Docket: A-65-13
Citation: 2014 FCA 266
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CORAM:
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PELLETIER J.A.
NEAR J.A.
SCOTT J.A.
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BETWEEN:
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IGLOO VIKSKI INC.
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Appellant
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and
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PRESIDENT OF THE CANADA BORDER SERVICES AGENCY
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Respondent
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REASONS FOR
JUDGMENT
SCOTT J.A.
[1]
This is an appeal brought pursuant to section 68
of the Customs Act R.S.C. 1985, c.1 (2nd Supp.) against a
decision of the Canadian International Trade Tribunal (the CITT) upholding the
decision of the President of the Canada Border Services Agency (the CBSA) to
classify the hockey gloves (the goods in issue) imported by Igloo Vikski Inc.
(the Appellant) under tariff item No. 62.16 and rejecting the Appellant’s
position that they be classified under tariff item No. 39.26 of the Customs
Tariff, S.C. 1997, c. 36 (the Customs Tariff).
[2]
It has long been established that decisions of
the CITT relating to tariff classification and the construction of tariff items
stand to be reviewed on a standard of reasonableness (Jam Industries Ltd. v.
Canada (Border Services Agency), 2007 FCA 210 at para.16, Mon-Tex Mills
Ltd. v. Canada (Commissioner of the Customs and Revenue Agency), 2004 FCA
346 at para. 2, Conair Consumer Products Inc. v. Canada (Customs and Revenue
Agency), 2004 FCA 282 at para. 3, Star Choice Television Network Inc. v.
Canada(Commissioner of Customs and Revenue), 2004 FCA 153 at para. 7).
[3]
The Customs Tariff gives legal effect to Canada’s obligations under the International Convention on the Harmonized Commodity
Description and Coding System which harmonizes the classification of all
trade commodities among signatory nations. Goods brought into Canada are classified under the Customs Tariff.
[4]
Subsection 10(1) of the Customs Tariff specifies
that the classification of goods must be in accordance with the General
Rules for the Interpretation of the Harmonized System (General Rules) and
the Canadian Rules, as set out in the Schedule.
[5]
The General Rules comprise six rules.
Classification begins with Rule 1, which provides that classification shall be
determined according to the terms of the headings and any relative section or
chapter notes and, unless such headings or notes do not provide otherwise,
according to the other rules.
[6]
For the purpose of this appeal, Rule 2(b)
of the General Rules, as well as its Explanatory Notes (XI) to
(XIII) are relevant, and provide as follows:
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General
Rules for the Interpretation of the Harmonized System, rule 2(b)
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Règles
générales pour l'interprétation du Système harmonisé, règle 2b)
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(b) Any
reference in a heading to a material or substance shall be taken to include a
reference to mixtures or combinations of that material or substance with
other materials or substances. Any reference to goods of a given material or
substance shall be taken to include a reference to goods consisting wholly or
partly of such material or substance. The classification of goods consisting
of more than one material or substance shall be according to the principles
of Rule 3.
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b) Toute mention d'une matière dans une
position déterminée se rapporte à cette matière soit à l'état pur, soit
mélangée ou bien associée à d'autres matières. De même, toute mention
d'ouvrages en une matière déterminée se rapporte aux ouvrages constitués
entièrement ou partiellement de cette matière. Le classement de ces produits
mélangés ou articles composites est effectué suivant les principes énoncés
dans la Règle 3.
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Explanatory Notes to Rule 2(b)
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Notes
explicatives
de la règle 2b)
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(XI) The effect of the Rule is
to extend any heading referring to a material or substance to include
mixtures or combinations of that material or substance with other materials
or substances. The effect of the Rule is also to extend any heading referring
to goods of a given material or substance to include goods consisting partly
of that material or substance.
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XI) L’effet de
la Règle est d’étendre la portée des positions qui mentionnent une matière
déterminée de manière à y inclure cette matière mélangée ou bien associée à
d’autres matières. Cet effet est également d’étendre la portée des positions
qui mentionnent des ouvrages en une matière déterminée de manière à y inclure
ces ouvrages partiellement constitués de cette matière.
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(XII) It does not, however,
widen the heading so as to cover goods which cannot be regarded, as required
under Rule 1, as answering the description in the heading; this occurs where
the addition of another material or substance deprives the goods of the
character of goods of the kind mentioned in the heading.
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XII) Elle
n’élargit cependant pas la portée des positions qu’elle concerne jusqu’à
pouvoir y inclure des articles qui ne répondent pas, ainsi que l’exige la
Règle 1, aux termes des libellés de ces positions, ce qui est le cas lorsque
l’adjonction d’autres matières ou substances a pour effet d’enlever à
l’article le caractère d’une marchandise reprise dans ces positions.
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(XIII) As a consequence of this
Rule, mixtures and combinations of materials or substances, and goods
consisting of more than one material or substance, if prima facie
classifiable under two or more headings, must therefore be classified
according to the principles of Rule 3.
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XIII) Il
s’ensuit que des matières mélangées ou associées à d’autres matières, et des
ouvrages constitués par deux matières ou plus sont susceptibles de relever de
deux positions ou plus, et doivent dès lors être classés conformément aux
dispositions de la Règle 3.
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[7]
Further to its analysis, the CITT concluded that
the goods in issue met the terms of heading No. 62.16 and that the presence of
plastic components therein did not deprive them of their character as gloves of
textile fabric on the basis of the application of Rules 1 and 2(b) of
the General Rules. It rejected the Appellant’s argument that under the
proper application of rules 1 and 2(b), the goods in issue were
classifiable under two competing headings, 39.26 and 62.16, permitting the
application of Rule 3 of the General Rules and leading to their
classification as “other articles of plastics”.
[8]
In this case, the principal argument of the
Appellant is that the goods in issue consist partly of plastic and partly of textile.
While the goods do not meet the description in heading 39.26 under Rule 1 since
the textile material is separate from the plastic material, they can be
described prima facie in the extended terms of heading 39.26 under Rule 2(b),
contrary to the Tribunal’s position.
[9]
The CITT’s explanation for finding against the
appellant is contradictory since having concluded that the plastic material in
the goods in issue was more than mere trimming, the Explanatory Notes to
Chapter 62 precluded the goods from classification in heading 62.16 under Rule
1. Consequently, it is the application of Rule 2(b) and its Explanatory
Notes (XI) to (XIII) that extended the terms of heading 62.16 to include
the goods in issue: gloves partly of textile material and partly of plastic
material.
[10]
For the reasons that follow, I am satisfied that
it was unreasonable for the CITT to classify the goods in issue under heading
No. 62.16 on the basis of the application of Rules 1 and 2(b).
[11]
I find that the CITT’s interpretation of Rule 2(b)
is unreasonable since it is not a prerequisite condition to the application of
Rule 2(b) that the goods in issue need first to meet the description in
a heading pursuant to Rule 1 as stated in paragraph 66 of its reasons. This
reasoning contradicts the cascading nature of the General Rules.
[12]
Since the goods in issue contain a textile
material which is separate from the plastic material, they do not meet the
description found in heading 39.26 under Rule 1. Contrary to the Tribunal’s
finding, it is for this very reason that Rule 2(b) and, more precisely, Explanatory
Note (XI) to that Rule must then be applied. It extends the terms of
heading 39.26 to encompass articles partly of plastic
material and partly of textile material The goods in issue then fall
under the description found in the extended terms of heading 39.26. It is also
by the application of Rule 2(b) and Explanatory Note (XI) that the
goods in issue could be classified in the extended terms of heading 62.16. As a
consequence, the goods in issue became classifiable prima
facie under two headings, headings 62.16 and 39.26,
thereby leading to the application of Rule 3 of the General Rules pursuant
to Explanatory Note (XIII) which the CITT failed to apply.
[13]
Consequently, the appeal will be allowed with
costs, the decision of the CITT will be set aside and the matter will be
referred back for adjudication based on an analysis which takes into account
the complete application of Notes (XI) to (XIII) of the Explanatory Notes
to Rule 2(b).
"A.F. Scott"
“I agree
J.D. Pelletier
J.A.”
“I agree
D.G. Near J.A.”
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