Canada: Supreme Court Justices Drop The Gloves Over Tariff Classification

Last Updated: September 13 2017
Article by Jamie M. Wilks

In wintertime ice hockey is the delight of everyone.

Opening words of the majority decision of the Supreme Court of Canada in Igloo Vikski40

Canada (Attorney General) v. Igloo Vikski Inc.
2016 sec 38

INTRODUCTION

In Canada (Attorney General) v. Igloo Vikski Inc.41 the Supreme Court of Canada had its first opportunity to consider the appropriate tariff classification of imported goods under the harmonized system schedule ("the HS schedule") to the Customs Tariff.42 Although it is a given that tax legislation is complex and difficult to interpret, the HS schedule is particularly opaque, perhaps because it reflects the input and wide-ranging interests of more than 180 members of the World Customs Organization (WCO). The Igloo Vikski case delves deeply into those complex interpretive rules of tariff classification and provides guidelines on how to apply them.

The issue in this appeal was whether the protective puck-catching and blocking equipment that a hockey goaltender wears on his or her hands (that is, goalie gloves) fell within the tariff classification of "gloves, mittens and mitts" "of any textile fabric" under tariff item 6216.00.00 of the HS schedule, as alleged by the Canada Border Services Agency (CBSA), or "other articles of plastics and articles of other materials" under tariff item 3926.90.90 of the HS schedule, as alleged by Igloo Vikski.43 There was no dispute that the hockey gloves were made of both textile and plastics, and both types of material were important in the construction of the glove. At stake was whether Igloo Vikski could claim any refund for duties paid on the imported gloves.

The Canadian International Trade Tribunal (CITT) found in favour of the CBSA and ruled that the hockey goalie gloves were "gloves, mittens and mitts" "of any textile fabric."44 On appeal, the Federal Court of Appeal found that the CITT misapplied the rules for interpreting the HS schedule and that the goalie gloves prima facie fell within both of the tariff classifications for textiles and plastics. Accordingly, the court sent the matter back to the CITT, instructing the tribunal to apply a tiebreaker rule to determine the correct classification of the articles.45 In the deciding playoff game before the Supreme Court of Canada, in an 8-1 decision, the court supported the CITT's finding that goalie gloves are properly classified as "gloves, mittens and mitts" "of any textile fabric."

TARIFF CLASSIFICATION REGIME

In considering the Supreme Court's interpretation of the HS schedule, it is important to have a basic understanding of the structure of the HS schedule. As noted by the court,

[t]he Harmonized System uses an eight-digit classification system for tariff classifications, which is incorporated into the Schedule to the Customs Tariff. That system proceeds, within sections of the Schedule, from general to specific classifications via chapters, headings, subheadings and tariff items. For example, within Section I ("Live Animals; Animal Products") is found the eight-digit tariff item No. 0302 .12.40, applicable to fresh or chilled sockeye salmon. The first two digits of that tariff item (03) denote the item as falling within Chapter 3 ("Fish and Crustaceans, Molluscs and Other Aquatic Invertebrates"); the first four digits (03 .02) denote the heading ("Fish, fresh or chilled, excluding fish fillets ... "); the first six digits (0302.12) denote the subheading ("Pacific Salmon"); and the full eight-digit tariff item denotes the specific good ("Sockeye").

The Schedule to the Customs Tariff also contains "General Rules for the Interpretation of the Harmonized System." Section 10(1) of the Customs Tariff directs that "the classification of imported goods under the tariff item shall, unless otherwise provided, be determined in accordance with the General Rules."

The General Rules are comprised of six rules governing the classification of goods under the Harmonized System. According to the jurisprudence of the Federal Court of Appeal and the CITT, these rules are to be applied in a "cascading" fashion ....

In addition to the Harmonized System and the General Rules, the Explanatory Notes to the Harmonized Commodity Description and Coding System published and amended from time to time by the World Customs Organization also inform the classification of imported goods. Specifically, s. 11 of the Customs Tariff provides that, in interpreting the headings and subheadings employed by the Harmonized System, "regard shall be had" to the &planatory Notes. While, therefore the &planatory Notes (unlike the Harmonized System and the General rules themselves) are not binding, they must be at least considered in determining the classifications of goods imported into Canada.46

The HS schedule also includes chapter notes and section notes that have the force of law and must be applied. Thus, in interpreting the HS schedule, an importer must (1) look to the description of the items in the schedule, as modified by any chapter notes or section notes; (2) apply the six "General Rules for the Interpretation of the Harmonized System" and the related "Canadian Rules";47 and (3) have regard to the WCO's explanatory notes.48

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Footnotes

40 Paying tribute to the well-known opening of the judgment in Miller v. Jackson, (1977) EWCA Civ. 6, per Lord Denning MR: "In summertime village cricket is the delight of everyone."

41 2016 sec 38.

42 Customs Tariff, SC 1997, c. 36, as amended.

43 As the Supreme Court put it, supra note 41, at paragraph 1, the question is whether the goaltender "blocks and catches the puck with a 'glove, mitten or mitt,' or with an 'article of plastics.'"

44 Igloo Vikski Inc. v. President of the Canada Border Services Agency, 2013 Cati.LII 4408 (CITT).

45 Igloo Vikski Inc. v. Canada (Border Services Agency), 2014 FCA 266.

46 Igloo Vikski (SCC), supra note 41, at paragraphs 5-8.

47 These rules are set out in a schedule to the Customs Tariff, supra note 42.

48 World Customs Organization, Explanatory Notes to the Ha1'monized Commodity Description and Coding System, 5th ed. (Brussels: WCO, 2012) (herein referred to as "the explanatory notes").

First published by the Canadian Tax Foundation in (2017) 65:1 Canadian Tax Journal.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2017

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