Canada (Border Services Agency) v. Decolin Inc.

Canada (Border Services Agency) v. Decolin Inc. Court (s) Database Federal Court of Appeal Decisions Date 2006-12-21 Neutral citation 2006 FCA 417 File numbers A-608-05 Decision Content Date: 20061221 Docket: A-608-05 Citation: 2006 FCA 417 CORAM: DESJARDINS J.A. LÉTOURNEAU J.A. PELLETIER J.A. BETWEEN: THE PRESIDENT OF THE CANADA BORDER SERVICES AGENCY Appellant and DECOLIN INC. Respondent Heard at Montreal, Quebec, on November 8, 2006. Judgment delivered at Ottawa, Ontario, on December 21, 2006. REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A. CONCURRED IN BY: DESJARDINS J.A. CONCURRING REASONS BY: PELLETIER J.A. Date: 20061221 Docket: A-608-05 Citation: 2006 FCA 417 CORAM: DESJARDINS J.A. LÉTOURNEAU J.A. PELLETIER J.A. BETWEEN: THE PRESIDENT OF THE CANADA BORDER SERVICES AGENCY Appellant and DECOLIN INC. Respondent REASONS FOR JUDGMENT LÉTOURNEAU J.A. [1] This appeal involves an issue of tariff classification of imported goods. It is brought under section 67 of the Customs Act, R.S.C. 1985 (2nd Supp.), c. 1 (Act) against a decision of the Canadian International Trade Tribunal (Tribunal). [2] The case relates to the importation of polyester tablecloths, runners, placemats and napkins with a Christmas motif that were imported on September 25, 2001. The goods in issue were classified by the appellant under tariff item no. 6302.53.90. The respondent attacked the appellant’s decision on the basis that the goods should have been classified under tariff item no. 9505.10.00 as articles for Christmas activities. [3] I reproduce both headings of the tariff: Chapter 63 Chapitre 63 63.02 Bed linen, table 63.02 Linge de lit, de linen, toilet linen table, de toilette and kitchen linen. ou de cuisine. 6302.53 Of man-made 6302.53 De fibres fibres synthétiques ou artificielles 6302.53.90 Other 6302.53.90 Autres Chapter 95 Chapitre 95 95.05 Festive, carnival 95.05 Articles pour or other fêtes, carnaval entertainment ou autres articles, including divertissements, conjuring tricks y compris les and novelty articles de magie jokes. et articles- surprises. 9505.10.00 Articles for 9505.10-00 Articles pour Christmas fêtes de Noël festivities [4] I also reproduce the Explanatory Notes to tariff heading 95.05 that existed at the time of importation, i.e. September 25, 2001, and the Explanatory Notes that followed in August 2003 pursuant to an amendment: At the time of importation (A) Festive, carnival or other entertainment articles, which in view of their intended use are generally made of non-durable material. They include: (2) Articles traditionally used at Christmas festivities, e.g. artificial Christmas trees (these are sometimes of the folding type), nativity scenes, Christmas crackers, Christmas stockings, imitation yule logs. In August 2003 The heading also excludes articles that contain a festive design, decoration, emblem or motif and have a utilitarian function, e.g. tableware, kitchenware, toilet articles, carpets and other textile floor coverings, apparel, bed linen, table linen, toilet linen, kitchen linen. (Emphasis added) [5] Basically, the new or amended Explanatory Notes excluded from the scope of tariff item no. 9509.10.00 articles that contain a festive design or decoration and that had a utilitarian function (emphasis added). Before the amendment, it is worth noting that the Explanatory Notes did not specifically exclude articles made of durable material. [6] The amendment to the Explanatory Notes to tariff heading no. 95.05 came after the importation of the goods in issue, but before the appellant’s final re-determination of the classification of the goods. In the end, the Tribunal concluded that the respondent was right in its claim: the goods in issue should not have been classified under tariff item no. 6302.53.90. The appellant seeks the quashing of the Tribunal’s decision and a reinstatement of its classification. [7] In my view, this appeal originates from a misconception and mischaracterization of the issue before the Tribunal. The appellant submits that the Tribunal erred in not applying the unequivocal language of the Explanatory Notes to tariff heading 95.05. As a consequence, it classified the goods in issue under tariff heading 95.05 rather than under tariff heading 63.02. [8] In other words, the appellant claims that the Tribunal’s decision was unreasonable in that it failed to give effect to the existing Explanatory Notes while this Court had said in the case of Attorney General of Canada v. Suzuki Canada Inc. and Canadian Kawasaki Motors Inc., 2004 FCA 131, at paragraphs 13 and 17, that Explanatory Notes “should be respected unless there is a sound reason to do otherwise”. [9] It is not disputed by the parties that the standard applicable to the review of the Tribunal’s decision is that of unreasonableness simpliciter: see Yves Ponroy Canada v. Canada (Deputy Minister of National Revenue (M.N.R.)), [2000] F.C.J. No. 1202 (F.C.A.), at paragraphs 4 to 6. [10] With respect for contrary views, the Tribunal did not unjustifiably refuse to apply the Explanatory Notes relied upon by the appellant. It was faced with two irreconcilable and confusing Explanatory Notes to tariff heading 95.05. One, the 2001 Note referred to the durability (or lack of) of the goods to be classified. The other, the 2003, speaks in terms of the utilitarian function of the goods. Durability and utility are two different concepts. An object may be durable and yet have no utilitarian function: e.g. a replica of Santa Claus. Conversely, an object may have a utilitarian function and yet be non-durable (e.g. a paper napkin or tablecloth). [11] As evidenced by paragraph 23 of its decision, the Tribunal found that the goods’ tariff classification ought to be determined in accordance with the wording of the Customs Tariff as it existed at the time of importation: The Tribunal observes that section 58 of the current Customs Act has a similar provision, which provides that the time for determining tariff classification is at or before the time the goods are accounted for under subsection 32(1), (3) or (5). These subsections require that goods not be released by a customs officer until they have been accounted for, unless the goods will be accounted for within a prescribed time. Sections 7.1 to 10.1 of the Regulations Respecting the Accounting for Imported Goods and the Payment of Duties indicate that the amount of time that may be prescribed for accounting is no more than a matter of days or weeks after the goods have been released through customs. Given that the goods in issue were imported in September 2001, the principle in Ferguson dictates that their tariff classification ought to be determined in accordance with the wording of the Customs Tariff as it existed in the fall of 2001 when they were accounted for, not August 2003 when the Explanatory Notes were amended. [12] I cannot say that its decision is unreasonable in the circumstances. It is supported by legal reasons and principles of fairness that can stand up to a probing examination. [13] This case is fact and circumstance driven. It is therefore not necessary to address the inconveniences and dangers alleged by both sides of maintaining or reversing the Tribunal’s decision. [14] Since writing my reasons, I have had the benefit of reading those of my colleague. For the sake of clarity, I wish to add the following comments. [15] I agree with my colleague that this Court never decided the issue of the retroactive application of amended Explanatory Notes in the Suzuki case. [16] I also agree with him that the words “as amended from time to time” cannot and do not give a retrospective or retroactive binding effect to an amendment to an Explanatory Note. Indeed, they entail no binding effect at all. The CITT’s role is to consider any amendment to an Explanatory Note in making its decision. This is what it did in the present instance. [17] In the same vein, in order to dispose of the case, it is not necessary to review the appropriateness of the CITT’s analogy with the Interpretation Act in its review and analysis of the 2003 amendment to the Explanatory Notes. [18] Consequently, I would dismiss the appeal with costs. “Gilles Létourneau” J.A. “I concur Alice Desjardins J.A.” PELLETIER J.A. (Concurring) [19] I agree with the disposition of this matter proposed by my colleagues but I arrive at that conclusion by a different route. [20] In the decision under appeal (reported as Appeal No. 2004-011), the Canadian International Trade Tribunal (CITT) decided that, in determining the proper classification of goods imported in 2001, it would not apply an amendment to the relevant Explanatory Notes, which amendment was adopted after the goods were imported. The President of the Canada Border Services Agency (the CBSA) appeals to this Court from that decision on the ground that the CITT, while not bound to apply the amended Explanatory Notes, erred in not doing so. THE BACKGROUND [21] Before addressing the specifics of this case, it is useful to review the background against which tariff classification decisions are made. [22] Canada is a member of the World Customs Organization and has subscribed to the International Convention on the Harmonized Commodity Description and Coding System (the International Convention) which was made part of the domestic law of Canada by the Customs Tariff, S.C. 1997, c. 36, whose preamble reads as follows: An Act respecting the imposition of duties of customs and other charges, to give effect to the International Convention on the Harmonized Commodity Description and Coding System, to provide relief against the imposition of certain duties of customs or other charges, to provide for other related matters and to amend or repeal certain Acts in consequence thereof. Loi concernant l’imposition de droits de douane et d’autres droits, la mise en oeuvre de la Convention internationale sur le Système harmonisé de désignation et de codification des marchandises et l’exonération de divers droits de douane ou autres, comportant des mesures connexes et modifiant ou abrogeant certaines lois en conséquence. [23] The International Convention does not deal with the duties to be applied to imported goods. It is simply intended to provide a standardized classification system so that negotiations on customs and tariffs can occur on the basis of a common classification system. As can easily be appreciated, this system can only work to the extent that the classification system is applied uniformly by all participating states. [24] For that reason, the International Convention provides its own rules of interpretation, which have also been incorporated into the domestic law of Canada, as evidenced by sections 10 and 11 of the Customs Tariff: 10. (1) Subject to subsection (2), the classification of imported goods under a tariff item shall, unless otherwise provided, be determined in accordance with the General Rules for the Interpretation of the Harmonized System ["the General Rules"]and the Canadian Rules set out in the schedule. […] 11. In interpreting the headings and subheadings, regard shall be had to the Compendium of Classification Opinions to the Harmonized Commodity Description and Coding System and the Explanatory Notes to the Harmonized Commodity Description and Coding System, published by the Customs Co-operation Council (also known as the World Customs Organization), as amended from time to time. 10. (1) Sous réserve du paragraphe (2), le classement des marchandises importées dans un numéro tarifaire est effectué, sauf indication contraire, en conformité avec les Règles générales pour l’interprétation du Système harmonisé et les Règles canadiennes énoncées à l’annexe. … 11. Pour l’interprétation des positions et sous-positions, il est tenu compte du Recueil des Avis de classement du Système harmonisé de désignation et de codification des marchandises et des Notes explicatives du Système harmonisé de désignation et de codification des marchandises et de leurs modifications, publiés par le Conseil de coopération douanière (Organisation mondiale des douanes). [25] Rule 1 of the General Rules provides as follows: 1. The tiles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. 1. Le libellé des titres de sections, de chapitres ou de sous-chapitres est considéré comme n'ayant qu'une valeur indicative, le classement étant déterminé légalement d'après des termes des positions et des Notes de sections ou de chapitres et, lorsqu'elles ne sont pas contraires aux termes desdites positions et Notes, d'après les Règles suivantes : [26] An issue which is not addressed by the General Rules is the effect to be given to amendments to various authoritative documents (tariff headings, Section and Chapter notes, Explanatory Notes) which intervene between the time of the initial tariff determination and the ultimate resolution of a challenge to that tariff determination. In this case, had the tariff determination been settled at or near the time of importation, the question of retroactive application would not have arisen. But, because the importer’s appeal dragged on through the system for a number of years, an amendment to the Explanatory Notes, adverse to the importer's position, intervened. What effect should be given to that intervening amendment? [27] A party who disagrees with a tariff classification decision can seek a re-determination of that decision by an officer of the CBSA, pursuant to section 59 of the Customs Act, R.S.C. 1985, c. 1 (2nd Supp.). In the event that the original decision is upheld, the importer can apply for a further re-determination by the President of the CBSA pursuant to section 60 of the Act. If the decision remains unfavourable to the importer, the latter can appeal the matter to the CITT pursuant to section 67 of the Act. The CITT’S mandate is described in subsection 67.(3): 67. (3) On an appeal under subsection (1), the Canadian International Trade Tribunal may make such order, finding or declaration as the nature of the matter may require, and an order, finding or declaration made under this section is not subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with except to the extent and in the manner provided by section 68. 67. (3) Le Tribunal canadien du commerce extérieur peut statuer sur l’appel prévu au paragraphe (1), selon la nature de l’espèce, par ordonnance, constatation ou déclaration, celles-ci n’étant susceptibles de recours, de restriction, d’interdiction, d’annulation, de rejet ou de toute autre forme d’intervention que dans la mesure et selon les modalités prévues à l’article 68. [28] With that background in mind, I now turn to the facts of this case. THE FACTS AND THE DECISION UNDER APPEAL [29] On September 1, 2001, Decolin Inc. (Decolin) imported into Canada polyester tablecloths, runners, placemats and napkins with a Christmas motif. The CBSA classified these goods under tariff heading no. 6302.53.90 of the Schedule to the Customs Tariff. Decolin attempted to persuade the CBSA to reconsider its position; having exhausted its remedies before the CBSA, it appealed the matter to the CITT. The CITT reversed the CBSA's determination and held that the goods were properly classified under tariff heading no. 9505.10.00. The significance of the determination is that tariff heading no. 95.05 is duty free whereas tariff heading no. 63.02 is not. The President of the CBSA (the President) appeals to this Court from that decision. [30] Tariff heading no. 6302.53.90 is derived as follows: 63.02 bed linen, table linen, toilet linen and kitchen linen. 6302.53 - of man made fibres 6302.53.90 - other 63.02 Linge de lit, de table, de toilette ou de cuisine. 6302.53 - De fibres synthétiques ou artificielles 6302.53.90 - Autres [31] Tariff heading no. 9505.10.00, on the other hand, is derived as follows: 95.05 Festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes. 9505.10.00 Articles for Christmas festivities. 95.05 Articles pour fêtes, carnaval ou autres divertissements, y compris les articles de magie et articles-surprises. …9505.10.00 Articles pour fêtes de Noël [32] As pointed out earlier, the Explanatory Notes must be taken into account. Before the amendment in 2003, the Explanatory Notes with respect to tariff heading no. 9505 read as follows: (A) Festive, carnival or other entertainment articles, which in view of their intended use are generally made of non-durable material. They include: […] (2) Articles traditionally used at Christmas festivities e.g. artificial Christmas trees (these are sometimes of the folding type), nativity scenes, Christmas crackers, Christmas stockings imitation Yule logs. (A) Les articles pour les fêtes, carnaval ou autres divertissements qui, compte tenu de leur utilisation, sont généralement de fabrication simple et peu robuste. Parmi ceux-ci on peut citer : … 2) Les articles habituellement utilisés à l'occasion des fêtes de Noël et notamment les arbres de Noël artificiels, les crèches, les sujets et animaux pour crèches, les angelots, les sabots et bûches de Noël, les pères Noël, etc. [33] In August 2003, the Explanatory Notes were amended by the addition of the following (the 2003 Amendment): The heading also excludes articles that contain a festive design, decoration emblem or motif and have a utilitarian function e.g. tableware, kitchenware, toilet articles, carpets, and other textile floor coverings, apparel, bed linen, table linen, kitchen linen. Sont également exclus de la présente position, les articles qui comportent un dessin, une décoration, un emblème ou un motif à caractère festif et qui ont une fonction utilitaire tels que les articles de table, les ustensiles de cuisine, les articles de toilette, les tapis et autres revêtements de sol en matières textiles, les vêtements, le linge de lit, de table, de toilette ou de cuisine, par exemple. [34] The CITT began its analysis by acknowledging that the Explanatory Notes were not enactments so that, strictly speaking, the Interpretation Act, R.S.C. 1985, c. I-21, did not apply to them. However, the CITT reasoned that because section 11of the Customs Act directs it to have regard to the Explanatory Notes, it could proceed by analogy to the scheme found in the Interpretation Act. [35] The CITT then referred to section 45.(2) of the Interpretation Act, which reads as follows: 45. (2) The amendment of an enactment shall not be deemed to be or to involve a declaration that the law under that enactment was or was considered by Parliament or other body or person by whom the enactment was enacted to have been different from the law as it is under the enactment as amended. 45. (2) La modification d’un texte ne constitue pas ni n’implique une déclaration portant que les règles de droit du texte étaient différentes de celles de sa version modifiée ou que le Parlement, ou toute autre autorité qui l’a édicté, les considérait comme telles. [36] Proceeding by analogy, the CITT concluded that the 2003 Amendment should not be construed as either confirming or altering the meaning of the Explanatory Note prior to the passage of the amendment. The CITT then observed that the 2003 Amendment could only affect the tariff classification of the goods in issue if it were given retroactive effect. In attempting to discern whether it was intended that the 2003 Amendment has retroactive effect, the CITT referred to section 58 of the Customs Act which prescribes the time for assessing the tariff classification of goods. The CITT's discussion of this issue is reproduced below: 23. The Tribunal observes that section 58 of the current Customs Act has a similar provision, which provides that the time for determining tariff classification is at or before the time the goods are accounted for under subsection 32(1), (3) or (5). These subsections require that goods not be released by a customs officer until they have been accounted for, unless the goods will be accounted for within a prescribed time. Sections 7.1 to 10.1 of the Regulations Respecting the Accounting for Imported Goods and the Payment of Duties15 indicate that the amount of time that may be prescribed for accounting is no more than a matter of days or weeks after the goods have been released through customs. Given that the goods in issue were imported in September 2001, the principle in Ferguson [Deputy Minister of National Revenue v. Ferguson Industries Limited [1973] S.C.R. 21] dictates that their tariff classification ought to be determined in accordance with the wording of the Customs Tariff as it existed in the fall of 2001 when they were accounted for, not August 2003 when the Explanatory Notes were amended. [37] The CITT found support for this position in the decision of the British Columbia Court of Appeal in Hornby Island Trust Committee v. Stormwell (1989), 53 D.L.R. (4th) 435, where it was held that: A statute should not be given a retroactive construction that has adverse effects, …unless it is clear that the legislature intended that the legislation should have such a construction. The reason is that the legislature should not be presumed to have enacted a statute that treats those it affects, or some of them, not just adversely, but unfairly, with respect to acts they have undertaken in the past. [At p. 441.] [38] This lead the CITT to conclude that it would be unfair to give the 2003 Amendment retroactive effect by applying it to goods which were imported prior to its coming into effect. In support of that position, the CITT referred to the legitimate expectations of the importers that their goods would be classified according to the terms of the tariff as it existed at the time of importation. It concluded that the retroactive application of the 2003 Amendment would be contrary to natural justice and principles of fairness. [39] The CITT then considered whether the 2003 Amendment could be considered as an aid to the interpretation of the Explanatory Notes as they existed prior to the amendment. It referred to the decision of this Court in Metro-Can Construction Ltd. v. Canada, [2000] F.C.J. No. 994, as authority for the proposition that a later amendment of an enactment can be considered in "interpreting an enactment as it previously read, but only insofar as it is part of the general legislative history of the enactment and not if it is too extensive.": see para. 25 of the CITT's reasons. The CITT concluded that the 2003 Amendment was of no assistance in construing the Explanatory Notes as they stood at the time of importation. [40] On the strength of the dictionary meaning of "festive", the CITT concluded that the goods in question were indeed festive in nature. It noted that while the Explanatory Notes observed that festive goods were generally made of non-durable material, the use of the word "generally" contemplated the possibility that goods made of durable material were not necessarily excluded. In fact, a number of the examples of festive goods given in the Explanatory Notes, notably artificial Christmas trees, are durable goods. As a result, the CITT decided that the goods were best classified under tariff heading no. 95.05. THE STANDARD OF REVIEW [41] It is not contested that the CITT is an expert tribunal and that, while it does not have the benefit of a privative clause, questions of tariff classification fall squarely within the heart of its expertise. Such questions are questions of mixed fact and law, involving as they do the application of a legal scheme to a set of facts. While the CITT has no relative expertise vis-à-vis the Court in terms of the interpretation of legal texts of general application, it does have the advantage of long experience in applying the Schedule of the Customs Tariff to a whole range of goods. On balance, the appropriate standard of review is reasonableness simpliciter: see Yves Ponroy Canada v. Canada (Deputy Minister of National Revenue M.N.R.), [2000] F.C.J. No. 1202 (F.C.A), at para. 4 to 6. ANALYSIS [42] The issues before this Court have been significantly reduced by counsel's concession that if the CITT is correct that the 2003 Amendment has no application to this problem, one cannot say that the CITT's decision on the merits is unreasonable. [43] Counsel for the President raised three issues, two of which can be disposed of summarily. Counsel argued that the CITT erred in applying the Interpretation Act to the Explanatory Notes as they are not enactments, as that term is used in the Act. The short answer is that the CITT did nothing of the sort. It specifically noted that the Explanatory Notes were not an enactment and therefore were not subject to the Interpretation Act. However, this did not preclude it from looking to the Interpretation Act for guidance as to how the legal system deals with subsequent amendments to an existing law. It noted the presumption against retroactivity and then, relying on section 58 of the Customs Act, concluded that Parliament did not intend the retroactive application of Explanatory Notes. This reasoning, as well as the conclusion to which it leads, is eminently reasonable. [44] The President also argued that the CITT wrongly asserted an equitable jurisdiction which its enabling legislation has not given it. Counsel argued that since the CITT is a statutory tribunal, it has only those powers which are conferred upon it by its enabling legislation. The general proposition advanced by counsel is irrefutable, but it has no application to these facts. The CITT did not invoke an equitable jurisdiction. It merely noted its obligation to act in accordance with the rules of natural justice: To impose retroactively a different tariff classification is, in the Tribunal's view, contrary to natural justice and principles of fairness. [At para. 24.] [45] Ever since the decision of the Supreme Court in Nicholson v. Haldimand Norfolk (Regional) Police Commissioners, [1979] 1 S.C.R. 311, it has been the law of Canada that all administrative tribunals must act fairly and not arbitrarily. The CITT did nothing more than recognize that which the law required it to do. [46] This leaves only the arguments dealing with the retroactive application of the 2003 Amendment. The first is that the CITT erred in treating the issue as one of retroactivity because the amendment did not change the scope of the tariff. The second is that the decision of this Court in Suzuki Canada Inc. v. Canada (Customs and Revenue Agency), 2004 FCA 131, [2004] F.C.J. No. 615, has already decided the question of retroactive application in the President's favour. The third is that section 11 of the Customs Act specifically contemplates a retroactive application when it requires the CITT to consider the Explanatory notes "as amended from time to time." I propose to deal with each of these questions in its turn. [47] The CITT proceeded on the basis that it was faced with a problem of retroactive application of a change in the Explanatory Notes. In my view, the better view is that the problem is one of retrospective explanation. The distinction is illustrated by the following passage from the reasons of Iacobucci J. in Benner v. Canada (Secretary of State), [1997] 1 S.C.R. 358: 39. The terms, "retroactivity" and "retrospectivity", while frequently used in relation to statutory construction, can be confusing. E. A. Driedger, in "Statutes: Retroactive Retrospective Reflections" (1978), 56 Can. Bar Rev. 264, at pp. 268-69, has offered these concise definitions which I find helpful: A retroactive statute is one that operates as of a time prior to its enactment. A retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. A retroactive statute operates backwards. A retrospective statute operates forwards, but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted. A retroactive statute changes the law from what it was; a retrospective statute changes the law from what it otherwise would be with respect to a prior event. [48] In the present case, both the importation of the goods and the initial determination of the tariff classification occurred prior to the adoption of the 2003 Amendment. Consequently, the CBSA's decision did not raise issues of retroactivity or retrospectivity. When the matter came before the CITT, the facts had not changed but the Explanatory Notes had. The question of retrospective application arose because the CITT was asked to apply new "law" to old facts. Had the CITT chosen to apply the 2003 Amendment, it would have given it retrospective effect, not retroactive effect. The CITT mischaracterized this issue, but since all parties treated the issue as one of retroactivity, so I will use that term in describing their positions. [49] Counsel for the President argued strenuously that retroactivity was not an issue before the CITT since the 2003 Amendment did not change the rules to be applied to the facts. In his view, the 2003 Amendment did nothing but recognize that which was implicit in the tariff and the other interpretive aids. In support of this position, counsel relied upon an extract of the proceedings of the World Customs Organization at which the 2003 Amendment was adopted. In that document, Canada’s representatives put their position with respect to the amendment as follows: 5. In Canada, the current EN [Explanatory Note] is subject to increasing scrutiny by the importing community and courts. More and more importers are questioning our interpretation of a "festive article". Apart from the traditional, inexpensive, non-durable articles like garlands and Chinese lanterns, we are being called upon to classify a variety of utility goods under heading 95.05. The list includes candles (heading 34.06) designed for use in birthday cakes as well as carpets, table linen and even kitchenware containing some sort of festive decoration, emblem or motif. [50] This is followed by the Secretariat Comments, which I take to be the comments of the permanent bureaucracy charged with administering the Harmonized System. Those comments are reproduced below: 6. The Secretariat wishes to draw the Committee’s attention to the fact that, as indicated in Doc. NC0704E1, the amendments under consideration are not intended to result in a change of scope. An examination of the comments produced above reveals that the purpose of the proposal is to further clarify the legal text of heading 95.05. Thus, the proposed texts put forward by Canada – to be inserted as exclusions – serve to supplement the existing Explanatory Notes. [51] Finally, counsel relies upon Article 3 of the International Convention. Article 3 provides as follows: Subject to the exceptions enumerated in Article 4 a) Each Contracting Party undertakes, except as provided in subparagraph (c) of this paragraph, that from the date on which this Convention enters into force in the respect of it, its Customs tariff and statistical nomenclatures shall be in conformity with the Harmonized system. It thus undertakes that, in respect of its Customs tariff and statistical nomenclatures: i) it shall use all the headings and subheadings of the Harmonized System without addition or modification, together with their related numerical codes; ii) it shall apply the General Rules for the Interpretation of the Harmonized System and all the Section, Chapter and Subheading Notes and shall not modify the scope of the Sections, Chapters headings or subheadings of the Harmonized System; and … [Emphasis added.] [52] Taking all of this together, counsel argued that it is clear that the World Customs Organization considered that the 2003 Amendment did not, and could not, change the scope of tariff heading no. 95.05. The 2003 Amendment, the argument goes, merely clarified that which was already implicit in the tariff heading. Furthermore, as a Contracting Party to the International Convention, Canada itself is prohibited from modifying the scope of the various tariff headings, which suggests that both the CITT and this Court are bound to follow the guidance of the amended Explanatory Notes. [53] The difficulty with this argument is that, if it was known all along that the Explanatory Notes with respect to tariff heading no. 95.05 was intended to exclude goods with a utilitarian function, why was the exclusion not included in the original version of the Explanatory Notes? The obvious answer is that it was not known that utilitarian goods were to be excluded. As a result of various challenges by importers, it became clear that the tariff heading and the Explanatory Notes were either incomplete or ambiguous. Since the tariff heading could not be changed, it was necessary to amend the Explanatory Notes in order to settle the issue. [54] It is true that the 2003 Amendment did not, in a literal sense, change the scope of the tariff headings in question since both tariff headings nos. 6302 and 9505 continued to be wide enough to include the goods in question. [55] It is equally true that the 2003 Amendment did change the scope of the Explanatory Notes to tariff heading no. 9505 by excluding certain items which would otherwise have fallen within the inclusive categories used in the Explanatory Notes. Nothing in tariff heading no. 9505 or in the Explanatory Notes, as they read prior to the adoption of the 2003 Amendment, would lead an attentive reader to conclude that of all articles traditionally used at Christmas festivities, those with a utilitarian function were to be excluded from classification under tariff heading no. 9505. In practical terms, tariff heading no. 9505 had a more limited scope after the adoption of the 2003 Amendment than it did before. [56] The argument that the 2003 Amendment is to be treated as simply making clear what was previously implicit in tariff heading no. 9505 is based upon the abstract notion that the Explanatory Notes cannot change the scope of the tariff headings. The CITT's decision to not give retroactive (in the CITT's view) effect to the 2003 Amendment is based upon the practical reality that the 2003 Amendment excluded from tariff heading no. 9505 a category of goods which were not previously excluded. [57] It is this practical difference in the application of the tariff headings which raised the question of the application of the 2003 Amendment to importations which occurred prior to its adoption. The CITT resolved this issue by reasoning by analogy from the provisions of the Interpretation Act. Since the Explanatory Notes are not legally binding in the interpretation of the tariff headings, though they must be considered (see Suzuki, at para. 12), it was reasonable for the CITT to decide that the issues of fairness which it identified constituted a sound reason to decline to apply the 2003 Amendment to goods imported prior to the date of its adoption. [58] Counsel for the President argued that even if a question of retroactive application arises, this Court previously sanctioned a retroactive application of Explanatory Notes in Suzuki. The issue in Suzuki was whether certain all-terrain vehicles were to be classified as "motorcycles" (tariff heading no. 8703) or "motor cars and other vehicles principally designed for the transport of persons" (tariff heading no. 8711). The CITT's decision, reported at 2003 C.I.T.T. No. 35, makes it clear that, after the goods were imported, a paragraph was added to the Explanatory Notes to tariff heading no. 8703 to specifically include "Four-wheeled motor vehicles with tube chassis, having a motor-car type steering system (e.g. a steering system based on the Ackerman principle)" while a corresponding addition was made to the Explanatory Notes to tariff heading no. 8711 to exclude the very same vehicles from that tariff heading. The CITT accepted expert evidence that while the ATV’s question had a steering system based on the Ackerman principle, they did not have a motor-car type steering system. As a result, the CITT held that the goods in question were properly classified under tariff heading no. 8711 because they had more in common with motorcycles than they did with motor-cars. [59] This Court held that the CITT had acted unreasonably in interpreting "motor-car type steering system" by ignoring the definition provided by the Explanatory Notes ("based on the Ackerman principle") and substituting another, taken from the expert evidence. The Court made two comments about the weight to be given to Explanatory Notes: 13. …Essentially, then, the Explanatory Notes are intended by Parliament to be an interpretive guide to tariff classification in Canada and must be considered within that context. To satisfy their interpretive purpose, and to ensure harmony within the international community, the Explanatory Notes should be respected unless there is a sound reason to do otherwise. […] 17. …the Tribunal is not bound to apply the Explanatory Notes, where there is a sound reason to depart from their guidance. Expert evidence can, in some circumstances, provide such a reason. However, even in a case where the Tribunal could reasonably choose not to apply the Explanatory Notes, it does not have the authority to rewrite or ignore such Notes by redefining their terms. [60] Counsel for the President relies on these passages as authority for the proposition that Explanatory Notes are to be given retroactive effect, as they were in Suzuki. [61] It is apparent from the Court’s reasons that the issue of retroactive effect was not argued. There is no mention anywhere in the Court’s reasons of the relative dates of importation and the complementary additions to the Explanatory Notes for tariff headings nos. 8703 and 8711. This is hardly surprising since the CITT agreed that the Explanatory Notes were to be taken into account: …The Tribunal's practice has been, in coming to a decision, not to ignore relevant classification opinions and changes to the Explanatory Notes, even if they were issued after goods were imported. As stated in Readi-Bake Inc. v. DMNR,18 the Explanatory Notes serve the purpose of clarifying the words of the headings and do not change them. Although section 11 of the Customs Tariff provides that, in interpreting the headings and subheadings, regard shall be had to the classification opinions and the Explanatory Notes as amended from time to time, the Tribunal is bound by neither one nor the other. [At p. 8.] [62] As a result, the issue of retroactivity was neither raised nor decided in Suzuki. The issue before the Court was the CITT's interpretation of the Explanatory Notes, not their retroactive application. If the CITT and counsel appearing for the parties all operated on the basis that the additions to the Explanatory Notes were material, it was not for this Court to challenge that assumption. [63] The last issue raised by the President on the issue of retroactivity is the wording of section 11 of the Customs Act which directs that in interpreting the tariff "regard shall be had to…the Explanatory Notes…as amended from time to time." This argument was raised for the first time in the course of oral argument; it is not found in the President’s Memorandum of fact and Law. [64] The President's position is that the reference to "as amended from time to time" directs the CITT to give effect to amendments as they are adopted without regard to the time at which the dispute before it arose. In other words, the 2003 Amendment is to be given retrospective effect. But, if the Explanatory Notes are not binding on the CITT in the normal course, they cannot be made binding by being given retrospective effect. The CITT identified a sound reason for not giving the 2003 Amendment retrospective effect. I am unable to say that it acted unreasonably in doing so. [65] In summary, the CITT declined to give retrospective effect to the 2003 Amendment because, given its practical effect, it would have been unfair to do so. This assessment is rooted in the nature of the amendment and in the nature of the goods. As a result, I do not wish to be taken as having established a hard and fast rule as to retrospective application of amendments to the Explanatory Notes. As noted earlier, the general practice of the CITT is to take into account amendments to the Explanatory Notes adopted after the importation of the goods. [66] Whether or not a given amendment is to be given effect is a matter which is best left to the informed discretion of the CITT, unless it misdirects itself to such a degree that our intervention is warranted in accordance with the Supreme Court's decision in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. CONCLUSION [67] I would therefore dismiss the appeal with costs. The CITT's reasons for declining to give the 2003 Amendment retrospective effect withstand a "somewhat probing examination" and as a result, there are no grounds upon which this Court should intervene: (Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., [1997] 1 S.C.R. 748). J.A. FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-608-05 STYLE OF CAUSE: THE PRESIDENT OF THE CANADA BORDER SERVICES AGENCY v. DECOLIN INC. PLACE OF HEARING: Montreal, Quebec DATE OF HEARING: November 8, 2006 REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A. CONCURRED IN BY: DESJARDINS J.A. CONCURRING REASONS BY: PELLETIER J.A. DATED: December 21, 2006 APPEARANCES: Me Pierre-Paul Trottier Me Yannick Landry FOR THE APPELLANT Me Michael Kaylor FOR THE RESPONDENT SOLICITORS OF RECORD: John H. Sims, Q.C. Attorney General of Canada FOR THE APPELLANT Lapointe Rosenstein Montreal, Quebec FOR THE RESPONDENT