Deputy Minister of National Revenue for Customs and Excise v. G.T.E. Sylvania Canada Limited, [1986] 1 CTC 131

Stone, J.:—The appellant alleges error of law on the part of the Tariff Board in its majority decision of February 23, 1983. By that decision certain goods imported into Canada by the respondent in 1980 from two shipping points in the United States were declared to be within tariff item 35525-1 of the Customs Tariff, R.S.C. 1970, c. C-41, as amended. The appeal is brought to this Court "upon a question of law” in accordance with subsection 48(1) of the Customs Act R.S.C. 1970, c. C-40, as amended.

The respondent engages in the manufacture in Canada of electrical distribution apparatus and electrical control equipment including a range of circuit breakers. These breakers carry current ranging from 15 to 125 amperes. Thermostatic metals are a vital ingredient in circuit breakers. Indeed, as was stated by the only witness to testify before the Board, they are "the heart and soul of the circuit breaker”. Thermostatic metals consist of two different types of metals with different coefficients of thermal expansion. These metals are continually bonded together throughout their entire length and breadth. When they are subjected to a change in temperature the two metals react differently one to the other and this causes the bonded metal to bend or deflect in one direction or the other. If held down at one end the bending creates a force. Examples of their applications are found in thermostats, circuit breakers and in air conditioners where an indication of temperature is a requirement.

The goods in issue were manufactured against the respondent's detailed specifications furnished in advance to the American suppliers. By those specifications the particular material and the exact dimensions of the goods were laid down. The suppliers were called upon to mark each piece of the goods on one side with a number representing amperage rating. This mark also identified the side having the higher element of thermal expansion. The reverse side was required to be indented with a guide mark by means of which the respondent could locate a copper braid to be welded onto each piece at its facilities in Canada. Tin plating was done to allow good bonding between the goods and copper braid. The suppliers complied with all of these requirements before the goods entered Canada.

The process by which the goods were manufactured, described by the witness and accepted by the Board, is reflected in the following findings of fact appearing at page 2 of the majority decision:

He outlined the various stages of manufacture of the goods. The two individual coils of metal are rolled together in a cold bonding mill, pressed together under extremely high pressure and subsequently subjected to a heating process to eliminate any stress that may have thereby been created. The bonded metal is then rolled to its final thickness and slit into pre-determined widths which may be coiled or cut into specific lengths. For the appellant’s requirements, the coiled strips undergo a coil heating operation to straighten them into a flat strip shape. They are then fed into a punch press where they are cut to length and marked with the amperage rating on one side which also indicates the direction of deflection, and a guide mark on the other side to indicate the location for subsequent welding. Because of the nature of the welding process that the thermostatic metals are subjected to after importation, they are plated and checked for quality control by the manufacturer.

At page 2 of the majority decision the Board describes the process by which welding was done and the goods were incorporated into circuit breakers:

Referring to a sample of a thermostatic metal strip that had undergone further manufacturing operations by the appellant after importation the witness outlined the operations that are required before the article can be incorporated into a circuit breaker. A metal strip pin and a copper braid are welded in a single opera tion to one end of the thermostatic metal strip at the guide mark. A contact arm with a silver cadmium device attached is then welded onto the free end of the braid. A second braid welded onto a load bus is then welded onto the other end of the thermostatic metal.

On March 5, 1982 the appellant classified the goods under tariff item 71100-1 which reads in part:

All goods not enumerated in this schedule as subject to any other rate of duty, and not otherwise declared free of duty, and not being goods the importation whereof is by law prohibited . . .

As such they would have attracted duty at a rate of 16.6 per cent. The respondent disagreed and took the matter to the Board by way of appeal pursuant to section 47 of the Customs Act claiming that the goods are properly classifiable under tariff item 35525-1:

Thermostatic metals, consisting of two or more layers of metals or alloys of metals, other than precious metals or alloys of precious metals, having different coefficients of expansion and permanently bonded together, in strips or sheets, coiled or not, for use in Canadian manufactures.

Goods falling within that item attract no duty. On the appeal to the Board the appellant contended that the goods were to be classified under tariff item 44524-1 as "electric apparatus and complete parts thereof” and as such subject to duty at a rate 16.6 percent or, alternatively, that they are covered by tariff item 71100-1.

At the hearing of that appeal it was agreed that the goods were "thermostatic metals, consisting of two or more layers of metals or alloys of metals, other than precious metals or alloys of precious metals, having different coefficients of expansion and permanently bonded together”, that they were neither “in sheets” nor "coiled” and that they were “‘for use in Canadian manufactures”. The sole issue at that stage was simply whether they were "thermostatic metals. . .in strips” within the meaning of tariff item 35525-1. The majority held that they were to be so regarded. The third member of the panel, dissenting, was of the view that the goods were not "thermostatic metals. . .in strips” but rather were "complete parts” within the meaning of tariff item 44524-1 and dutiable as such.

The position of the appellant in this Court is that the goods cannot properly be classified as "thermostatic metals. . .in strips” but rather that they were articles comprising complete parts of electrical apparatus made from thermostatic metals. It is contended that by treating the goods as "thermostatic metals.. .in strips” the majority fell into error, confusing the primary product (i.e. "thermostatic metals. . .in strips”) with articles made from that product. Such conclusion, it is urged, could only have been arrived at by misconstruing tariff item 35525-1 and, if so, the error is one of law that is capable of being corrected by this Court. It is argued that the minority decision is correct and that we ought to adopt it.

The respondent, of course, adopts the majority decision and asserts that no error of law was committed. In any event, it submits that classification of the goods under tariff item 35525-1 involved findings of fact with which we are not entitled to interfere. These findings, it is said, are to be found in the following passage appearing at pages 3 and 4 of the majority decision:

In the appeal before the Board there was no dispute that the goods in issue are thermostatic metal within the meaning of tariff item 35525-1 and that they are used in the manufacture of electrical apparatus. The issues to be resolved are whether they are strips, as that word is used in 35525-1 and in section 2.(1) of the Customs Tariff, or are parts of circuit breakers and therefore complete parts of electrical apparatus, n.o.p. within tariff item 44524-1.

The goods in issue have an approximate width of one-quarter inch, a thickness of one-sixteenth inch and a length of one and one-quarter inches (appellant's brief) which conform with the dictionary definition of strip, for example, the Concise Oxford Dictionary: “a narrow flat bar of iron or steel". These dimensions are also within the width of eight inches or less and a thickness of 0.2030 inches or less, provided for “strip”, when applied to iron or steel, in section 2.(1) of the Customs Tariff. Tariff item 35525-1 provides for strips, coiled or not. The goods in issue are flat, i.e. not coiled. There is no requirement for length either in 35525-1 or in section 2.(1). The fact that the goods in issue have been cut to a specific length and stamped with an amperage rating and a weld mark does not alter their status as thermostatic metal strips.

The Board, therefore, declares that the goods in issue are thermostatic metal strips and are specifically provided for in tariff item 35525-1. It is not necessary, therefore, to determine whether or not they are complete parts of electrical apparatus within the basket item 44524-1.

This brings me to consider the law governing this kind of case. There is no argument about what it is. The argument is over its application. The guiding principle is to be found in a decision of the Supreme Court of Canada in Canadian Lift Truck Co. Ltd. v. D./M.N.R. for Customs and Excise (1956), 1 D.L.R. (2d) 497. That case was also concerned with the classification by the Board of goods entering Canada from the United States and the question was whether an error had been committed in declaring them to be of a class or kind not made in Canada. In deciding that no error existed, the Supreme Court of Canada (per Kellock, J. at 498) formulated the following principle applicable in a case of this kind:

The question of law above propounded involves at least two questions, namely, the question as to whether or not the Tariff Board was properly instructed in law as to the construction of the statutory items, and the further question as to whether or not there was evidence which enabled the Board, thus instructed, to reach the conclusion it did.

While the construction of a statutory enactment is a question of law, and the question as to whether a particular matter or thing is of such a nature or kind as to fall within the legal definition is a question of fact, nevertheless if it appears to the appellate Court that the tribunal of fact had acted either without any evidence or that no person, properly instructed as to the law and acting judicially, could have reached the particular determination, the Court may proceed on the assumption that a misconception of law has been responsible for the determination; (Edwards v. Bairstow, [1955] 3 All E.R. 48).

That test has been applied by the Supreme Court in subsequent decisions (see e.g. Dominion Engineering Works Limited v. D./M.N.R., [1958] S.C.R. 652 at 657; D./M.N.R. for Customs and Excise v. Research-Cottrell Limited et al., [1968] S.C.R. 684 at 693) and also by this Court. We are not to interfere with a decision of the Board unless it involves error of law either in construing the statute (see e.g. the decision of this Court in Great Canadian Oil Sands Supply Ltd. et al. v. D./M.N.R. for Customs and Excise, [1976] 2 F.C. 281) or in arriving at a finding of fact.

The role of the Board in finding fact and the finality of a finding in a particular case is made clear in subsection 47(3) of the Customs Act:

(3) On any appeal under subsection (1), the Tariff Board may make such order or finding as the nature of the matter may require, and, without limiting the generality of the foregoing, may declare

(a) what rate of duty is applicable to the specific goods or the class of goods with respect to which the appeal was taken,

(b) the value for duty of the specific goods or class of goods, or

(c) that such goods are exempt from duty,

and an order, finding or declaration of the Tariff Board is final and conclusive subject to further appeal as provided in section 48 R.S., c. 58, s. 44; 1955, c. 32, s. 4.

If it commits no legal error in finding fact the Board’s decision cannot be interfered with by this Court even if we disagreed with the fact found (see e.g. D./M.N.R. for Customs and Excise v. Kipp Kelly Limited, [1982] 1 F.C. 571 (F.C.A.) at page 579; SKF Canada Limited v. D./M.N.R. for Customs and Excise (1983), 47 N.R. 61 at 62 (F.C.A.)). Once the task of construing the tariff item is properly carried out it is for the Board and only for the Board to decide whether or not particular goods are covered by that item. It is not for this Court to intervene unless, as I have already said, the decision involves an error of law.

Whether particular goods come within a tariff item once construed is often a difficult question, sometimes being one of degree. Yet, it remains a question of fact for the Board to decide according to its statutory mandate and its peculiar expertise. The Court must not take over that function. This is made clear by the cases which have applied the Canadian Lift Truck test as is well illustrated by two recent decisions of this Court in Kipp Kelly and SKF (supra). The same approach has been taken in England where that test had its genesis in Edwards v. Bairstow, [1956] A.C. 14 (H.L.). I would refer, for example, to a more recent decision of the House of Lords in Melon and others v. Hector Powe Ltd., [1981] 1 All E.R. 313 at 317, per Lord Fraser and to a passage in the speech of Lord Roskill in Pioneer Shipping v. B.T.P. Tioxide Ltd., [1982] A.C. 724 at 752-53 (H.L.):

My Lords, in Edwards v. Bairstow, [1956] A.C. 14, 36, Lord Radcliffe made it plain that the court should only interfere with the conclusion of special commissioners if it were shown either that they had erred in law or that they had reached a conclusion on the facts which they had found which no reasonable person, applying the relevant law, could have reached. My Lords, when it is shown on the face of a reasoned award that the appointed tribunal has applied the right legal test, the court should in my view only interfere if on the facts found as applied to that right legal test, no reasonable person could have reached that conclusion. It ought not to interfere merely because the court thinks that upon those facts and applying that test, it would not or might not itself have reached the same conclusion, for to do that would be for the court to usurp what is the sole function of the tribunal of fact.

A majority of the Court of Appeal approached the matter in much the same way in O’Kelly and others v. Trusthouse Forte p.l.c., [1983] 3 All E.R. 456 at 475, per Fox L.J. and per Sir John Donaldson M.R. at 478.

The task facing the Board here was to determine whether or not the imported goods were "thermostatic metals. . .in strips". As I see it, two distinct steps are envisaged in arriving at that decision. First, it was necessary for the Board to construe the statutory language. After that, it had to decide on the basis of the evidence whether or not the goods fell within the tariff item as so construed. The majority went about their task of construction by having regard to a dictionary meaning of the word "strip" (viz, "a narrow flat bar of iron or steel") and to its statutory definition found in subsection 2.(1) of the Customs Tariff:

2.(1) In this Act and in any other Act relating to the customs

"strip", when applied to iron or steel, means a flat-rolled product of any shape

(a) having a width of more than eight inches but not more than twelve inches, and a thickness of 0.2299 inch or less, or

(b) having a width of eight inches or less and a thickness of 0.2030 inch or less;

They concluded that the goods fitted the dictionary definition and that some were covered by the statutory definition. This led them to decide that the goods fell within tariff item 35525-1.

Agreement by the parties that the goods were “‘thermostatic metals” did not, of course, relieve the Board of deciding whether they were "thermostatic metals. . .in strips”. Here, the words "in strips” are present in a particular context, viz, "thermostatic metals. . .in strips or sheets” appearing in the general context of the tariff item. In my view, it was not sufficient to do as the majority appear to have done here, namely, to construe the words "strips” in isolation. The entire context had to be examined to see whether that word could fairly bear the meaning which the majority ascribed to it. The statutory term "strip” refers not to "thermostatic metals” as such but to "a flat-rolled product of any shape”. The term "sheet” is given a corresponding meaning in subsection 2.(1) of the Customs Tariff:

"sheet”, when applied to iron or steel, means a flat-rolled product of any shape

(a) having a width of more than twelve inches but not more than forty-eight inches, and a thickness of 0.2299 inch or less, or

(b) having a width of more than forty-eight inches, and a thickness of 0.1799 inch or less.

In my opinion, an examination of the words "in strips” in their context indicates that what is described in the tariff item as "thermostatic metals. . .in strips” refers to the flat-rolled product in the shape of "strips” after it emerges from a supplier's rolling mill whereby the layers of metals comprising it are bonded together and pressed to their final thickness. These are the "strips” envisaged by the tariff item. If the view of the majority were correct, then virtually any article made into the shape of a "strip” from thermostatic metals for use in Canadian manufactures would fall within that item. Moreover, its acceptance would require that we turn a blind eye to the realities of the case. The product known as "thermostatic metals” was brought into existence and slit into "strips” by the American suppliers before the goods could be made. This was found to be so by the majority for, as they correctly pointed out at page 2 of their decision, the coiled strips of thermostatic metals were straightened into flat strip shapes, cut to length, marked and plated according to "the appellant’s requirements” after the product emerged from the rolling mill.

The majority described the goods as "thermostatic metal strips” but, in a way, that merely begged the question for it remained to be determined whether they were "thermostatic metals. . .in strips” within the meaning of the tariff item. In this I would respectfully agree with the views of the dissenting member (at page 4):

The evidence clearly indicates that the rolling into sheets and the slitting into strips are each definite stages in the manufacture of the goods. The bonded metal was rolled to its final thickness in the form of sheets and then slit into strips of pre-determined widths. At that stage the goods would have qualified for classification in tariff item 35525-1. But the evidence is equally clear that the strips had undergone several additional stages in the manufacturing process before importation. They had been cut to specified lengths and marked, then plated to facilitate the welding procedures.

In my view, the fact that the thermostatic metals come within statutory and dictionary definitions of the word "strip” and that they may be referred to in the industry as "strips” is not enough to bring them within tariff item 35525-1. The words of that tariff item are “in strips”, in the context of the phrase "in strips or sheets”. What was contemplated when the tariff item was enacted were goods at the earlier stage of manufacture.

The contextual approach to statutory construction is firmly established. It was put in this way by Stamp, J. in Bourne v. Norwich Crematorium, Ltd., [1967] 2 All E.R. 576 at 578 (Ch.D.).

English words derive colour from those which surround them. Sentences are not mere collections of words to be taken out of the sentence, defined separately by reference to the dictionary or decided cases, and then put back again into the sentence with the meaning which you have assigned to them as separate words, so as to give the sentence or phrase a meaning which as a sentence or phrase it cannot bear without distortion of the English language.

Its application is well illustrated by the case of R. v. National Insurance Commissioner et al., [1974] 3 All E.R. 522 (Q.B.D. Div. Ct.). There, a statutory tribunal had to construe the word “night” in a context which read: “. . . he is so severely disabled physically or mentally that he requires from another person, in connection with his bodily functions, frequent attention throughout the day and prolonged or repeated attention during the night. ..”. Two years earlier, in Brutus v. Cozens, [1972] 2 All E.R. 1297; [1973] A.C. 854, the House of Lords had decided (per Lord Reid at 861) that the meaning of an ordinary word of the English language is not a question of law although the proper construction of a statute is such a question. The reasoning of Lord Widgery, C.J., speaking for the Court (at 526), commends itself to me:

Now as to the construction of the section, it is important to remember the words of Lord Reid in Brutus v. Cozens, [1972] 2 All E.R. 1297, [1973] A.C. 854. In that case Lord Reid was considering the meaning of the word “insulting” in a statute with which this court is more familiar than the statute now under consideration. He observed that the giving of a meaning to an ordinary English word is not a question of law at all, but of course the construction of a statute is a question of law. In regard to those matters, I take warning from what Lord Reid said that in considering here what is on the face of it an ordinary English word “night” prima facie the giving of a meaning to that word is not a matter of law at all. However, though “night" is one of the commonest English words in its ordinary usage, it does have different shades of meaning and the decision of the correct shade of meaning to give to the word in a particular context requires consideration of the context and thus becomes a matter of construction and therefore a matter of law. [Emphasis added.]

Here, too, though the word “strips” is also a common English word in its ordinary sense, its meaning cannot be ascertained simply by taking that sense and reading it into the statute without any regard for the words that accompany it. The correct meaning is to be gathered by examining the word in the context in which it appears in the tariff item. That involves statutory construction and therefore the matter is one of law.

In my opinion, the majority of the Board erred in construing the statutory language upon which the decision rests. I therefore conclude that the appeal should be allowed and, having regard to the circumstances and to the powers conferred on us by subsection 48(17) of the Customs Act, that the matter should be referred back to the Board for rehearing and determination on the basis that the goods in issue do not fall within tariff item 35525- 1.

Appeal allowed.