Canada: There's No Place Like Home: CITT Rules Hotels Are Not Domestic Settings

Whether an imported good is for "domestic" or for "other" purposes is an important distinction for customs because importers of goods "for domestic purposes" must pay customs duties ranging from eight per cent to 9.5 per cent of the declared value of the goods, while goods for "other" purposes are duty-free when imported into Canada. This distinction is found at the tariff item (eight-digit) level in Canada's List of Tariff Provisions applicable to the tariff classification of various types of furniture, such as seats, tables, and desks. Given the foregoing, the issue of whether any particular goods are of one type or another has been the subject of a number of appeals before the Canadian International Trade Tribunal (CITT or Tribunal). In the most recent decision by the CITT dealing with this issue, the Tribunal settled some of the uncertainty around when to classify goods as one type versus the other.

In Stylus Sofas Inc., Stylus Atlantic, Stylus Inc. and Terravest (SF Subco) Limited Partnership v. President of the Canada Border Services Agency (Stylus Sofas), the CITT was tasked with deciding whether certain seating should be classified as upholstered seats with wooden frames for domestic purposes or for "other" than domestic purposes. If for domestic purposes, the imported seating would be subject to a duty of 9.5 per cent versus duty-free. The CITT noted that the test to be applied is the intended use of the goods in issue, as opposed to their actual use. The analytical approach applied by the Tribunal was to consider the design, characteristics, marketing and pricing in order to determine the intended use of the goods at issue.

In its decision, the CITT took the Canada Border Services Agency (CBSA or Agency) to task for raising for the first time during closing arguments a position that CBSA has advanced in other appeals, namely, that a hotel is a "home away from home" and should be considered as a "domestic" setting. Notwithstanding the late introduction of this new line of argument, the CITT reviewed the CBSA's argument and landed a significant blow against the Agency's attempt to extend the concept of "domestic" outside of the household. It seems that the CBSA was trying to leverage a previous ruling by the CITT, Costco Canada v. The Commissioner of the Canada Customs and Revenue Agency, in which the Tribunal held that "domestic" should be interpreted in a wide enough manner so as to include goods that can be found outside the house, but which are primarily used by individuals in a domestic setting.

The CBSA has twice tried to argue that furniture intended to be used in hotels qualifies as furniture intended for domestic purposes. The CBSA put this argument to the Tribunal first in 6572243 Canada Ltd. O/A Kwality Imports v. President of the Canada Border Services Agency (Kwality Imports) and again in the recent Stylus Sofas appeal. In Kwality Imports, the Tribunal held in favor of the CBSA, not because it agreed that hotels were domestic settings, but rather because the importer was not able to satisfy the Tribunal that the imported furniture was intended primarily for use in hotels. In Stylus Sofas the CBSA returned to the CITT with the argument that hotels are in fact domestic settings, and therefore that goods intended for use in hotels should be classified as goods intended for domestic purposes. 


In order to convince the Tribunal that hotels are domestic settings, the CBSA argued that a hotel is a "home away from home", and that hotels are "domestic environments" due to the fact that they are places people go to sleep. The counter-argument put forward by the appellant was in essence a reductio ad absurdum: that the CBSA's reasoning would collapse the distinction in the Customs Tariff between furniture intended for domestic purposes and furniture intended for other purposes.

The CITT sided with the appellant, holding that there is a conceptual connection between a "domestic setting" and a house or household, and that: 

"[W]hile 'domestic' need not be limited to the 'four walls' of a home, there is nothing to suggest that its use should be applied to situations or settings which are clearly outside a household or domestic setting, including a hotel."

Hotels may be places where individuals and families go to sleep, but the CITT could not look beyond the fact that while hotels may market themselves as a "home away from home", they are in reality businesses rather than households or homes.


Having held that furniture intended for use in a hotel was not ipso facto intended for domestic purposes, the Tribunal then considered whether the appellant had discharged its burden of establishing that the imported furniture was not intended primarily for domestic use.  The Tribunal explained that this burden could be discharged in one of two ways: by demonstrating that the imported furniture was equally intended for domestic and other purposes, or by establishing that the furniture was primarily intended for non-domestic purposes.  Evidence relating to the design, characteristics, marketing and pricing of the imported furniture was put before the Tribunal in an effort to show that the furniture was intended primarily for use in hotels.   

The Tribunal considered evidence presented by the appellant with respect to the design and physical characteristics of the furniture, noting that it was constructed to a degree of durability exceeding what would be expected from furniture used in a home: for example, the chairs were built using heavy foam cushions, a solid hardwood frame construction, hardwood corner blocks, and both a specialized frame glue and screws or high-pressurized staples.  The fact that the furniture was sold not only to customers operating in the hospitality industry, but also to residential retailers did not, according to the Tribunal, detract from the fact that the Appellant had "intentionally designed the goods in issue not for domestic purposes but to meet the needs of its hospitality clients." In making this finding, the Tribunal confirmed once again that it is the intended use of the furniture that is significant, and that actual use in domestic settings is consistent with an intended use in a business setting. 

The Tribunal had no difficulties in finding that the goods were marketed to the hospitality industry, as the appellant was able to present evidence demonstrating that the goods were marketed directly to hospitality clients through the appellant's efforts to build relationships with hospitality buyers, interior designers and hotel owners.

Turning to the issue of price, the Tribunal did not consider this factor to be indicative of intended use, consistent with its rejection of a similar argument made by the CBSA in a previous case.  In fact, the CBSA did not try to refight this particular battle in Stylus Sofas, but instead agreed with the appellant that, at least in these circumstances, pricing was not a determinative criterion. The Tribunal agreed, noting that it would be inappropriate to expect the goods to be sold at a high price point in light of the fact that they were intended for sale to the low to mid-range hospitality market, and that pricing of the goods was "reflective of the quality of the furnishings rather than a determining factor of their intended purpose."

On the basis of its review of the design, characteristics, marketing and pricing of the goods at issue, the Tribunal was ultimately satisfied that the appellant had met its burden of establishing that the CBSA had incorrectly classified the goods, and allowed the appeal.


Stylus Sofas is an important decision, as the CITT made short work of the CBSA's attempt to extend the scope of the domestic sphere into hotels. Also noteworthy are the lessons that can be learned by importers with regard to the type of evidence that should be maintained in order to establish that the furniture items they import are not intended primarily for domestic use.

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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