NAFTA Tariff Treatment Appeals
The CSCB would like to thank our associate member, Michael Kaylor of Lapointe Rosenstein, for reviewing this article.
Members may be interested in the outcome of several appeals filed to change the tariff treatment of goods outside of the legislated time frame.
In some instances, a NAFTA Certificate of Origin is on hand at time of accounting. However, because the goods in question are believed to be duty free, the NAFTA tariff treatment is not declared at time of final accounting. If CBSA performs an audit and finds that the goods should have been classified under a dutiable tariff item, they will request that the entries be amended.
Since the one-year time frame has passed to change the tariff treatment to a NAFTA tariff treatment, corrections must submitted using the tariff treatment used at time of accounting, resulting in an unexpected outlay of duty.
1. EDITIONS GALLERY (AP-2005-017)
The CBSA re-determined the tariff classification of statuettes imported by Editions Gallery and decided that a dutiable tariff item was more accurate. On the issue of tariff classification, the CITT sided with CBSA.
However, Editions Gallery also asked the CITT to consider a re-determination of tariff treatment and allow the goods entry under a NAFTA tariff treatment.
Editions Gallery argued that under subsections 58(1) and (2) of the Customs Act, there is always a determination of some sort made when goods are accounted for. If there is no explicit determination under 58(1), subsection 58(2) indicates a deemed determination. In this case, they felt that the tariff treatment of the goods had been the subject of a deemed determination under 58(2).
Further, subsection 60(1) of the Act states: ... if the origin, tariff classification and value for duty of imported goods are not determined under subsection (1), the origin, tariff classification and value for duty of the goods are deemed to be determined, for the purposes of this Act, to be as declared by the person accounting for the goods in the form prescribed under paragraph 32(1)(a). That determination is deemed to be made at the time the goods are accounted for under subsection 32(1), (3) or (5).
This implies that a deemed determination, made at the time of accounting, is a decision by the CBSA and thus subject to appeal.
The CBSA countered by saying that a NAFTA origin decision had not been made and that CBSA could only consider a re-determination of origin request under section 60 if an origin decision was previously made. As a result, the tariff treatment had to remain as MFN.
The CITT stated that they understood the CBSA’s reasoning for not allowing a re-determination of origin under section 60 of the Act.
However, the CITT also felt that the CBSA had indeed made a decision regarding origin since the DASs indicated an MFN rate of duty of 6.5% as well as a tariff classification decision and that this represented a “. . . decision[s] of the President of the Canada Border Services Agency under subsection 60(4) of the Customs Act . . .”, i.e. a re-determination.
And, although the CBSA did not consider that it could make a re-determination of origin, the fact is that, in order to re-determine the duty rate, CBSA needed to decide whether the initial deemed determination of origin would stand; otherwise, it would not know what duty rate to apply.
The CITT agreed with the CBSA on the issue of tariff, but did not agree with them on the issue of tariff treatment. And, since there was no evidence to indicate that the goods were manufactured elsewhere than in the United States or had value content from other than the United States, they allowed the change to a NAFTA tariff treatment.
C.B. Powell appealed to the President of the CBSA under section 60 of the Customs Act to allow for a change to a NAFTA tariff treatment once the CBSA advised that the tariff classification used at time of accounting was incorrect.
The CBSA rejected C.B. Powell’s appeal, based on the fact that CBSA had not made a previous re-determination on the issue of origin.
C.B. Powell then appealed to the Federal Court, which ruled that the decision of the President of the CBSA was in fact a decision under section 60 of the Customs Act and that the CITT should hear the case regarding tariff treatment.
The CBSA advised that it would appeal the Federal Court decision (to allow the case to be heard at the CITT) to the Federal Court of Appeal.
CBSA’s argument was that the original decision by the President of the CBSA was correct and that there was no “decision” that could be appealed to the CITT by C.B. Powell. CBSA took the position that no re-determination was possible under subsection 60(1). As a result, there was no decision that could be judicially reviewed, nor could the Federal Court order any decision to be made under subsection 60(1).
The Federal Court of Appeal disagreed.
They stated that if C.B. Powell wished to have recourse against the ruling of the President, it should pursue an appeal to the CITT under subsection 67(1). It is up to the CITT and not the Federal Court or the Federal Court of Appeal to interpret the word “decision” in subsection 67(1) and determine whether or not the CITT can hear C.B. Powell’s appeal.
The CSCB, and C.B. Powell we are sure, are anxiously awaiting the outcome of the CITT’s review.
3. WOLSELEY ENGINEERED PIPE GROUP (AP-2009-010)
In June of 2009, Wolseley Engineered Pipe Group filed a notice of appeal with the CITT to appeal CBSA’s reclassification of goods. A week later, they requested that the issue of tariff treatment be added to their appeal. They also asked that their appeal on the issue of tariff treatment be held in abeyance until a decision was rendered on the C.B. Powell case. The CITT denied that request.
In their appeal, Wolseley stated that the CBSA had made a re-determination of both tariff classification and tariff treatment. They argued that a re-determination of tariff classification is automatically accompanied by a re-determination of the rate of duty that in turn depends on origin.
The CBSA took the position that the CITT does not have the jurisdiction to hear an appeal on the origin of these goods. CBSA argued that this was not a case where they refused to make a decision on origin, but a case of Wolseley not initially requesting a re-determination of origin.
The CBSA further indicated that this case was different from Editions Gallery and from C.B. Powell since in those previous cases, they had specifically requested a re-determination of both tariff and origin.
In this case, the CITT ruled that a decision had not been made relating to the origin of the goods. The decision rendered refers to classification and value for duty, but not origin. CBSA’s verification report specifically stated that the review should not be misconstrued as meaning a determination of origin had been made.
Whether or not an appeal will be made is unknown. In Wolseley’s case, the CITT allowed a duty-free tariff that allowed the goods to remain duty-free. However, it is the CSCB’s view that neither of the CITT’s decisions in the Wolseley case - tariff or origin - is correct.
If there is a NAFTA Certificate of Origin on hand at time of importation - use it! - even if the goods are duty-free.