Date: 20020130
Docket: A-806-00
Neutral citation: 2002 FCA 43
CORAM: STONE J.A.
DÉCARY J.A.
EVANS J.A.
BETWEEN:
THE COMMISSIONER FOR THE CANADA CUSTOMS AND REVENUE
AGENCY FORMERLY KNOWN
AS THE DEPUTY MINISTER OF NATIONAL REVENUE
FOR CUSTOMS AND EXCISE
Appellant
and
GL & V / BLACK CLAWSON-KENNEDY
PULP AND PAPER MACHINE GROUP INC.
Respondent
Heard at Ottawa, Ontario, on January 30, 2002.
Judgment delivered from the Bench at Ottawa, Ontario, on January 30, 2002.
REASONS FOR JUDGMENT OF THE COURT BY: EVANS J.A.
Date: 20020130
Docket: A-806-00
Neutral citation: 2002 FCA 43
CORAM: STONE J.A.
DÉCARY J.A.
EVANS J.A.
BETWEEN:
THE COMMISSIONER FOR THE CANADA CUSTOMS AND REVENUE
AGENCY FORMERLY KNOWN
AS THE DEPUTY MINISTER OF NATIONAL REVENUE
FOR CUSTOMS AND EXCISE
Appellant
and
GL & V / BLACK CLAWSON-KENNEDY
PULP AND PAPER MACHINE GROUP INC.
Respondent
REASONS FOR JUDGMENT
(Delivered from the Bench at Ottawa, Ontario
on January 30, 2002.)
[1] This is an appeal under section 68 of the Customs Act, R.S.C. 1985, (2nd Supp.), c.1, by the Commissioner for the Canada Customs and Revenue Agency against a decision of the Canadian International Trade Tribunal dated September 27, 2000. In that decision the Tribunal allowed an appeal by GL & V / Black Clawson-Kennedy Pulp and Paper Machine Group Inc. and held that certain goods imported by the company should be classified under tariff item 8439.99.90 as "other parts of machinery for making pulp of fibrous cellulosic material", rather than under tariff item 7610.90.00 as "other aluminium structures".
[2] The Commissioner argues that the decision should be reversed, on the ground that the Tribunal erred in law by misinterpreting the words of the tariff items relevant to this case. It is common ground that, in order to prevail, the Commissioner must establish that the Board's decision was unreasonable:Canada (Deputy Minister of National Revenue, Customs and Excise - M.N.R) v. Schrader Automotive Inc. (1999), 240 N.R. 381 (F.C.A.). When applying this standard a court should ask itself whether the decision under review is "... supported by any reasons that stand up to a somewhat probing examination": Canada (Director of Investigation & Research) v. Southam Inc., [1997] 1 S.C.R. 748, at page 751.
[3] The goods in question in this case are known as aluminium walkway systems, and comprise stairs, ladders, and walkways with handrails. They were specifically designed to be attached to a paper-making machine with brackets and bolts that accompanied them. In order to reduce their bulk, they were shipped from Italy in an unassembled state. On their arrival at the respondent's factory in Canada, the respondent assembled and tested them before shipping them, in a disassembled form, to the client for whom they had been ordered. Finally, the goods were permanently attached to the client's paper-making machine. The respondent's business is the design and manufacture of sections of paper-making machines.
[4] The function of the goods in question is to give operators of a machine access to parts of the machine so that they can make necessary adjustments to, and service, the machine while it is in operation. Each aluminium walkway system is designed for the particular machine to which it is to be attached and has no other use; it is "integrated and designed as a unit" with the machine. There was uncontradicted testimony that the walkways are essential for adjusting and servicing paper-making machines, and that production would be impossible without them.
[5] Counsel for the Commissioner submits that the Tribunal's reasoning was so legally flawed that the resulting decision was unreasonable.
[6] First, the Tribunal failed to comply with the General Rules for the Interpretation of the Harmonized System, which govern the interpretation of the tariff: the Tribunal could only consider if the goods were parts of a paper-making machine after it had concluded that they could not be classified as "other aluminium structures". His argument was that the Tribunal must decide that an item describing entire goods does not apply to the goods in question before it considers whether they can be classified under another tariff item as parts of something. He also submitted that rule 1 of the General Rules requires the Tribunal to reach a conclusion on the application to the goods of a tariff heading before considering a sub-heading.
[7] We cannot accept this argument. After carefully reading the reasons of the Tribunal, we are not satisfied that it failed to address and decide the issues in the order that counsel says that it should have. Admittedly, it may not always be obvious when the Tribunal is simply summarising the positions of the parties and making findings of fact, and when it is making its own legal analysis. Nonetheless, when read as a whole, the reasons seem to us clearly to indicate that the Tribunal decided that the goods were not a structure before it determined that they were properly classified as parts of a paper-making machine.
[8] Having reached this conclusion, we need not comment further on counsel's submissions on the way that the General Rules apply to this case.
[9] Second, counsel for the Commissioner submitted that the Tribunal's conclusion that the goods should not be classified as "other aluminium structures" was unreasonable because the basis of its conclusion was that neither the explanatory notes relevant to tariff heading 76.10 ("aluminium structures"), nor the accompanying examples, contain "the notion of machinery or equipment." The Commissioner argues that the Tribunal's finding of fact that the walkway systems were an integral part of the paper-making machinery to which they were affixed misled it into concluding that the walkways themselves constituted machinery.
[10] In our opinion, however, this is not an accurate interpretation of the Tribunal's reasoning. It seems to us that the Tribunal was only making the point that the goods in question were distinguishable from the examples given of aluminium structures because they were designed to be used in connection with, and were an essential component, of machinery, not that they were themselves machinery. We see nothing unreasonable in this conclusion. Nor are we satisfied that the dictionary definitions of "walkway" and "passerelle" to which counsel referred us are determinative of the interpretation of the words of the tariff item in question.
[11] Counsel also submitted that goods must be classified as they are when they are imported and that it was therefore impermissible for the Tribunal to take into account the subsequent use of the walkway system. In our view, however, since the aluminium walkway system was specifically designed to be attached permanently to a paper-making machine so that the machine could function effectively, the Tribunal cannot be said to have breached the principle that goods must be classified as of the time of their importation.
[12] Third, counsel submitted that the Tribunal erred in law because it unreasonably concluded that the walkway system was a part of a paper-making machine. Counsel noted that the Tribunal had found that a walkway system comprised a "part" of a paper-making machine because it was "essential to the operation of the machine". He argued that this cannot be a defining criterion of a part because it is capable of applying to things that are manifestly not parts. Rather, he submits, the Tribunal should have applied a dictionary definition of "part" and asked whether the machines would be incomplete without the walkway. For example, while a computer needs electrical current in order to function, it does not need power to make it complete.
[13] In a case such as this involving goods that were physically and permanently attached to a machine (albeit so that they could easily be removed in the case of breakage), it was not unreasonable for the Tribunal to ask whether the walkway was a part of the machine by considering whether it was essential to its operation. The removal of the goods rendered the machine functionally incomplete.
[14] Nor was it unreasonable for the Tribunal to conclude that the walkway was essential to the operation of the machine, even though the machine would function mechanically without it. The evidence was that, as the machine ran, adjustments and servicing became necessary for the continuation of its satisfactory operation. Since the walkways are essential to enable operatives to perform these tasks, it was not unreasonable for the Tribunal to conclude that they are essential to the operation of the machine.
[15] Counsel for the Commissioner also argues that the Tribunal erred in concluding that the walkway system is a part of a paper-making machine because it is "integrated and designed as a unit" with the machine. This argument rests on the fact that the walkway system is only bolted onto the machine and, if necessary, can be removed, and is not moulded onto it and irremovable.
[16] We cannot regard this argument as demonstrating the unreasonableness of the Tribunal's decision in light of the other evidence before it: in particular, the fact that each system is designed to be used with a particular machine and has no other purpose, is removed only for the purpose of repair, and is necessary for the functional operation of the machine. In our view, the Tribunal's decision in this case is not inconsistent with the "committed by design" test that it has employed in other cases.
[17] That attachments to other kinds of goods have been characterised as "accessories" rather than as "parts" does not establish that a walkway system cannot reasonably be considered a part of a paper-making machine. Whether goods are a part of a whole is for the Tribunal to decide case-by-case, drawing on its expertise in this area and applying to the particular facts before it the various the criteria for determining whether something is a part.
[18] For these reasons, and despite the very able submissions made on behalf of the Commissioner by Mr. Sébastien, the appeal will be dismissed with costs.
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-806-00
STYLE OF CAUSE:
THE COMMISSIONER FOR THE CANADA CUSTOMS AND REVENUE
AGENCY FORMERLY KNOW
AS THE DEPUTY MINISTER OF NATIONAL REVENUE
FOR CUSTOMS AND EXCISE
and
GL & V / BLACK CLAWSON-KENNEDY
PULP AND PAPER MACHINE GROUP INC.
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: JANUARY 30, 2002
REASONS FOR JUDGMENT OF THE COURT: STONE J.A.,
DÉCARY J.A.,
EVANS J.A.
DELIVERED FROM THE BENCH: JANUARY 30, 2002
APPEARANCES:
Mr. Louis Sébastien
Mr. Étienne Trépanier FOR THE APPELLANT
Mr. Michael Kaylor FOR THE RESPONDENT
SOLICITORS OF RECORD:
Mr. Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Ontario FOR THE APPELLANT
Lapointe Rosenstein
Montréal, Québec FOR THE RESPONDENT