Canada: Duties Relief — CITT Clarifies Application of "End Use" Provisions

Last Updated: June 26 2006

Article by Greg Kanargelidis, ©2006, Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on International Trade - May 2006

The evolution of the existing jurisprudence indicates that the Tribunal insists that for duties relief to be accorded to imported goods, the goods must be attached to a "host" good both physically as well as "functionally."

In a decision dated March 20, 2006, the Canadian International Trade Tribunal (CITT) clarified the circumstances in which the various so-called "end use" provisions apply to imported goods. In Jam Industries Ltd. v. President of the Canada Border Services Agency, the CITT determined that the duties relief provisions do not apply when musical instruments are connected to a computer and thereby have enhanced functionality.

Legislative Background

All goods imported into Canada are imposed with customs duties pursuant to the provisions of the Customs Tariff. To determine the applicable tariff rate of duty applicable to any imported goods, the goods must be classified among some 8,000 tariff classifications which are set out in the List of Tariff Provisions, which is a schedule to the Customs Tariff.

The List of Tariff Provisions includes 99 chapters organized in 21 sections. An importer is required to classify imported goods in a tariff classification found within Chapters 1 – 97 of the Customs Tariff. Chapter 99 of the Customs Tariff sets out duties relief provisions that might apply to goods classified in Chapters 1 – 97 of the Customs Tariff. The particular tariff item at issue in Jam Industries is No. 9948.00.00, which provides for "duty free" treatment to imported goods that are:

Articles for use in the following:

Automatic data processing machines and units thereof …

In other words, if the imported good is an "article", "for use in" a computer, then the article will be accorded duty-free treatment under tariff item No. 9948.00.00 when imported into Canada.

Given the potential for substantial duties relief, importers have often sought to rely on the benefits of tariff item No. 9948.00.00 and there are several CITT decisions dealing with this or similar provisions. In addition, the phrase "for use in" is defined in subsection 2(1) of the Customs Tariff in the following terms:
"for use in", wherever 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.

The Jam Industries Case

Jam Industries concerns 29 models of keyboard synthesizers, digital pianos and digital organs, and four expansion boards for synthesizers. All of these items (except the expansion boards), are enabled by Musical Instrument Digital Interface (MIDI).

The importer did not challenge the Canada Border Service Agency’s determination of the classification of the goods within Chapters 1 – 97 of the Customs Tariff, but argued that the goods are entitled to the benefits of classification under the "end use" tariff item No. 9948.00.00. The CBSA argued that the goods are not "articles for use in" computers and therefore do not benefit from the duties relief "end use" provision.

The CITT’s Decision
The CITT has held that the expression "for use in" requires that goods be both physically and functionally joined. Furthermore, the CITT considered that the concept of "functionally joined" means that the goods "for use in" the so-called "host" goods have a functional relationship (be it active or passive) with the "host" goods.

It is clear from the jurisprudence that the functional relationship of the imported good to the "host" good does not have to qualify as the "sole" or "principal" use for tariff relief purposes. In addition, it is not an impediment to the application of the tariff relief provision if the imported good is only temporarily attached to the "host" good in question. Finally, to the extent there are several uses for the imported goods, the existence of such other uses does not prevent an imported article from falling within the tariff relief provision.

In Jam Industries, the CITT considered and applied this jurisprudence and prior decisions to the facts at issue and found that the musical instruments did not qualify for the tariff relief provision. In particular, the CITT held that in the prior cases, the imported article exhibited a special relationship to the host goods. In each of those cases, the goods "for use in" complemented the function of the host good. In all these cases, it is clear which is the host and which is the complementary good.

The CITT went on to state that that "special" relationship had not been established in the case of the musical instruments. This conclusion was based in part on the fact that the goods at issue (with the exception of the extension boards) could be and are used as musical instruments on their own. Furthermore, the CITT determined that the goods in issue "do not contribute to the function" of a computer and are not "required by the computer for its operation or the performance of its functions".

As a result, the Tribunal ruled that the musical instruments cannot be said to be "for use in" a computer on the basis that the instruments do not "complement" the functions of a computer by virtue only of their connection to that computer. Instead, the Tribunal noted that the reverse appears to be true, in other words, that the connection to a computer enables the musical instruments to acquire additional capability. The Tribunal also held that the "expansion boards" also did not qualify for classification under tariff item No. 9948.00.00 on a different basis.


The Tribunal’s decision in Jam Industries clarifies the circumstances in which duties on imported goods may be relieved by reliance on the various "end use" provisions set out in Chapter 99 of Canada’s List of Tariff Provisions. The Tribunal’s decision signals a resistance by the Tribunal to expand the application of the tariff relief provision to goods "for use in" certain specified other so-called "host" goods, such as a computer. The evolution of the existing jurisprudence indicates that the Tribunal insists that for duties relief to be accorded to imported goods, the goods must be attached to a "host" good both physically as well as "functionally." With respect to the "functionality" test, the Tribunal clarifies in Jam Industries that the test is applied "one way", namely, the imported good or article must enhance or be necessary to the operation of the "host" good; it is not sufficient for the imported article to have enhanced functionality by being attached to the "host" good. Importers should review their importations and, to the extent possible, take advantage of the duties relief provisions available based on "end use" of the imported goods.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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