Best Buy Canada Ltd appealed the decision of the Canadian International Trade Tribunal (the Tribunal) that certain floor stands for flat-panel televisions (the Goods) were properly classified under the Customs Tariff as “other parts” suitable for use solely or principally with televisions as opposed to “other metal furniture” or “other wooden furniture”, consistently with Samus Systems. The Tribunal declined to apply two World Customs Organization (WCO) opinions on the basis that the models at issue in the Opinions had castor wheels and were not designed for domestic use. Section 11 of the Customs Tariff requires that “regard shall be had” to opinions published by the WCO when interpreting headings and subheadings under the tariff classification system
… [W]hile not binding, opinions of the WCO must “at least be considered” in determining the classification of goods imported into Canada… . Having “regard” further entails that the Tribunal should respect WCO opinions unless there is “sound reason” to do otherwise.
Near JA allowed the appeal, finding (at para 5):
… [I]t is far from clear why the absence of castors and the location of the proposed use of the stands would make the stands in this case a part suitable for use solely or principally with televisions. Although the Opinions were relevant because they dealt with goods that were materially the same as those before the Tribunal, the Tribunal failed to consider or have regard to the Opinions as required under the Customs Tariff.
The applicant (“KIK”) was an Ontario-based company that imported empty, pre-labeled plastic containers from outside North America and then filled them with sunscreen and other body care products which it had manufactured in Canada. The filled containers were then shipped to retailers in the United States. S. 6(b) of Art. 303 of the North American Free Trade Agreement (“NAFTA”) permitted duty relief where imported goods that were subsequently exported were in “the same condition” as when they were imported. This relief was implemented under s. 89(1)(a) of the Customs Tariff Act.
A CBSA response to a requested ruling by KIK as to the availability of requrested drawback relief briefly recited the facts, stated (incorrectly) that the only allowable processes were specifically listed processes that were in the applicable NAFTA regulations as examples of processes that did not result in a change in condition and then concluded (without any other explanation) that “the processes applied to the goods are not allowable” and, as a result, the applicant was not entitled to the drawback it had claimed. However, KIK’s representatives (KPMG) immediately contacted the officer by email for an explanation and made submissions, and as part of further email exchanges the officer clarified that the items were not considered “same condition” as they were not exported in the same condition as imported since by filling the containers with a substance, a new product was created.
Before rejecting KIK’s application for judicial review of this decision, Norris J noted (at para. 76):
Had I limited my consideration of the officer’s [initial letter] I would have found that the decision is unreasonable. The explanation offered in the letter is fundamentally flawed. But when the officer’s erroneous understanding of the relevant lists as being exhaustive instead of merely illustrative is removed from the analysis in the decision letter, the officer’s conclusory statement that “the processes applied to the goods are not allowable” does not meet the [Vavilov] requirements of justification, transparency and intelligibility.
However, in finding that the subsequent email exchanges could be taken into account, Norris J stated (at para. 69):
The officer’s responses to the inquiries and further submissions from the applicant’s representatives are part and parcel of the justification for the decision that was given to the applicant. … The officer was not responding to an application for judicial review of the decision, something that had not yet been commenced at the time of the exchanges.
Taking into account such email explanation, the officer’s decision was reasonable. Norris J stated (at para. 78):
If the applicant was only dealing with these goods by, for example, breaking larger lots of plastic storage products into smaller ones and then repackaging them, this arguably would be a “same condition” process (as the officer attempted to illustrate with the example of the nails). But that is not what the applicant is doing. Rather, the applicant is filling the empty plastic containers with another product – the body care and sunscreen products. As the officer explained in his November 30, 2018, email, by filling the empty containers with these products and then closing them with caps or lids, the applicant is “creating a new product” … of which the container products are a part.
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|Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 18.1 - Subsection 18.1(2)||follow-up correspondence of the taxpayer’s accounting firm resulted in the transformation of a reversible CBSA decision into a reasonable one||191|
Customs Tariff Schedule
Tariff Item 84.18
The appellant (Danby) appealed the CITT finding that wine coolers, which were indisputably “Refrigerators, freezers and other refrigerating or freezing equipment” (per item no. 8418), fit under the heading thereunder for “Refrigerators, household type” (item no. 8418.2X) rather than as “Other refrigerating or freezing equipment; heat pumps” (item no. 8418.69).
After noting (at para. 11) that the ordinary meaning of “refrigerator” was informed by dictionary definitions that “mention the cooling of food, but … also … contemplate cooling other items,” and (at para. 7) that there was “no dispute … that the industry does not treat wine coolers as refrigerators,” and before dismissing the appeal, Locke JA stated (at para. 20):
I do not wish to suggest that the ordinary meaning of a term should always apply even where it has a meaning in the industry. But there is a presumption to that effect, and that presumption is not rebutted by the mere fact that the industry meaning of the term in question differs from the ordinary meaning.
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|Tax Topics - Statutory Interpretation - Ordinary Meaning||rebuttable presumption that the ordinary meaning of a word should prevail over its industry meaning||122|
General Rules for the Interpretation of the Harmonized System
Igloo Vikski imported ice hockey goaltender gloves, which were composed of various types of textiles and plastics, bound together by stitching, with the inner padding consisting mainly of plastic (in the case of “blockers”) or both plastic and textiles (in the case of “catchers”). The Canadian International Trade Tribunal (“CITT”) affirmed the CBSA decision that the gloves in dispute were properly classified as tariff item 6216.00.00 (gloves, mittens or mitts), rather than as item 3926.20.92 (other articles of plastics).
Rule 1 of the General Rules for the Interpretation of the Harmonized System directed that the classification of goods must refer first to the applicable headings (i.e., descriptions), and Rule 2(b) provided that where a good containing a mixture of more than one material, a reference to goods in a heading included goods that consisted partly of the material (provided that the addition of the other material does not alter the goods' character to the point that they cannot answer the heading's description). Igloo Vikski contended that the gloves fell within both the 39.26 and 62.16 headings, at least when read in light of Rule 2(b) (i.e., in the case of 3926, they were other plastic goods because they were made partly of plastic), so that their classification should be resolved (in favour of heading 39.26) by reference to yet a further Rule (Rule 3(b).) The CITT had found that the gloves did not fall within heading 39.26 (before reference was made to Rule 2(b)) because an Explanatory Note indicated that this article included various listed categories of items, one of which (in para. (1) of the list) was articles of apparel and clothing made by sewing or sealing sheets of plastics (which was not the case for the gloves.) It went on to find that the gloves came within heading 62.16 (before reference was made to Rule 2(b)) notwithstanding an Explanatory Note that stated that the presence of additional materials in the good does not affect their classification so long as the additional materials do not constituted “more than mere trimming” (which was not the case for the gloves). As only heading 62.16 applied, no resort should be made to Rule 3(b).
In finding that the CITT decision met the requisite standard of reasonableness, Brown J stated (at paras. 29, 45):
The General Rules are commonly described as “cascading” in nature… . While the General Rules are hierarchical in the sense that any classification exercise must begin with Rule 1… , Rule 1 … does not lose all relevance where Rule 2 is applied. Nor is it an error to consider whether a good meets the description of a heading — that is, to apply Rule 1 — when Rule 2 is also applied. Indeed, Rule 2 would have no purpose were it not applied in conjunction with Rule 1, since its function is to guide the application of Rule 1 when the good in question is incomplete or a composite of different materials. …
… For Rule 2(b) to apply, the goods under consideration must, in accordance with Rule 1, meet the description contained in that heading in whole or in part (once the relevant Chapter, Section, or Explanatory Notes are taken into account) — in this case, as “[g]loves, mittens [or] mitts” under heading 62.16, or as “articles of plastics” under heading 39.26. To be clear, a good must be described in whole or in part by a heading — even if it may ultimately not be classified under that heading because of its unfinished or composite nature — before Rule 2 can be applied. This is consistent with the process of reasoning applied by the CITT to this case… .
Respecting the CITT’s finding that the gloves did not come within heading 39.26 because they did not come within the specific listing of apparel in para. (1), he stated (at paras 49 and 50):
The Explanatory Note overall begins with inclusive language (“[t]hey include”), but para. (1) of the Note specifically does not. The examples listed in para. (1) (“e.g., aprons, belts, . . .”) illustrate the types of articles that meet the criteria of “[a]rticles of apparel and clothing accessories . . . made by sewing or sealing sheets of plastics”. … This led ultimately to the CITT’s conclusion that it could not use Rule 2(b) to extend heading 39.26 to cover the gloves (paras. 55 and 66-69): even if the gloves were comprised entirely of plastics, they could not be classified under heading 39.26 as they were not made by sewing or sealing sheets of plastic together. …
… Even accepting that the term “includes” typically denotes that a non-exhaustive list is to follow …, the non-exhaustive quality of each list item in this case can reasonably be seen as a distinct matter.
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|Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions||an “includes” definition could reasonably be viewed as being limited by the listed items||208|
|Tax Topics - Treaties||narrower range of interpretations where implementing a Convention||85|