Canadian Importers Travel “Back to the Future” and Gain Fair, Transparent and Free Trade
If you are a fan of the movie trilogy “Back to the Future” you know that the dates October 25th, 26th and 27th, 2015 are the three days in time in which each of the centres on. The premise of the trilogy is that wrongs from the past can be fixed by simply traveling backwards and forwards in time, with the goal being to build a better future.
For years now, importing into Canada from countries where free trade agreements have been negotiated has become more CBSA created fiction rather than the transparent application of the Customs Act to help international traders build a better future for Canada. It seems to all have started when corn chips were imported more than eight years ago. That seemingly innocent series of import transactions set forth a chain reaction in the fabric of the international trade/time continuum that only Marty McFly and Doc Brown could understand.
Last week, the CITT released its decisions on BRI-CHEM SUPPLY LTD.(AP-2014-017), EVER GREEN ECOLOGICAL SERVICES INC. (AP-2014-027) and SOUTHERN PACIFIC RESOURCE CORP. (AP-2014-028), each of which was an appeal in the same vein as the now infamous FRITO-LAY CANADA, INC. V.PRESIDENT OF THE CANADA BORDER SERVICES AGENCY (AP-2010-002).
While the story is too complicated to explain in this brief blog, it’s important to understand that one of the biggest issues Canadian importers have had with CBSA’s logic, and the issue at the heart of all of the above cases, was the fact that CBSA applied what seems akin to science fiction from the movie screen to Canadian ports of entry. The concept of “zero refund position” is not written or defined anywhere in the Customs Act or any free trade agreement (FTA) legislation, yet CBSA argued that if an import entry originally declared as MFN and duty-free became dutiable due to a change in tariff classification at some point in the future, and more than a year had passed since time of entry, the importer had no right to claim duty free treatment under a FTA by filing a revenue neutral correction on that shipment.
Instead of the entry in question transitioning seamlessly in a revenue neutral correction from one duty-free transaction (duty free under MFN tariff treatment and tariff classification “a”) to another duty-free transaction (duty free under a FTA tariff treatment and corrected tariff classification “b”), the CBSA argument was based on the false assumption that the import entry would have to go through a Nano second of time where the goods were dutiable (MFN tariff treatment and tariff “b”) – in other words, a rip in the fabric of the international trade/time continuum!
If that Nano second of time (where goods were dutiable) took place after the period where refund claims could be filed under a FTA, the importer was stuck in a time warp. In a “Back to the Future” style scenario, they were trapped in the future with goods that qualified for a FTA (in the past, the present and the future!), but no way to file the corrected entries in the present without having to pay nonrefundable duties. The CBSA argument contradicted everything importers thought to be true about correcting revenue neutral entries that qualified for FTA benefits. For many years into FTAs such as NAFTA, revenue neutral adjustments were allowed, but suddenly, there was a rip in the fabric of time and what was true in the past was not true in the present nor the future!
It is somewhat fitting that the CITT released these decisions on October 26, 2015, one of the key dates in the movie “Back to the Future”, where Marty McFly and Doc Brown go back to the past to fix what’s wrong with the future. This entire “zero position refund” debacle has left Canadian importers stuck in a similar type of time warp for years now. We can only hope that the recent ruling of the CITT in favour of importers yet again ends this whole sad story.
Traditionally, when CBSA has been asked to defend their Nano second logic, they have responded that “NAFTA trumps a CITT decision”, making CITT rulings seem irrelevant and undermines the very foundation of the Tribunal. Through their actions, CBSA seemed to imply that the CITT did not understand NAFTA and had ruled incorrectly, but rather than right the wrong and challenge the decision at Federal Court level of appeal, CBSA simply ignored the ruling as being applicable only to the specific importer named in the case. If you take time to read the above rulings, CITT has taken a clear stand on the issue and has clearly stated how they believe CBSA should administer future transactions for any and all importers with the same fact patterns as the original Frito Lay Canada case. The CITT views are the polar opposite of those of the CBSA and it is obvious CITT members are not impressed with CBSA’s positioning on this issue.
The CITT should be applauded for drafting a plain language ruling that contains words that seem stronger and crisper than those originally used in the Frito-Lay Canada case. In Bri-Chem Supply Ltd., the CITT clearly reprimands the CBSA for “abuse of process” and points out that their argument of “zero position refund” is as much a work of science fiction as the hover board ridden by Marty McFly.
I think it is fair to state that Canadian importers are not looking forward to any sequels, prequels or reruns of this Frito-Lay “series” of arguments with the CBSA. Enough is enough. Let’s get “back to the future” of building Canadian prosperity through fair, transparent and free trade.