In Charoen Pokphand Foods Canada Inc. v. President of Canada  Border Services Agency, the Federal Court of Appeal (the “FCA”) affirmed a decision from the Canadian International Trade Tribunal (the “CITT”) upholding the Canada Border Service Agency’s (the “CBSA”) classification of frozen wonton soup under the tariff item “stuffed pasta”, and not under the tariff item for “soups and broths”. 

Given Chief Justice Wagner’s recent comments about people forming critical opinions without reading the underlying courts’ judgement, let’s take a look at this seemingly paradoxical decision.

The Issue

The central issue was the tariff classification of a product consisting of frozen wontons stuffed with cooked shrimp and placed in a block of frozen liquid soup concentrate in the same packaging (the “Goods”) as either “soups and broths” or “stuffed pasta”.

The Legal Framework – Tariff Classification

Subsection 10(1) of the Customs Tariff provides that the classification of imported goods under a tariff item shall be determined in accordance with the General Rules for the Interpretation of the Harmonized System (the “General Rules”) and the Canadian Rules.

The Arguments

The Appellant argued that the Goods should be classified as “soups and broths and preparations therefor” under heading 21.04 of the Customs Tariff Schedule (the “Schedule”), by way of application of the General Rule 1.

The CBSA argued that, since the Goods consist of two separate components, namely, soup and shrimp wontons, General Rules 2(b) and 3(b) should apply, resulting in the Goods being classified as “stuffed pasta” under heading 19.02.

The Decisions

The CITT found that classification under General Rule 1 was not optimal because the Goods consist of separate edible components packaged together, as the wontons were not blended into the soup.  Under General Rules 2(b) and 3(b), the “essential character” of the Goods needed to be determined.  Since the wontons formed a greater proportion of the Goods by weight, the “essential character” of the Goods is “imparted by its wonton-stuffed pasta component”.  As such, the CITT determined the Goods should be classified as “stuffed pasta” under heading 19.02 of the Schedule.

The FCA upheld the CITT’s decision, finding no error in its application of the law on the correctness standard of review.

Takeaways

The decision highlights the technical complexity of Customs & Trade matters, and that common-sense conclusions like “wonton soup should be classified as soup” may not be correct.  Navigating the Schedule’s technical descriptions while applying the interpretation rules can be arduous and, given the complexity, legal counsel is recommended.

Given the potentially significant difference in tariff rates between different tariff classifications (e.g., 6% for “soups and broths” vs. 11% for “stuffed pasta”), accurate classification is crucial so importers can appropriately plan their pricing in the Canadian market and avoid unexpected CBSA assessments – which can occur several years after importation!

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