Date: 20000724
Docket A-720-98
OTTAWA, ONTARIO, THE 24TH DAY OF JULY 2000
CORAM: DÉCARY J.A.
ISAAC J.A.
SHARLOW J.A.
BETWEEN:
FLORA MANUFACTURING & DISTRIBUTING LTD.
Appellant
- and -
THE DEPUTY MINISTER OF NATIONAL REVENUE
Respondent
JUDGMENT
This appeal is allowed with costs. The decision of the CITT is set aside and replaced with a determination that the products in issue should be classified under tariff item 3004.50.99 as originally claimed.
"Robert Décary"
J.A.
Date: 20000724
Docket: A-720-98
CORAM: DÉCARY J.A.
ISAAC J.A.
SHARLOW J.A.
BETWEEN:
FLORA MANUFACTURING & DISTRIBUTING LTD.
Appellant
- and -
THE DEPUTY MINISTER OF NATIONAL REVENUE
Respondent
Heard at Ottawa, Ontario, Wednesday the 21st day of June 2000
JUDGMENT delivered at Ottawa, Ontario, the 24th day of July 2000
REASONS FOR JUDGMENT BY: SHARLOW J.A.
CONCURRED IN BY: DÉCARY J.A.
ISAAC J.A.
Date: 20000724
Docket A-720-98
| CORAM: DÉCARY J.A. |
| ISAAC J.A. |
| SHARLOW J.A. |
BETWEEN:
FLORA MANUFACTURING & DISTRIBUTING LTD.
Appellant
" and "
THE DEPUTY MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR JUDGMENT
SHARLOW J.A.
[1] This is an appeal of the decision of the Canadian International Trade Tribunal (CITT) as to the classification under the Customs Tariff, S.C. 1997, c. 36, as amended, of certain liquid vitamin and iron supplements imported by Flora Manufacturing & Distributing Ltd.
[2] Flora claims that these products fall within customs tariff classification 3004.50.99, "other medicaments containing vitamins or other products of heading 29.36", which carried a nil tariff rate. Customs tariff classification 3004.50.99 includes single and multiple vitamin products for human use, as well as vitamin-iron preparations for human use.
[3] The Deputy Minister of National Revenue decided pursuant to section 63 of the Customs Act, R.S. 1985, c. 1 (2nd Supp), as amended, that they fell within customs tariff classification 2202.90.90, "other non-alcoholic beverages", which carried a tariff rate of up to 14.4%. Flora appealed to the CITT under section 67(1) of the Customs Act, which dismissed the appeal. Flora has appealed that decisions under subsection 68(1) of the Customs Act, alleging an error of law.
[4] In a decision issued concurrently with this one in four related appeals relating to a number of herbal remedies, this Court has determined, again, that the appropriate standard of review of CITT decisions in customs tariff classification appeals is reasonableness: Deputy Minister of National Revenue v. Flora Manufacturing & Distributing Ltd., (A-617-98 and A-633-98), Yves Ponroy Canada (A-97-98) and Hilary"s Distribution Ltd. (A-633-98) (see also Minister of National Revenue (Customs & Excise) v. Schrader Automotive Inc. (1999), 240 N.R. 381 (F.C.A.)). The reasonableness standard was described in the following terms by Iacobucci J. in Canada (Director of Investigations and Research) v. Southam Inc., [1997] 1 S.C.R. 748 at paragraph 56:
| An unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. Accordingly, a court reviewing a conclusion on the reasonableness standard must look to see whether any reasons support it. The defect, if there is one, could presumably be in the evidentiary foundation itself or in the logical processes by which conclusions are sought to be drawn from it. |
[5] The headings for customs tariff classifications 22.02 and 30.04 read as follows:
| 22.02 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic-beverages, not including fruit or vegetable juices of heading No. 20.09. 30.03 Medicaments ... consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale. |
22.02 Eaux, y compris les eaux minérales et les eaux gazéifiées, additionnées de sucre ou d'autres édulcorants ou aromatisées, et autres boissons non alcooliques, à l'exclusion des jus de fruits ou de légumes du no. 20.09 30.03 Médicaments ... constitués par des produits mélangés entre eux, préparés à des fins thérapeutiques ou prophylactiques, mais ni présentés sous forme de doses, ni conditionnés pour la vente au détail. |
[6] The explanatory notes for Chapter 22, which includes customs tariff classification 22.02, say that Chapter 22 "does not include medicaments of heading no. 30.03." Thus, if Flora's products are "medicaments", they are not within Chapter 22, and this appeal should succeed.
[7] However, the explanatory notes for Chapter 30, which includes customs tariff classification 30.03, say that Chapter 30 does not include foods or beverages (such as diatetic, diabetic or fortified foods, food supplements, tonic beverages and mineral waters). Thus, if Flora's products are beverages or tonic beverages, they cannot be medicaments and must fall within Chapter 22. In that case, this appeal should fail.
[8] The first question, then, is whether or not the products in question are "medicaments".
[9] The uncontradicted evidence before the CITT was that each of these products have a "drug identification number" assigned to it by Health Canada under section C.01.014.2 of the Food and Drug Regulations. It appears to be the case that a drug identification number cannot be assigned to a product until the responsible Health Canada officials are satisfied that it meets the definition of "drug" and that a number of other conditions are met.
[10] The word "drug" is defined in the Food and Drugs Act, R.S.C. 1985, c. F-27 as:
| ... any substance or mixture of substances manufactured, sold or represented for use in (a) the diagnosis, treatment, mitigation or prevention of a disease, disorder, abnormal physical state, or the symptoms thereof, in man or animal, (b) restoring, correcting or modifying organic functions in man or animal, or (c) disinfection in premises in which food is manufactured, prepared or kept. |
...les substances ou mélanges de substances fabriqués, vendus ou présentés comme pouvant servir_: a) au diagnostic, au traitement, à l'atténuation ou à la prévention d'une maladie, d'un désordre, d'un état physique anormal ou de leurs symptômes, chez l'être humain ou les animaux; b) à la restauration, à la correction ou à la modification des fonctions organiques chez l'être humain ou les animaux; c) à la désinfection des locaux où des aliments sont gardés. |
[11] It is argued for Flora that the CITT should have considered the existence of drug identification numbers for the products in issue as conclusive evidence that they are "medicaments". I am unable to accept this argument.
[12] The definition of "drug" in the Food and Drugs Act is considerably broader than the meaning of "medicament". Even apart from that, however, it would be wrong to state a categorical rule as to the weight that the CITT must give to evidence that a drug identification number has been assigned to a product. There may be situations where such evidence would be practically conclusive, but there is no reason to suggest that would invariably be so.
[13] In this case, it would have been open to the CITT to consider the evidence of the existence of a drug identification number to be relevant, and it appears that such evidence was presented. However, that evidence is not referred to in the decision under appeal, suggesting that CITT did not consider it particularly probative. Perhaps that is because the basis of the determination by Health Canada was not sufficiently explained. In any event, the determination of the weight to be put on evidence is a matter that is entirely within its jurisdiction as finder of fact. The failure of the CITT to mention the drug identification number in its reasons discloses no error of law.
[14] The other argument submitted for Flora raises a question of the interpretation of Schedule I of the Customs Tariff. The evidence before the CITT established, and the CITT accepted, that the products in issue are intended to be taken and are taken as a source of vitamins and iron. However, the CITT held that they are not medicaments because they are used primarily to maintain general health or well being, rather than to treat or prevent a particular disease.
[15] The existence of the distinction cited by the CITT has its source in the following portion of the explanatory notes for tariff classification 30.03 (medicaments):
| The provisions of the heading text do not apply to foodstuffs or beverages such as dietetic, diabetic or fortified foods, tonic beverages or mineral waters (natural or artificial), which fall to be classified under their own appropriate headings. This is essentially the case as regards food preparations containing only nutritional substances. The major nutritional substances in food are proteins, carbohydrates and fats. Vitamins and mineral salts also play an important part in nutrition. |
| Similarly, foodstuffs and beverages containing medicinal substances are excluded from the heading if those substances are added solely to ensure a better dietetic balance, to increase the energy-giving or nutritional value of the product or to improve its flavour, always provided that the product retains its character as a foodstuff or a beverage. |
| Moreover, products consisting of a mixture of plants or parts of plants or consisting of plants mixed with other substances, used for making herbal infusions or herbal "teas" and claimed to offer relief from ailments or contribute to general health and well-being but whose infusions do not constitute a therapeutic or prophylactic dose of an active ingredient specific to a particular ailment, are also excluded from this heading (heading 21.06). |
| Further, this heading excludes food supplements containing vitamins or mineral salts which are put up for the purpose of maintaining health or well-being but have no indication as to use for the prevention or treatment of any disease or ailment. These products which are usually in liquid form but may also be put up in powder or tablet form, are generally classified in heading 21.06 or Chapter 22. |
| On the other hand, the heading covers preparations in which the foodstuff or the beverage merely services as a support, vehicle or sweetening agent for the medicinal substances (e.g., in order to facilitate ingestion). |
[16] The CITT appears to have reasoned that a deficiency of vitamins or iron is not itself a disease. It is merely a condition that may lead to a disease. Therefore, the fact that vitamin and iron supplements are taken to prevent or reverse such a deficiency does not indicate a use for the prevention or treatment of a disease.
[17] In my respectful view, this reasoning cannot reasonably support the decision. If, as the CITT accepted, the ingestion of vitamins and minerals prevents or reverses a deficiency that may lead to a disease or an ailment, it must follow that the purpose of ingesting vitamins and minerals is to prevent that disease or ailment. It is suggestive, though of course not conclusive, that vitamin products intended for human use are expressly included in sub-subheadings as "medicaments" in Schedule I of the Customs Tariff.
[18] It was also argued for Flora that the CITT was wrong to conclude that a liquid preparation intended to be taken by the spoonful or capful cannot reasonably be considered to be a "beverage" within the meaning of Schedule I. Although there is considerable force in Flora's argument, it is not necessary to reach any conclusion on that point and I would decline to do so.
[19] I would allow this appeal with costs, set aside the decision of the CITT and replace it with a determination that the products in issue should be classified under tariff item 3004.50.99 as originally claimed.
Karen R. Sharlow
J.A.
"I agree
Décary J.A."
"I agree
Isaac J.A.