Jam Industries Ltd. v. Canada (Border Services Agency)

Jam Industries Ltd. v. Canada (Border Services Agency) Court (s) Database Federal Court of Appeal Decisions Date 2007-05-31 Neutral citation 2007 FCA 210 File numbers A-245-06 Decision Content Date: 20070531 Docket: A-245-06 Citation: 2007 FCA 210 CORAM: RICHARD C.J. LÉTOURNEAU J.A. PELLETIER J.A. BETWEEN: JAM INDUSTRIES LTD. Appellant and THE PRESIDENT OF THE CANADA BORDER SERVICES AGENCY Respondent Heard at Ottawa, Ontario, on April 24, 2007. Judgment delivered at Ottawa, Ontario, on May 31, 2007. REASONS FOR JUDGMENT BY: PELLETIER J.A. CONCURRED IN BY: RICHARD C.J. LÉTOURNEAU J.A. Date: 20070531 Docket: A-245-06 Citation: 2007 FCA 210 CORAM: RICHARD C.J. LÉTOURNEAU J.A. PELLETIER J.A. BETWEEN: JAM INDUSTRIES LTD. Appellant and THE PRESIDENT OF THE CANADA BORDER SERVICES AGENCY Respondent REASONS FOR JUDGMENT PELLETIER J.A. INTRODUCTION [1] This is an appeal from a decision of the Canadian International Trade Tribunal (CITT) in which that tribunal upheld the decision of the President of the Canada Border Services Agency (CBSA) refusing the appellant Jam Industries Ltd.'s (the appellant) request to classify certain goods under tariff item no. 9948.00.00, a concessionary tariff item which eliminates or reduces the duties otherwise payable on goods which come within its terms. [2] The goods which are the object of this dispute are 29 models of keyboard synthesizers, digital pianos and digital organs (the Keyboard goods), 13 models of non-keyboard synthesizers (collectively with the Keyboard goods, the Musical Instruments) and four expansion boards for synthesizers. The issue in this appeal is whether the Musical Instruments are "articles for use in" automatic data processing machines (computers) within the meaning of tariff item no. 9948.00.00. The CITT decided that they were not. Having regard to the standard of review, this Court is not in a position to interfere with that decision. FACTS [3] The appellant is the importer of the goods in question. The CBSA classified the goods according to three different tariff items. The Keyboard goods were classified under tariff item no. 9207.10.00 of the schedule to the Customs Tariff, the non-keyboard synthesizers were classified under tariff item no. 9209.94.90 while the expansion boards were classified under tariff item no. 8543.89.99 of the Customs Tariff. [4] The appellant asked to have the goods classified under tariff item no. 9948.00.00 so as to obtain the benefit of the preferential tariff. The CBSA declined to classify the goods as requested, as did the President of that agency when the question was put before him. The appellant appealed to the CITT pursuant to subsection 67(1) of the Customs Act, R.S.C., 1985 (2d Supp.), c. 1 (the Act). [5] The CITT had to construe tariff item no. 9948.00.00 which, in its material parts, reads as follows: 9948.00.00 Articles for use in the following: … Automatic data processing machines and units thereof, magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data. … Parts and accessories of the foregoing. [6] The phrase "for use in" is defined at subsection 2(1) of the Customs Tariff: "for use in" whenever it appears in a tariff item, in respect of goods classified in the tariff item, means that the goods must be wrought or incorporated into, or attached to, other goods referred to in that tariff item". « devant servir dans » ou "devant servir à" Mention dans un numéro tarifaire, applicable aux marchandises qui y sont classées et qui doivent entrer dans la composition d'autres marchandises mentionnées dans ce numéro tarifaire par voie d'ouvraison, de fixation ou d'incorporation. » [7] The evidence before the CITT was that all the Musical Instruments were MIDI enabled. MIDI (Musical Instrument Digital Interface) is a protocol by which musical information can be transferred in digital form between devices which incorporate the MIDI interface. Those devices can be other musical instruments or they can be computers. In order for the transfer to take place, the devices must be connected in some way, usually by means of a cable, the type of cable varying with the nature of the devices being connected. The evidence before the CITT established that when the Musical Instruments were connected to a computer, both the computer and the Musical Instruments were able to perform tasks which they could not otherwise perform. The debate before the CITT was whether the Musical Instruments were "for use in" a computer, or "for use with" a computer. THE TRIBUNAL'S DECISION [8] The CITT's decision is based upon the meaning to be given to the phrase "for use in". It began its analysis by examining the statutory definition, quoted above, and found that the French version of the definition made it clear that the goods which are "for use in" another product must enter into the composition of the host goods. This suggests that "for use in" refers to a relationship like that of a part to the whole. [9] The CITT then referred to its jurisprudence to say that the goods caught by tariff item no. 9948.00.00 "exhibited a special relationship to the host goods", that is, they "complemented the function of the host goods": Tribunal Reasons, at para. 42. This is a different conception of "for use in" as it refers to the effect of the attachment of the goods (increased functionality) rather than to the form of attachment (incorporation). [10] The CITT then purported to examine the relationship of the Musical Instruments to a computer to which they might be connected in light of this analysis. It concluded that the Musical Instruments "… do not contribute to the function of an automated data processing machine and are not required by the computer for its operation or the performance of its functions.": Tribunal Reasons, at para. 44. In fact, the CITT found that the computer complemented the function of the Musical Instruments, rather than the other way around. Consequently, the CITT decided that the Musical Instruments were not goods "for use in" an automated data processing machine within the meaning of tariff item no. 9844.00.00. [11] The CITT summarized its conclusions as follows: Accordingly, in this case, the Tribunal is not satisfied that the goods in issue complement the functions of a computer by virtue of their connection to that computer. Rather, the reverse appears to be true, i.e. the connection to a computer enables the goods in issue to acquire additional capability. Through the connection of the MIDI-enabled instrument to a computer, it is the instrument's functions that are expanded or improved and not those of the computer. [Tribunal Reasons, at para. 45.] [12] As for the expansion boards, the CITT held that the reference to "parts and accessories of the foregoing" in tariff item no. 9844.00.00 was a reference to the items listed in the tariff item, and not a reference to the goods which were to be used in the listed items. Consequently, the CITT's position was that the expansion boards would not fall under the concessionary tariff because they were not "for use in" parts or accessories of computers, but rather they were parts and accessories for the Musical Instruments. [13] In the end, the CITT rejected the appeal from the decision of the President of the CBSA. STANDARD OF REVIEW [14] The appellant appeals to this Court pursuant to subsection 68(1) of the Act which provides as follows: 68. (1) Any of the parties to an appeal under section 67, namely, (a) the person who appealed, (b) the President, or (c) any person who entered an appearance in accordance with subsection 67(2), may, within ninety days after the date a decision is made under section 67, appeal therefrom to the Federal Court of Appeal on any question of law. 68. (1) La décision sur l'appel prévu à l'article 67 est, dans les quatre-vingt-dix jours suivant la date où elle est rendue, susceptible de recours devant la Cour d'appel fédérale sur tout point de droit, de la part de toute partie à l'appel, à savoir : a) l'appelant; b) le président; c) quiconque a remis l'acte de comparution visé au paragraphe 67(2). [15] The appellant is limited to an appeal on a question of law. It says that the question of law is the interpretation of the term "for use in" as set out in subsection 2(1) of the Customs Tariff. [16] Matters of interpretation of the Customs Tariff are questions of law which, due to the CITT's extensive expertise in tariff classification, can only be reviewed on a standard of reasonableness simpliciter: Agri Pack v. Canada (Customs and Revenue Agency), 2005 FCA 414, 345 N.R. 1 (F.C.A.), at para. 24 (Agri Pack). [17] In Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 56, the Supreme Court of Canada stated that an unreasonable decision is one that: 56 … in the main, is not supported by any reasons that can stand up to a somewhat probing examination. Accordingly, a court reviewing a conclusion on the reasonableness standard must look to see whether any reasons support it. The defect, if there is one, could presumably be … in the logical process by which conclusions are sought to be drawn from it … An example of the latter kind of defect would be a contradiction in the premises or an invalid inference. ANALYSIS [18] At the hearing before us, the appellant and the respondent appeared to agree that the CITT's own jurisprudence established that the test of whether a good was "for use in" another good was whether it was "physically connected and are functionally joined" to that other good. This formulation is taken from the Tribunal's previous decision in Agri-Pack v. Canada (Customs and Revenue Agency), [2004] C.I.T.T. No. 129, affirmed on appeal in Agri Pack. [19] The appellant argued that the CITT changed the test by adding new elements to the original test which made it unduly restrictive, specifically, its insistence that the functional connection must enhance the functionality of the "host" item, the computer, rather than that of the thing attached to the computer, in this case the Musical Instrument. The appellant's argument, in the end, was that it was an error of law for the CITT to depart from its own jurisprudence as to the application of the phrase "for use in" as it appears in tariff item no. 9948.00.00. [20] The difficulty with that argument is that, even if the CITT has departed from its own prior jurisprudence, that fact alone does not prove that the decision in issue here is unreasonable, and does not give rise to a distinct ground of judicial intervention. In Domtar Inc. v Québec (Commission d’appel en matière de lésions professionnelles), [1993] 2 S.C.R. 756, the Supreme Court held that a conflict in the interpretation of a single provision by different tribunals, or differing interpretations of a single provision by different panels of the same tribunal, is not an independent ground of judicial review: see para. 83, 93. If the language of the statute is capable of supporting each interpretation, then both can stand. [21] Despite the fundamental interest of litigants in the consistency of administrative decision-making and the predictability of outcomes which such consistency provides, the Supreme Court found that the risk of inconsistent decisions was the price to be paid for the legislature's choice to have certain questions decided by administrative agencies rather than by the Courts: 94. If Canadian administrative law has been able to evolve to the point of recognizing that administrative tribunals have the authority to err within their area of expertise, I think that, by the same token, a lack of unanimity is the price to pay for the decision-making freedom and independence given to the members of these tribunals. Recognizing the existence of a conflict in decisions as an independent basis for judicial review would, in my opinion, constitute a serious undermining of those principles. [Domtar, at para. 94.] [22] In the result, the conflict within the CITT's jurisprudence does not justify this Court's intervention. The CITT's conclusion that in order to be classified under tariff item no. 9948.00.00, the goods in question must complement the function of an automated processing device (a computer), rather than the other way round, is not illogical and is a reasonable interpretation of the phrase "for use in". As such, the CITT's conclusion is not unreasonable and is therefore immune from review by this Court. [23] I would therefore dismiss the appeal with costs to the respondent. "J.D. Denis Pelletier" J.A. "I agree, J. Richard J.A." "I agree, Gilles Létourneau J.A." FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-245-06 STYLE OF CAUSE: Jam Industries Ltd. v. The President of the Canada Border Services Agency PLACE OF HEARING: Ottawa, Ontario DATE OF HEARING: April 24, 2007 REASONS FOR JUDGMENT BY: PELLETIER J.A. CONCURRED IN BY: RICHARD C.J. LÉTOURNEAU J.A. DATED: May 31, 2007 APPEARANCES: Richard A. Wagner FOR THE APPELLANT Andrew Gibbs Philippe Lacasse FOR THE RESPONDENT SOLICITORS OF RECORD: Ogilvy Renault LLP Ottawa, Ontario FOR THE APPELLANT John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario FOR THE RESPONDENT