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Canadian International Trade Tribunal (CITT)
MORE CASES
Part 2
. Charoen Pokphand Foods Canada Inc. v. Canada (Border Services Agency)
In Charoen Pokphand Foods Canada Inc. v. Canada (Border Services Agency) (Fed CA, 2024) the Federal Court of Appeal dismissed a Customs Act [s.68(1)] appeal from an earlier CITT appeal, here on the proper classification of a food 'good' ['Charoen Pokphand Authentic Asia™ Hand-Wrapped Shrimp Wonton Soups']:[12] The first issue raised by the appellant relates to the analytical framework applied by the Tribunal, i.e. its application of the Rules. The appellant argues that the Tribunal erred by finding that Rule 1 was insufficient to dispose of the classification and, in the alternative, that the Tribunal erred in law by refusing to apply Rule 2(a) to classify the goods in issue.
[13] It is recalled that the Rules have been described as a hierarchy, meaning that Rule 1 is paramount and that subsequent Rules are only applied if the application of a previous Rule is inconclusive (Canada (Attorney General) v. Igloo Vikski Inc., 2016 SCC 38, [2016] 2 S.C.R. 80 at paras 7, 29).
[14] In the appellant’s view, Rule 1, if properly applied, would have been sufficient to dispose of the classification of the goods in issue. During the hearing, the appellant strongly urged the Court to find that the goods in issue were "“soup”" or "“preparations therefor”" and, as such, should be classified under heading 21.04. However, the Tribunal found that the goods in issue could not, as a whole, be classified solely with reference to Rule 1, as the distinct components of the goods in issue were prima facie classifiable under different headings, i.e. heading 19.02 (pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared) and heading 21.04 (soups and broths and preparations therefor) (Decision at para. 65). Specifically, the appellant challenges the Tribunal’s finding that the goods in issue do not constitute "“preparations therefor”" within the meaning of heading 21.04 and alleges that the Tribunal erred in law by not distinguishing Anderson Watts Ltd., 2019 CanLII 110939 (AP-2018-003) (Anderson Watts), a decision involving the interpretation of the term "“preparations therefor”" in the context of goods such as "“Instant Noodles”" and "“Noodles in a Cup”". In Anderson Watts, the Tribunal held that goods consisting of "“multiple edible components intended to be used and packaged together”" (in that case, powdered soup base and dry instant noodles) do not constitute preparations within the meaning of heading 21.04 due to their non-blended nature (Anderson Watts at paras 40–42).
[15] Although the interpretation of provisions of the Schedule to the Act can be a question of law (Impex at paras 29–42), "“the actual application of the provisions to a set of facts is more likely to be a matter of mixed fact and law”" (Canada (Attorney General) v. Best Buy Canada Ltd., 2021 FCA 161 at para. 24 (dissenting reasons with no disagreement from the majority on that point) (Best Buy)). Here, the appellant is taking issue with the Tribunal’s application of the analytical framework and the Anderson Watts decision. Contrary to what the appellant alleges, the Tribunal’s determination that the goods were not classifiable pursuant to Rule 1 is a question of mixed fact and law. The Tribunal clearly identified and followed the applicable framework for Rule 1 (Decision at paras 24, 38–46). Further, the Tribunal was entitled to consider and rely on its precedent in Anderson Watts. More importantly, the appellant is disagreeing with the evidentiary finding of the Tribunal that "“the wontons remain a distinct component and do not form part of the frozen soup concentrate”" and "“[t]he wontons are not ‘blended’ into the soup concentrate”" (Decision at para. 44). In doing so, the appellant is urging this Court to reassess and reweigh the evidence. This is not our role.
[16] Still, under the Tribunal’s Rule 1 analysis, the appellant alleges that the Tribunal incorrectly applied the Explanatory Note to heading 21.04. The Explanatory Notes provide for two subcategories of "“soups, broths and preparations therefor”": 1) "“preparations for soups or broths requiring only the addition of water, milk, etc.”" and 2) "“soups and broths ready for consumption after heating.”" As indicated above, the Tribunal made a finding that the goods in issue did not fall within either subcategory. The appellant contends that the Tribunal should have found that the goods in issue could fit within the first subcategory, and alternatively, disagrees with the Tribunal’s treatment of the subcategories as exhaustive rather than inclusive. The appellant is in disagreement with the Tribunal’s finding and I remain unconvinced by the appellant’s arguments that the Tribunal erred in law in its determination.
[17] In the alternative to its Rule 1 arguments, the appellant also challenges the Tribunal’s finding that Rule 2(a) does not assist in the classification of the goods. Rule 2(a) applies to unfinished goods. The Tribunal made a factual finding that the goods in issue are "“imported… ready for retail sale”" (Decision at para. 76). The Court cannot interfere with this finding on appeal. Further, I note that pursuant to Explanatory Note III on incomplete or unfinished articles, Rule 2(a) will generally not apply to Section IV goods, such as the goods in issue (Respondent’s Memorandum of Fact and Law at para. 29).
[18] The second issue raised by the appellant relates to the application of Rule 3(b) and the method used by the Tribunal to determine the "“essential character”" of the goods in issue. Rule 3(b) provides that goods made up of two different components are classified under the tariff of the component that gives them their essential character. Essentially, the appellant disputes the fact that the Tribunal placed greater emphasis on the relative weight of the goods’ components, i.e. wontons and soup concentrate, as opposed to the marketing and advertising of the goods in issue to determine their essential character. In other words, the appellant seems to imply that the marketing of the goods as a "“soup”" is determinative to the Tribunal’s determination of essential character.
[19] I disagree.
[20] The essential character of a good is always assessed on a case-by-case basis (Explanatory Note VIII to Rule 3(b)). The determination requires the assessment and weighing of evidence, a question heavily infused with factual determinations. For instance, in this case, the expert evidence before the Tribunal demonstrated that the goods in issue contain 76 percent shrimp wontons and 24 percent soup concentrate by weight, whereas the product labelling and literature demonstrated that the goods contain 55 to 60 percent shrimp wontons and 40 to 55 percent soup concentrate (Decision at para. 81). The Tribunal concluded, after considering the relative weight and other factors (Decision at para. 83), that the essential character of the goods in issue was imparted by the stuffed pasta component (Heading 19.02). Absent an egregiously incorrect and unsupported finding of fact, our Court cannot review factual findings in the context of an appeal pursuant to subsection 68(1) of the Customs Act (see Keurig at paras 17–19; Best Buy at para. 25; Canada (Border Services Agency) v. Danson Décor Inc., 2022 FCA 205 at para. 26). . Remington Sales Co. (Hyundai Heavy Industries (Canada)) v. Canada (Border Services Agency)
In Remington Sales Co. (Hyundai Heavy Industries (Canada)) v. Canada (Border Services Agency) (Fed CA, 2023) the Federal Court of Appeal considered appeals and cross-appeals of CITT decisions respecting determinations of the President of the Canada Border Services Agency (CBSA), here regarding 'dumping' of power transformers.
Here the court ilustrates a 'dumping' determination, and subsequent CITT procedures:[11] The President made a final determination of dumping on October 22, 2012. The determination was made with respect to “liquid dielectric transformers (power transformers) having a top power handling capacity equal to or exceeding 60,000 kilovolt amperes (60 megavolt amperes), whether assembled or unassembled, complete or incomplete, originating in or exported from Korea” (paragraph 5 of the reasons of the CITT in both appeals).
[12] The CITT made a finding that the dumping had caused injury to the domestic industry on November 20, 2012.
[13] In 2018, the CBSA initiated a review of the normal values and export prices applicable to power transformers exported from Korea to Canada by Hyundai Electric & Energy Systems (Hyundai Electric). The period of investigation for this review was from November 1, 2016, to October 31, 2018.
[14] In conducting this review, the CBSA determined that Remington imported transformers produced by Hyundai Electric and that Remington and Hyundai Electric were associated for the purposes of SIMA. The President, based on a reliability test conducted by the CBSA that calculated export prices under section 25, formed the opinion that the export prices determined under section 24 were not reliable. Therefore, the export prices were determined in accordance with the provisions of section 25.
[15] The export prices determined under section 25 resulted in retroactive assessments of anti-dumping duties.
[16] Remington and HCI each appealed the re-determination made by the President of the amount of the anti-dumping duties, and in particular the determination of the export price by the President, to the CITT.
II. Decision of the CITT
[17] The hearing before the CITT was an appeal de novo. The CITT addressed the arguments of HCI fully in its reasons issued in HCI’s appeals and then incorporated by reference these reasons in its decision in Remington’s appeal. Therefore, even though HCI has discontinued its appeal to this Court, to understand the reasoning of the CITT it is necessary to refer to the reasons issued by the CITT in HCI’s appeals. The references herein to particular paragraphs in the CITT’s reasons are references to the paragraphs in the reasons issued in the HCI appeals, unless otherwise indicated.
[18] The issues raised by Remington and HCI all related to the determination of the export price. In particular, they questioned whether a reliability test based on calculating the export price under section 25 was an appropriate basis for the President to form an opinion on whether the export price determined under section 24 was reliable. Remington and HCI also challenged certain deductions that the President made in determining the export price.
[19] The CITT described the reliability test conducted by the President in paragraph 23:... To perform the reliability test, the CBSA will select a representative sample of transactions and perform the export price calculation using the methodology of section 24 and then using the methodology of section 25 and compare the two results. If the section 25 export price is equal to or greater than the section 24 export price in 80 percent or more of the sample transactions, measured by volume or value as appropriate, then the section 24 export price will normally be considered reliable. Conversely, if the section 25 export price is lower than the section 24 export price in more than 20 percent of the sample transactions, then the section 24 export price will usually be considered unreliable, and section 25 will be used to determine export prices for that exporter. [20] The CITT noted, in paragraph 24 of its reasons, that “[t]he aim of the calculations under both sections 24 and 25 is to arrive at an ex-factory price for the goods”.
[21] The CITT concluded that the President erred in only performing a mathematical computation to assess whether the export price under section 24 was reliable:[80] Further, a determination of reliability that is focused exclusively on a mathematical formula comparing section 24 and section 25 export prices, with the objective of determining what should have been the appropriate level of profit realized on the importer’s resale of the goods, falls short of what would constitute an appropriate consideration of relevant factors that determine the reliability of the section 24 export price. [22] In paragraph 85, the CITT set out what, in its view, must be considered by the President in forming an opinion on the reliability of the section 24 export price:A proper reliability test must examine the section 24 export price in terms of its character or quality. It must assess reliability on the basis of all relevant factors such as the general and specific economic commercial conditions that existed at the time of the transaction, the consistency and accuracy of financial books and records that normally reveal the financial situation of the parties to the transaction, the particular nature of the goods that are the subject of trade, and the commercial context in which the transaction is completed. The reliability test must address the specific mischief which is to be prevented such as manipulation of the prices, etc. [23] Since the test used by the President did not assess the “character and quality of the section 24 export price” but rather “only compared two sets of prices — the section 24 export price and the section 25 export price” (paragraph 86) — the CITT remanded the matter to the President for reconsideration of whether the section 24 export price was unreliable.
[24] The CITT then addressed HCI’s arguments concerning the amounts deducted in computing the export price. In particular, HCI submitted that for the purposes of paragraph 25(1)(d), “the price of the goods as assembled” is the total contract price for the goods and any related services that are to be provided under the contract. The costs, charges or expenses for the services would then be deducted under subparagraphs 25(1)(d)(ii) to (v).
[25] The CITT found that since SIMA is focused on the dumping of goods, the President did not err in excluding the amounts to be paid for any services that were separately identified in the contract for the sale of the transformers. Since the price for the goods used by the President did not include any amounts payable for such services, no further deduction would be made under subparagraphs 25(1)(d)(ii) to (v) in relation to such services.
[26] In the reasons related to Remington’s appeal, the CITT summarized its findings with respect to the other deductions that were in issue in relation to the re-determination of the export prices:[50] For the same reasons given in EA-2019-008 and EA-2019-010 [HCI’s appeals], the Tribunal also makes several findings regarding the deductions made in re-determining export prices under sections 24 and 25 of SIMA:
...
(b) The Tribunal finds that, as the amount of profit is not being challenged, its deduction cannot be an issue, regardless of whether there are amounts regarding profit on services in the profit calculation.
(c) The Tribunal finds that it is not convinced that the evidence shows that the CBSA engaged in the practice of selecting the higher of service expenses or revenues for the purpose of reducing the section 25 export prices.
(d) The Tribunal finds that the CBSA correctly deducted third-party expenses for the purpose of arriving at the ex-factory price.
(e) For reasons of judicial economy, the Tribunal will not address whether paragraph 25(1)(c) should be applied rather than paragraph 25(1)(d). Nothing turns on the outcome of this question in the context of this proceeding. . Remington Sales Co. (Hyundai Heavy Industries (Canada)) v. Canada (Border Services Agency)
In Remington Sales Co. (Hyundai Heavy Industries (Canada)) v. Canada (Border Services Agency) (Fed CA, 2023) the Federal Court of Appeal considers the appellate SOR for CITT appeals:[28] Section 62 restricts any appeal to this Court to only questions of law. No appeal lies to this Court on any question of fact or mixed fact and law (unless there is an extricable question of law). Since appeals are restricted to questions of law, the standard of review is correctness (Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, at para. 37). . Terra Reproductions Inc. v. Canada (Attorney General)
In Terra Reproductions Inc. v. Canada (Attorney General) (Fed CA, 2023) the Federal Court of Appeal considered a JR where the Canadian International Trade Tribunal (CITT) declined to address a complaint about federal procurement for being 'out of time'.
In these quotes the court (Stratas JA) sets out some CITT time limit regulations:[1] The applicant complained to the Canadian International Trade Tribunal about a procurement issued by the Department of Natural Resources. The Tribunal decided not to deal with the complaint. It was out of time. Section 6 of the Canadian International Trade Tribunal Procurement Inquiry Regulations, SOR/93-602 provides that a potential supplier, such as the applicant, must raise an objection or file a complaint with the Tribunal no more than ten working days after the day on which the basis of the complaint became known or reasonably should have become known. The applicant objected three working days after the deadline had expired.
[2] There is nothing in the record suggesting that the applicant asked the Tribunal to apply subsections 6(3) and (4). These subsections, in narrow circumstances, permit a complaint to be made within thirty days.
....
[9] In oral argument, the applicant submits that the Tribunal should have applied s. 6(3)(b) and s. 6(4) on its own, to give the applicant the benefit of the thirty-day period. We disagree. In these circumstances, it is not the obligation of the Tribunal to look after the substantive interests of any party before it or develop or run a party’s case for it. As well, parties are advised in at least one guideline document, “Bid Challenge and Recourse Mechanisms”, of the deadlines. Here, the onus was on the applicant, who was well aware of the timing of its objection or complaint, to refer the Tribunal to s. 6(3)(b) and offer evidence and arguments in support of that request. . Canadian Hardwood Plywood and Veneer Association v. Canada (Attorney General)
In Canadian Hardwood Plywood and Veneer Association v. Canada (Attorney General) (Fed CA, 2023) the Federal Court of Appeal considered a JR [under s.96.1 of the Special Imports Measures Act] of a CITT dumping ruling. The CITT found dumping but that it "did not cause injury and (was) not threatening to cause injury to the domestic industry, pursuant to subsection 43(1) of the SIMA".
In these quotes the court considered the test for any 'injury' causing by the dumping, starting with the CITT's analysis and then moving to it's own:A. Did the Tribunal apply an unreasonable legal test when it conducted the past injury analysis?
(1) Tribunal Reasons regarding the determination of past injury
[19] First, in order to determine whether the dumping and subsidizing of the subject goods had caused or were threatening to cause injury to the domestic industry, the Tribunal determined which domestically produced goods constituted like goods, as defined under subsection 2(1) of the SIMA.
[20] The Tribunal also assessed whether there was, within the subject goods and the like goods, more than one class of goods. The Tribunal agreed with the complainants (the applicants here) and the respondent importers that there was a single class of goods, which included: (1) decorative and other non-structural plywood; and (2) veneer core platforms for the production of decorative and other non-structural plywood. The Tribunal determined that “domestically produced goods of the same description were ‘like goods’ in relation to the subject goods” (Tribunal Reasons at para. 69). The Tribunal found that there was no evidence of a dividing line that would clearly separate two classes of goods. Rather, the goods “appear[ed] to fall at various points along a continuum within a single class of goods” (Tribunal Reasons at para. 74).
[21] Next, the Tribunal set out an overview of the Canadian decorative and other non-structural plywood market and considered the arguments that the domestic industry was already being injured by the dumping and subsidizing of the subject goods in 2017, at the beginning of the POI [SS: "POI" = period of inquiry] (Tribunal Reasons at paras. 90–95). This analysis of the CITT's ruling continues at paras 22-43.
Then the court states it's own analysis:(3) Analysis
[49] The factors that may be considered by the Tribunal when it undertakes an injury analysis are found in subsections 37.1(1) and 37.1(3) of the SIMR. These subsections are reproduced as an Appendix to these reasons.
[50] While compelling, there are several reasons why I cannot agree with applicants’ arguments, having regard to the standard of review of reasonableness and the deference that is owed to the Tribunal in these matters.
[51] First, I will consider the POI. It was reasonable for the Tribunal to limit its inquiry to the three-year POI it set.
[52] The Tribunal set the POI for its inquiry from January 1, 2017, to June 30, 2020. That is the starting point. A determination that dumping or subsidizing has caused material injury must be based on injurious effects that crystalized during the POI. The Tribunal could not find that injury to the domestic industry allegedly suffered prior to the POI was caused by the subject goods and then extrapolate from there. There was no evidence before the Tribunal to make such a finding.
[53] Indeed, at this stage, when the Tribunal’s role is to determine whether the dumping or subsidizing of the subject goods (as found by the CBSA) caused material injury, the timing of the analysis is already set. The Tribunal cannot examine a POI set much earlier than the one used by the CBSA, since there was no finding that the subject goods were dumped or subsidized at that time (as noted in the Tribunal Reasons at paragraph 101). For the same reason, the Tribunal cannot set a much longer POI starting several years before the start of the period of investigation considered by the CBSA.
[54] As mentioned, when a Tribunal makes a finding of injury, it must find that the injury was caused by the dumping and subsidizing of the subject goods during the POI (see Nitisinone Capsules (5 December 2018), PI-2018-006 (CITT) at paras. 42–43 and Liquid Dielectric Transformers (9 July 2012), PI-2012-001 (CITT) at para. 32 [Liquid Dielectric Transformers]). In its previous decisions, the Tribunal concluded that “[a] determination that dumping ‘has caused’ material injury must, by definition, be based on injurious effects that crystalized (i.e. became manifest) during the POI”, although foreseeably imminent injury could arguably “support a determination that the dumping is threatening to cause material injury” (Liquid Dielectric Transformers at para. 32) [italics in original, underline added]. It was reasonable for the Tribunal to rely on its previous decisions which held that the injury must be caused by the dumping and subsidizing of the subject goods during the POI. Furthermore, the Tribunal’s Finding here is within a range of reasonable outcomes.
[55] Next, I cannot accept the arguments that the Tribunal required the domestic industry to demonstrate that the injury was increasing or intensifying during the POI. A careful reading of the Tribunal Reasons does not lead me to such a conclusion. The applicants do not reference any portion of the Tribunal Reasons that suggests this. To the contrary, the Tribunal based its decision in part on an assessment of “changes in the volume of the goods, their effect on the price of like goods, and their resulting impact on the state of the domestic industry, during the POI” (Tribunal Reasons at para. 103).
[56] Turning to the factors set out in section 37.1 of the SIMR, I note that the language of subsections 37.1(1) and 37.1(3) of the SIMR indicates that the Tribunal has great flexibility in how it analyzes the factors therein (note the use of the words “may be considered”). The fact that the Tribunal gave greater weight to some factors rather than others would not, in itself, render its decision unreasonable.
[57] Nothing in the SIMR precludes the Tribunal from examining trends, even in the context of factors where the SIMR does not explicitly require looking at trends. This is consistent with the fact that several of the factors listed in subsections 37.1(1) and 37.1(3) of the SIMR depend on an assessment of trends.
[58] In any event, it cannot be said that the Tribunal’s decision relied exclusively on factors that depended on trends or changes during the POI. The Tribunal specifically examined the factors from paragraphs 37.1(1)(a)–(c) of the SIMR when it conducted its injury analysis and did not rely solely on factors that required a deteriorating trend (Tribunal Reasons at paras. 106–78).
[59] For example, the Tribunal analyzed factors on price undercutting at paragraphs 115–37 of the Tribunal Reasons, analyzed “other performance indicators” at paragraphs 169–76 of the Tribunal Reasons, and analyzed the magnitude of the margin of dumping and amount of subsidy at paragraph 177 of the Tribunal Reasons. These factors do not require an assessment of deteriorating trends.
[60] When considering the question of price undercutting, the Tribunal found “the subject goods consistently undercut the domestically produced like goods throughout the POI” (Tribunal Reasons at para. 117). This conclusion was not based on any upward or downward trend in the data.
[61] The Tribunal also examined other factors that were not based on trends, in particular the fact that significant investments have been put of hold or delayed (Tribunal Reasons at para. 173) and the fact two domestic producers closed their operations or declared bankruptcy (Tribunal Reasons at paras. 174–76).
[62] As can be seen, the Tribunal’s determination of whether the dumping or subsidizing of the subject goods caused material injury did not rely exclusively on factors that depended on trends.
[63] What the applicants take issue with here is that the Tribunal placed less weight on factors not requiring an assessment of trends. It is the Tribunal’s role to weigh the factors when it determines whether the dumping and subsidizing caused injury and not for this Court to second-guess the Tribunal’s factual findings. The Tribunal’s Finding is not unreasonable on that basis.
[64] I will now address the argument that, by examining the domestic industry’s net income, a causal link between the subject goods and the like goods is established. Paragraph 42(1)(a) of the SIMA and section 37.1 of the SIMR preclude the Tribunal from finding that the mere presence of subject goods automatically caused injury to the domestic industry. The Tribunal must be satisfied, on the basis of its analysis, that it is the subject goods, and not other factors, that have caused the injury. The Tribunal did so here when it analyzed the evidence as it related to the factors set out in section 37.1 of the SIMR.
[65] The Tribunal examined the domestic industry’s financial performance at paragraphs 165–68 of the Tribunal Reasons. When considering the factors set out in section 37.1 of the SIMR, I cannot accept that the Tribunal should have relied on net income rather than gross income when examining the domestic industry’s financial performance.
[66] The text of subsections 37.1(1) and 37.1(3) of the SIMR do not require the Tribunal to examine the domestic industry’s net income. Not only do these subsections not require the Tribunal to examine or place any particular weight on any factor (through the use of the wording “may be considered”), but they also do not mention the terms “net income”.
[67] In sum, in my view, it was reasonable for the Tribunal to conclude, based on the evidentiary record before it, that dumping or subsidizing of the subject goods did not cause injury to the domestic industry. Overall, it seems that the applicants are taking issue with the weighing of the evidence as it relates to the factors set out in section 37.1 of the SIMR. They are essentially asking this Court to reweigh the evidence, prefer certain evidence that was before the Tribunal, and arrive at a different conclusion. That is not our role on judicial review. As mentioned, the Tribunal has a special expertise and, in light of this, we must show deference. Absent exceptional circumstances, this Court should not interfere with the decision maker’s factual findings (Vavilov at para. 125). There are no such exceptional circumstances here.
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