Canada: Who Has The Burden Of Proof In A Canadian Customs Appeal?

Last Updated: July 26 2017
Article by Cyndee Todgham Cherniak

On July 18, 2017, the Canadian International Trade Tribunal (the "Tribunal") posted its decision in Schlumberger Canada Limited v. President of the Canada Border Services Agency (CITT Appeal No. AP-2015-022).  In this decision, the Tribunal opined on who has the burden of proof in tariff classification appeals.

First, it is important to know that, in Canada, customs appeals are trials de novo.  In law, the expression trial de novo means a "new trial" by a different tribunal.  The Tribunal is a different body than the Canada Border Services Agency ("CBSA").

Second, in a tariff classification appeal, the Appellant has the burden of proof.  This is not a common law principle in Canada.  Subsection 152(3) of the Customs Act places the burden of proof in this appeal with the Appellant.  Subsection 152 of the Customs Act provides as follows

"(1) In any proceeding under this Act relating to the importation or exportation of goods, the burden of proof of the importation or exportation of the goods lies on Her Majesty

(2) For the purpose of subsection (1), proof of the foreign origin of goods is, in the absence of evidence to the contrary, proof of the importation of the goods.

(3) Subject to subsection (4), in any proceeding under this Act, the burden of proof in any question relating to

(a) the identity or origin of any goods,

(b) the manner, time or place of importation or exportation of any goods,

(c) the payment of duties on any goods, or

(d) the compliance with any of the provisions of this Act or the regulations in respect of any goods

lies on the person, other than Her Majesty, who is a party to the proceeding or the person who is accused of an offence, and not on Her Majesty.

(4) In any prosecution under this Act, the burden of proof in any question relating to the matters referred to in paragraphs (3)(a) to (d) lies on the person who is accused of an offence, and not on Her Majesty, only if the Crown has established that the facts or circumstances concerned are within the knowledge of the accused or are or were within his means to know."

In a valuation appeal, the Appellant also has the burden of proof (See Lamb v. The President of the Canada Border Services Agency (CITT File No. AP-2014-012).  But, when you are dealing with a valuation approach, there is a reasonableness standard that comes into play:

Paragraph 25: " is for Mr. Lamb to establish that his preferred approach properly constitutes a possible flexible application of the deductive value method pursuant to section 53 and, further, that it represents a more appropriate application of that method, flexibly undertaken, compared to the approach utilized by the CBSA. In other words, Mr. Lamb has the burden of establishing that the CBSA erred in the way it chose to apply the deductive value method in a flexible manner in order to appraise the value for duty of the Volvo pursuant to section 53."

Third, the Tribunal previously stated in an origin appeal, MRP Retail Inc v. The President of the Canada Border Services Agency (CITT File No. AP-2006-005) that an appellant must prove by a preponderance of the evidence (see paragraph 65):

" the Tribunal's view, MRP must prove by a preponderance of evidence, but not beyond all possible doubt as the CBSA suggests, that the goods in issue were originating goods. To hold an appellant to such a high standard of proof would be to impose an even heavier burden than that placed upon a prosecutor in a criminal case, where the accused's liberty is often potentially at stake. The Tribunal is of the view that such an onerous requirement could only be imposed by express language, and nothing in the legislation under consideration leads to the conclusion that Parliament intended a burden of this nature."

Fourth, the Tribunal expects an appellant to submit evidence that establishes the basic facts supporting the tariff classification it argues. That being said, the Tribunal has also recognized in the past that while the appellant bears the initial onus of establishing its case on a prima facie basis, the onus then shifts to the respondent to rebut same.

Fifth, since the Tribunal conducts a trial de novo, it may receive new evidence that was not previously presented to the CBSA.

Sixth. the Tribunal may make comments about the evidence and the parties in its decision.  In the Schlumberger case, the Tribunal made comments about the CBSA's role in a tariff classification appeal:

"...the Tribunal wishes to comment on the role of the CBSA in tariff classification matters. It is clear that the burden in tariff classification appeals is on the appellant; however, the CBSA in this case was unhelpful. Even after the Tribunal made it clear during the hearing and the post-hearing teleconference that it was not satisfied that perforating gun parts could be classified as parts of "an other firearm or similar device", the CBSA simply refrained from adducing further evidence or making new submissions. Instead, it chose to simply reiterate its original position and rely on Schlumberger to fail to satisfy its burden. Without going as far as stating that the CBSA has an active duty to help an appellant's case, as in certain other fields of law, its passive stance in the face of its own deficient classification position, was, in this case, remarkable."

Seventh, the Tribunal may offer an opportunity to parties in a tariff classification appeal to submit post-hearing submissions.  In this case, the Tribunal the Tribunal asked for further submission when the Appellant presented new arguments.  The Tribunal described what was allowed as follows:

"37. In its original submissions and two subsequent submissions prior to the hearing, Schlumberger argued that the perforating gun parts are properly classified in tariff item No. 8479.89.90 as parts of well fracturing machines of tariff item No. 8479.89.10. However, at the hearing, Schlumberger acknowledged that the perforating guns were, in fact, not well fracturing machines, referencing Dr. Butt's expert report (wherein he makes an explicit distinction between the concept of fracturing and perforating). [17] Changing its argument, Schlumberger then submitted that the perforating gun should be classified in tariff item No. 8479.89.90 as other machines or mechanical appliances, with the classification of the perforating gun parts continuing to be in tariff item No. 8479.90.90 as "other parts" of heading No. 84.79.

38. Although the CBSA was given an opportunity to object to the change in argument, it did not do so. Nevertheless, in the interest of fairness, the Tribunal provided both parties the opportunity to make any post-hearing submissions they felt necessary relating to Schlumberger's new arguments.

39. Both parties made written submissions. Schlumberger presented a further nuanced position. In addition to the submission made at the hearing that the goods are classified as other machines of heading No. 84.79, in the alternative, it submitted that the perforating guns are classified as electrical machinery and equipment of heading No. 85.43. Schlumberger; however, failed to adduce any evidence in respect of its alternative argument aside from arguing that the perforating gun is remotely detonated electronically from a computer on site."

In the end, the Tribunal allowed the appeal in part.  However, the Tribunal also held that Schlumberger had failed to meet its burden of proof on any of the relevant factors in order to be granted duty relief under Chapter 99 for any of the goods in issue.

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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