau J.A.

                                                                                                Pelletier J.A.

 

DATED:                                                                                 May 31, 2007

 

 

APPEARANCES:

 

Yannick Landry Pierre-Paul Trottier	FOR THE APPELLANT
Michael Kaylor	FOR THE RESPONDENT

 

SOLICITORS OF RECORD:

 

John H. Sims, Q.C. Deputy Attorney General of Canada, Ottawa, Ontario	FOR THE APPELLANT
Michael Kaylor Lapointe Rosenstein	FOR THE RESPONDENT