One of the more difficult things I have run into in my 35+ years of practice in customs, trade, and indirect tax, is navigating through extremely difficult to understand appeals processes, buried in multiple similar and parallel sections in the Customs Act (“Act”).

A recent case makes me think that I am not alone in this world (!), with the Canadian International Trade Tribunal (“CITT”) chastising the Canada Border Service Agency (“CBSA”) for misunderstanding and potentially misapplying the customs appeal processes.

The 9311-3652 Québec Inc. Decision

The appeal in this case arose due to the CBSA’s initial classification of the goods (cheese fondue) under tariff item 2106.90.94, which imposed higher customs duties than 9311-3652 Québec Inc. (“Quebec Inc”)  had been paying under tariff item 2106.90.95.  By the time of the hearing at the CITT, the CBSA’s position had shifted and it was advocating for a classification under tariff item 1901.90.39 which was duty-free.  However, the CBSA failed to communicate its position prior to the hearing, and was effectively utilizing the appeal process to develop favourable jurisprudence by having the CITT classify the goods under tariff heading 1901.

The CITT’s analysis highlighted two significant failures by the CBSA: first, it neglected to exercise its authority under section 61 of the Customs Act to resolve the matter administratively, and thereby imposed unnecessary financial burdens on the self-represented importer; second, its decision to proceed with an appeal under section 67 of the Act absent a genuine commercial dispute was improper and a misuse of the CITT’s limited resources.  The CITT ultimately allowed the appeal and classified the goods under tariff item 1901.90.39, which ensured Quebec Inc received a refund from the CBSA for the customs duties it paid.

Section 70 of the Act – A Misunderstanding

Lying at the core of the matter in this case was the CBSA’s misunderstanding of section 70 of the Act.  The provision provides a consultation procedure for the CBSA to refer questions regarding tariff classification directly to the CITT without involving a third party, such as Quebec Inc, that has zero interest in the matter.   An appeal under section 67 of the Act is a separate and distinct procedure that cannot be used for the same aim, as its function is  to resolve disputes with concrete commercial implications.

The CITT criticized the CBSA’s procedural approach, indicating that it held Quebec Inc hostage through the appeal procedure in order to resolve a theoretical jurisprudential issue that had been rendered moot.  The CITT also stressed that when the CBSA takes such a course of action and draws an importer into a dispute that does not concern it, the reputation of the public administration is undermined in the eyes of the importer and the public.

Takeaways

When it comes to dealing with the various appeals options that one finds for customs assessments, seizures, and ascertained forfeitures, importers can generally use the benefit of specialized legal advice. That advice usually needs to be sought immediately since tight appeal deadlines exist, and in many instances, duties assessed need to be paid upfront before the appeal is permitted.

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