Date:
20071214
Docket: A-31-07
Citation: 2007 FCA 405
CORAM: NOËL
J.A.
NADON
J.A.
PELLETIER
J.A.
BETWEEN:
INNOVAK DIY PRODUCTS INC.
Appellant
and
PRESIDENT OF THE CANADA BORDER
SERVICES AGENCY
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1]
At issue
is an appeal from a decision of the Canadian International Trade Tribunal (the “CITT”),
which dismissed Innovak DIY Products Inc.’s (“Innovak”) appeal of the President
of the Canada Border Services Agency’s (the “CBSA”) advanced ruling for Tariff
classification under paragraph 43.1(1)(c) of the Customs Act,
1985, c.1 (2nd Supp.) (the “Customs Act”). Innovak maintains that the
goods in question should be classified as rubber articles, under heading No. 40.16
of the Schedule to the Customs Tariff S.C. 1997, c.36 (the “Act”) and
that the CBSA erred in holding otherwise.
RELEVANT FACTS
[2]
The goods
at issue in this appeal are bungee cords, made of man made vulcanized rubber
that are covered with plaited polypropylene, cut to length and fitted with
hooks. The vulcanized rubber interior is made of smaller individual rubber
strands that are neither twisted nor braided. The outside plaited polypropylene
is a protective cover that prevents the interior rubber cords from premature
wear and tear.
[3]
The CBSA, in
an initial advance ruling, decided that the goods at issue should be classified
as textiles, under Tariff item No. 5609.00.00. Innovak brought an appeal
against the aforesaid decision which was dismissed by the CITT on December 20,
2005.
[4]
Innovak later
informed the CITT that the initial ruling that formed the subject matter of the
appeal had been issued by an official who had not received the requisite
designation from the CBSA to issue such rulings. A second ruling, identical to
the first, was subsequently issued by an authorized officer and in order not to
repeat the appeal process, the parties asked the CITT issue a fresh decision
identical to first, but directed at the second ruling. The CITT obliged and
this is the decision that is the subject of the present appeal.
CITT DECISION
[5]
The CITT
first notes that in its written submissions, Innovak agreed with the CBSA that the
semi-finished goods (i.e. without the hooks) are properly classified under
heading No. 56.04 as “[r]ubber thread and cord, textile covered…”. This
proposition is supported by the first paragraph of Part III, Explanatory
Notes to Section XI, which states, “Under Note 10 to this Section, elastic
products consisting of textile materials combined with rubber threads are
classified in Section XI”. The second paragraph of Part III confirms the
following: “Rubber thread and cord, textile covered are included in heading
56.04” (CITT’s decision, para.22).
[6]
The crux
of the debate arose at the stage when the semi-finished goods underwent further
modification and became an article that required a new Tariff classification
(i.e., adding the hooks) (CITT’s decision, para. 10). While the CBSA suggested
that the proper classification for the finished goods was as a textile under
heading No. 56.09 (“Articles of yarn, strip or the like of heading No. 54.04 or
No. 54.05, twine, cordage, rope or cables, not elsewhere specified or included”),
Innovak maintained that the essence of the product lies in its elasticity,
which is derived from the rubber and so, argued that the article should be
classified as a rubber product, under heading No. 40.16 (“Other articles of
vulcanized rubber other than hard rubber”) (CITT’s decision, para. 10).
[7]
While the
CITT recognizes that heading No. 56.09 does not appear to include unfinished
articles that fall under heading No. 56.04, it concludes that the Explanatory
Notes to heading No. 56.09 are inclusive in nature and so, the heading also
covers the goods in issue. The heading and the notes provide respectively:
|
56.09 Articles of
yarn, strip or the like of heading 54.04 or 54.05, twine,
cordage, rope or
cables, not elsewhere specified or included.
Explanatory Notes
This
heading covers articles of the yarns of Chapters 50 to 55, articles of strip
or the like of heading 54.04 or 54.05, and also articles of twine, cordage,
rope or cables of heading 56.07, other than those covered by a more
specific heading in the Nomenclature.
It
includes yarns, cordage, rope, etc., cut to length and looped at one or both
ends, or fitted with tags, rings, hooks, etc., (e.g., shoe laces, clothes
lines, towing ropes), ships' fenders, unloading cushions, rope ladders,
loading slings, dish "cloths" made of a bundle of yarns folded in
two and bound together at the folded end, etc.
The
heading does not cover:
(a)
Bridles, reins, halters, harness, etc. (heading 42.01).
(b)
Cords cut to length, with knots, loops, or metal or glass eyelets, of a kind
used on Jacquard or other machines (heading 59.11).
(c)
Textile fabrics and articles made from such fabrics, which are classified in
their appropriate headings (e.g., shoe laces made from braids are classified
in heading 63.07).
(d)
Rope soles for sandals (heading 64.06).
(e)
Articles for gymnastics and other articles of Chapter 95.
|
56.09 Articles en
fils, lames ou formes similaires des nos 54.04 ou 54.05, ficelles, cordes ou
cordages, non dénommés ni compris ailleurs.
Notes
explicatives
La présente position groupe les articles fabriqués avec des fils
des Chapitres 50 à 55, avec des lames et formes similaires des nos
54.04 ou 54.05 ou avec des ficelles, cordes ou cordages du no 56.07
et qui ne sont pas couverts d'une manière plus spécifique par d'autres
positions de la Nomenclature.
Sont notamment rangés ici des fils, ficelles, cordes et cordages
coupés de longueur, dont l'une ou les deux extrémités forment une boucle ou
sont munies de ferrures, de crochets, d'anneaux ou d'autres accessoires
(lacets de soulier, cordes à linge, câbles pour la traction, par exemple),
les élingues de chargement, les défenses de bateaux, les coussins de
déchargement, les échelles, les lavettes (pour le lavage des éviers, des
carrelages, etc.) formées par une botte de fils ou de ficelles repliée en son
milieu et enserrée près de son extrémité repliée, etc.
Sont exclus de cette position :
a) Les articles de bourrellerie (brides, rênes, licols, traits,
etc. du no 42.01).
b) Les fils d'arcade pour mécaniques Jacquard et les autres
produits pour usages techniques du no 59.11).
c) Les tissus et articles en tissus, qui suivent leur régime
propre (les lacets de souliers fabriqués avec des tresses relèvent du no
63.07, par exemple).
d) Les semelles de chaussures (no 64.06).
e) Les
agrès de gymnastique et autres articles du Chapitre 95.
|
[8]
Although
the bungee cords are not rope or cordage (as they are not braided or twisted),
the bungee cords are similar products which, properly come within this
classification (CITT’s decision, para. 25). According to the CITT, the second
paragraph of the Explanatory Notes further extends the list of articles
included under heading No. 56.09 and the third paragraph provides a list of
goods that are explicitly excluded from the list and does not specifically
exclude unfinished products under heading No. 56.04, which buttresses the view
that the other types of cords or threads not similarly explicitly excluded are
instead implicitly included under heading No. 56.09 (CITT’s decision,
para. 26).
[9]
The CITT
further rejects Innovak’s contention that the goods in issue do not fall under
the textile heading No. 56.09 as they are “elsewhere specified or included” in
the section covering rubber articles, under heading No. 40.16 - “other articles
of vulcanized rubber other than hard rubber.” The CITT finds Innovak’s argument
problematic given that it would imply that, by putting hooks onto a textile
product, the product would become a rubber article. While the essential
character of the bungee cords may well be their rubber interior, this is only a
relevant consideration under Rule 3(b) of the General Rules and
should not be considered unless the classification cannot be directed under
Rule 1, 2, or 3(a) (CITT’s decision, para. 27).
[10]
In
conclusion, the CITT states that given that the semi-finished goods (the cord
without the hooks) would fall under heading No. 56.04 and, as a result, could
not, in their finished form fall under heading No. 40.16, the goods in issue
are properly classified under heading No. 56.09 and under Tariff item No.
5609.00.00 (CITT’s decision, para. 28).
POSITIONS OF THE PARTIES
[11]
In support
of its appeal, Innovak submits that the CITT erred in its interpretation of
heading No. 56.09 by failing to note that heading No. 56.09 purposefully leaves
out articles of rubber, thread and cord. Innovak argues that the implied
exclusion rule applies in the interpretation of the Explanatory Notes
for heading No. 56.09. Articles that are made of rubber should be included
under heading No. 40.16 since Section XI, which covers textiles and textile
articles, includes textiles that may be coated with rubber but not articles
that are made of rubber and coated with textile (Appellant’s Memorandum of Fact
and Law, para. 29).
[12]
According
to Innovak, the fact that the unfinished goods were characterized as textiles does
not preclude a finding that the finished product is properly classified as a
rubber article (Appellant’s Memorandum of Fact and Law, para. 52). The addition
of the hooks transforms the goods in issue unto a useful article whose
essential character is derived from the rubber thread (Appellant’s Memorandum
of Fact and Law, para. 55).
[13]
The
CBSA, on the other hand, submits that the CITT’s decision to classify the
bungee cords under heading No. 56.09 was reasonable and based on a proper
interpretation of the relevant section, Chapter and Explanatory Notes.
Section XI, heading No. 56.09, as the Explanatory Notes indicate, is
inclusive and provides a non-exhaustive list of goods.
[14]
The
CBSA further submits that the goods in issue are specifically excluded from
Chapter 40 (Rubber and Rubber articles). In particular Note 2(b) of the Chapter
Notes to Section VII, Chapter 40 specifically states that the Chapter does not
cover “Goods of Section XI (textiles and textile articles)”. As well, the Explanatory
Notes to heading No. 40.16 specifically excludes the goods in issue when it
states:
The
following are also excluded from this heading:
(a) Articles
of woven, knitted or crocheted fabrics, felt or non-wovens, impregnated,
coated, covered or laminated with rubber falling in Section XI (see Note 3 to
Chapter 56 and Note 4 to Chapter 59) and articles made from textile materials
with rubber threads (Section XI).
ANALYSIS AND DECISION
[15]
The
standard of review for decisions of the CITT with respect to Tariff
classifications is summarized in Agri Pack v. Canada
(Customs and Revenue Agency),
[2005] F.C.J. No. 2059
(“Agri Pack”):
24 According
to the wording of section 68(1) of the Act, appeals are authorized from CITT
decisions on questions of law only. Matters of construction or interpretation
of the Tariff and its Schedule are questions of law which, due to the CITT's
extensive expertise in tariff classification, can only be reviewed on a
standard of reasonableness simpliciter (Minister of National Revenue (Customs
and Excise) v. Schrader Automotive Inc. (1999), 240 N.R. 381 (F.C.A.) at para.
4; Sandvik Tammock Canada Ltd. et. al. v. Minister of Revenue (Customs and
Excise), [2001] F.C.J. No. 1692 (C.A.) at para. 13).
25 A Court reviewing an
interpretation of the Tariff on a reasonableness standard must defer when
confronted with any reasoning that rationally supports the CITT's
interpretation (Star Choice Television Network Inc. v. Canada (Customs and
Revenue Agency), [2004] F.C.J. No. 674 (C.A.) at para. 7). A decision is
unreasonable if a tribunal adopts an interpretation that the words of the
Tariff cannot reasonably bear.
[16]
Section 10
of the
Customs Tariff
sets out that the classification of imported goods under a Tariff item shall be
determined in accordance with the General Rules and the Canadian
Rules. As the CITT sets out at paragraph 10 of its decision, the General
Rules are applied in a consecutive order. Rule 1 establishes that a
classification is determined according to the terms of the headings and any
relevant Section or Chapter Notes. Section 11 of the Act then specifies that
regard shall be had to the Explanatory Notes to the Harmonized Commodity
Description and Coding System that the World Customs Organization publishes. As
was stated in Agri
Pack, supra at
paragraph 41,
Chapter Notes, headings and sections have the status of law.
[17]
In this
case, the parties agreed that the unfinished materials – the vulcanized rubber
plaited with polypropylene - were classified under the section on textiles,
under heading No. 56.04 as “rubber thread and cord, textile covered”. The
parties further agreed that manufacturing of the textile covered rubber cord by
cutting it to length and adding hooks on each end changed the nature of the
good into an article. With the addition of hooks, Innovak submits that the
article became a rubber article under Section VII, Chapter 40 and heading No. 40.16
while the CBSA maintains that the good remained properly classified in Section XI
as a “Textile or Textile Articles” and thus, the CITT’s classification of the
bungee cord in heading No. 56.09 was reasonable.
[18]
Innovak has
not demonstrated that the CITT’s decision to classify the bungee cords as a
textile, under heading No. 56.09 is unreasonable. Once it is accepted that the
unfinished cords are properly classified as goods under heading 56.04, the only
matter which remains to be decided is the heading under which they might fall
when considered as finished articles. The heading of Chapter 56 deals with
classes of goods, specifically, 1) wadding, felt and non-wovens; 2) special
yarn ; 3) twine, cordage, rope and cables.
[19]
Heading
56.09 (see para. 7 above) includes articles made from two of those three
classes of goods and no one has suggested that the finished cords would fall
under the third – wadding, felt and non-wovens. As a result, heading 56.09 on its face would include the
finished bungee cords, whether they are considered as falling within one or the
other of those groups, so long as they are “not elsewhere specified or
included.” Since the CITT was satisfied that the bungee cords were not so
specified or included anywhere else, its conclusion is reasonable and does not
call for this Court’s intervention.
[20]
I would
dismiss the appeal with costs.
“Marc Noël”
“I
agree
M. Nadon J.A.”
“I
agree
J.D. Denis Pelletier J.A.”
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