Lexpert Magazine

LEXPERT MAGAZINE | JULY/AUGUST 2017 43 tion of their tariff classification and their tariff treatment. In both Frito-Lay and the Bri-Chem tril- ogy, the tariff treatments at issue were Most Favoured Nation (MFN) and NAFTA US tariff treatment (NAFTA). e MFN tariff treatment is available to goods from every country except North Korea. It is the fall- back tariff treatment for all goods. At the time of entry, the importers mistakenly claimed MFN treatment. As the imports were of US origin, the proper declaration ought to have cited tariff-free NAFTA treatment. But because the par- ticular MFN tariff rate in each case for the classifications claimed was also zero, there was no immediate incentive for the im- porters to correct their declaration, as they were entitled to do under the rules. As it turned out, all four importers not only chose the wrong tariff treatment, but also the wrong tariff classification. Had they chosen the correct classification under the MFN treatment, the importers would have been liable to duty. In Frito-Lay, for example, the goods had been erroneously classified as "cardboard," which attracted a zero MFN rate, as opposed to "corn snacks," which attracted an 11-per-cent MFN rate. Aer CBSA began audits, several years aer the goods' first entry, it became evi- dent that the chosen classifications were in- correct. CBSA's practice was to assess duty on the basis of the erroneous classification by reclassifying the goods correctly but to do nothing about the erroneous tariff treatment. In these instances, then, CBSA refused to accept the change in tariff treat- ment from MFN to NAFTA even though the goods were demonstrably eligible for NAFTA tariff treatment. e agency rea- soned that, as the country of origin had not changed, there was no basis for correction of the treatment. is was important because the Cus- toms Act limits requests for refunds based on NAFTA to a one-year retroactive per- iod. In stark contrast, however, the same rules would have permitted reassessment based on tariff reclassification for the four retroactive years affected by the erroneous classifications in Frito-Lay and Bri-Chem. Consequently, if the tariff classification changed but the tariff treatment did not, the importers would have to pay four years' MFN duty. Even if the correction to the NAFTA version was accepted aer the duty was paid, the importers would have been limited to refunds for only one year. In all four cases, rather than wait for CBSA to finish its audit and change the tariff classification only, the importers filed simultaneous corrections to the tar- iff classification and the tariff treatment. is moved the duty rate from a zero (but incorrect) MFN classification to a zero NAFTA tariff treatment, meaning the change was revenue-neutral. e import- ers' argument was that these simultaneous corrections to tariff classification and tariff treatment were not a request for a refund and therefore were not barred by the one- year limitation on NAFTA refund claims. This clearly struck the CBSA as bordering on original sin, resulting in tactics that eventually earned a reprimand from the tribunal. "e Tribunal under- stands the foregoing as straightforward corrections to everyday mistakes and be- lieves that the CBSA should have simply acknowledged these corrections for what they were. In the Tribunal's view, that should have been the end of the matter in this case," the CITT stated in its Frito-Lay reasons. "Instead, as of the filing of the corrections, the CBSA took Frito-Lay for what can only be described as somewhat of an administrative ride." e "administrative ride" included challenging the jurisdiction of the CITT: the CBSA argued that its very failure to respond to Frito-Lay's tariff corrections meant that the agency had not rendered a "decision" that could found an appeal. "e case was an uphill struggle to get to the Tribunal because the CBSA did ev- erything they could to avoid the litigation," Kirby says. "So much so that, aer waiting for two years for a decision which the Cus- toms Act requires to be issued 'without de- lay,' we had to convince the CITT that the CBSA's refusal to issue a decision was a de- cision in itself that was capable of appeal." Fortunately, Frito-Lay's struggle ended with the tribunal's conclusion that the chip maker was entitled to correct both the tar- iff treatment and the tariff classification, thus avoiding duty for any of the four years of imports. Frito-Lay, however, did not spare other importers similar grief. e issue arose again in March 2014 with respect to three separate importers, whose cases constitut- ed the Trilogy: Bri-Chem, Ever Green Eco- logical Services Inc. (EGES) and Southern Pacific Resource Corp. (SP). "Early on in these matters, it became clear that CBSA would not follow the Frito-Lay ruling," "The [CBSA] has always viewed itself as the self-proclaimed final authority on customs law and policy, feeling at liberty to dispute any legal argument or decision on the basis that it knows better …" " DARRELL PEARSON > BENNETT JONES LLP | ART OF THE CASE | PHOTO: SHUTTERSTOCK

• NEWCover
• front
• big
• back