From time to time, importers who import dairy products (e.g.,
cheese, milk, butter) pursuant to the Import For Re-Export Program
(IREP) may have a dispute with the Department of Global Affairs
Canada (formerly DFATD and DFAIT) or the Canada Border Services
Agency. Pursuant to the IREP Program, Canadian processors may
obtain approval from Global Affairs Canada under the Export and
Import Permits Act to import dairy products for processing or
repackaging to manufacture dairy or food products for re-export.
For example, cheese can be imported in order to be further
manufactured into frozen pizzas to be exported. The dairy products
imported under IREP are not subject to the prohibitively high
customs tariffs charged at the over-access tariff rate. Instead,
the dairy products are imported at the applicable "within
access" duty rates.
Under the IREP Program, importers are accepted into the program
by Global Affairs Canada. After acceptance into the IREP Program,
importers receive import permits for each shipment of dairy
products so that duty relief occurs at the border at the time of
The most common dispute is that Global Affairs Canada may cancel
an import permit after an inspection/ verification. For example,
Global Affairs determines that imported dairy products were
diverted for sale in Canada or that procedures do not properly
account for wastage. When this occurs, Global Affiars Canada
cancels an import permit and, subsequently, the CBSA charges
over-access duty rates and issues a detailed adjustment statement
("DAS") to the importer. Usually the over-access duty
rates are over 200% and the DAS is for a significant amount of
If the importer disagrees with the decision by Global Affairs
Canada to cancel the import permit, the importer must file a
judicial review with the Federal Court of Canada. If the importer
does not file a judicial review application, it may not be able to
challenge the decision of the CBSA to impose duties. The recent
Volpak decision (AP-2012-009) of the Canadian International Trade
Tribunal ("CITT") highlights the view of the CITT that
their jurisdiction is limited. The CITT clearly stated in their
Decisions made by DFATD regarding the issuance and cancellation
of IREP permits are not within the Tribunal's jurisdiction and
are therefore outside the scope of this appeal.
The CITT went on to state:
While the Tribunal acknowledges that the relevant period to be
examined for the classification of goods is the time of
importation, the Tribunal also recognizes that the IREP is a unique
program that is designed to administer the flow of certain goods
not only into Canada but also back to the United States over a set
period of time. The IREP is a process, and the program, together
with any permit issued under its auspices, governs not only the
moment of importation but also the entire process of importing,
processing and re-exporting.
By cancelling Volpak's initial permit, DFAIT essentially
determined that the goods in issue were no longer part of the
process and, therefore, no longer qualified as "within access
commitment" for the purposes of the IREP. That being the case,
the CBSA had no option, by virtue of the conditions set out in
subsection 10(2) of the Customs Tariff, but to re-classify the
goods in issue as outside the IREP and, thus, to designate them as
"over access commitment".
This conclusion is reinforced by the CBSA's role within the
bifurcated IREP system. The CBSA has no power to issue permits
under the IREP, nor does subsection 10(2) of the Customs Tariff
grant the CBSA the power to investigate DFATD's rationale with
respect to granting or cancelling permits. The provisions of EIPA
clearly grant DFATD sole authority to issue, amend or cancel
permits under the IREP. To allow the CBSA to effectively ignore
DFATD's decision to cancel a permit would compromise the
statutory framework that Parliament created...
The CITT has clearly signaled that certain matters relating to
the cancellation of import permits must go to the Federal Court by
way of judicial review.
This means that importers must fight two battles (one at the
Federal Court and one at the CITT) when an IREP import permit is
cancelled and results in a customs duties assessment. It is
important to preserve one's legal right by filing the
application for judicial review within 30 days of
the cancellation of the import permit. It is also very important to
preserve one's legal rights by filing a request for
re-determination with the CBSA with respect to the DAS for the
tariff classification in the over-access HS Code and assessment of
duties and taxes within the 90 day limitation
These cases are often very complicated and the affected
importers require legal assistance in framing the correct issues
for the appropriate decision maker.
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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