Date: 20010111
Docket: T-941-99
BETWEEN:
ROLLS WOOD GROUP (REPAIRS & OVERHAULS) LTD.
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
HANSEN J.:
Introduction
[1] This is an application for judicial review of the January 15, 1999 decision of the Minister of National Revenue ("Minister") in which the Minister re-determined the tariff classification of the turbo-jet engines imported into Canada by the applicant between January 1, 1997 and December 31, 1997 on the basis of subsection 61(e) of the Customs Act, R.S.C. 1985 (2nd Supp.), c.1, as am. by S.C. 1993, C.44, s.92 ("Act") and criterion 3 of the Minister's criteria.
Facts
[2] The applicant, Rolls Wood Group (Repairs & Overhauls) Ltd. ("Rolls Wood"), is incorporated under the laws of Scotland and amongst other endeavours, overhauls, repairs and modifies turbo-jet engines for use in natural gas transmission equipment. Rolls Wood provides these services to Canadian customers at its facilities in Scotland. When the required work is completed, the applicant returns the turbo-jet engines to Canada.
[3] Rolls Wood is a successor corporation of Prime Mover Maintenance Limited. In 1990, Prime Mover Maintenance Limited applied to the Department of National Revenue, Customs and Excise ("Department") for a reclassification of its imports of turbo-jet engines. The Department determined the imports were not gas turbine engine systems under tariff item 8411.80.00.51, but instead were duty-free turbo-jet engines under tariff item 8411.12.00.90. This determination resulted in the applicant receiving a refund of $32,825.26 for duties paid on imports under the tariff item classification for gas turbine engine systems.
[4] In March 1997, the Department issued a Detailed Adjustment Statement ("DAS") to Rolls Wood instructing it to report its goods returning to Canada after repair on a two line entry. The tariff classification, however, remained unchanged.
[5] In September 1997, the applicant received a further DAS indicating the Department had re-determined the import classification from turbo-jet engines to turbo-jet parts. This change in classification did not change the imports' duty-free status. On the same date, the Department advised Rolls Wood by letter that it was reviewing its imports of turbo-jet engines for the period August 1995 to September 1997. The Department requested information about the engines, which Rolls Wood provided on October 23, 1997.
[6] On January 15, 1999, Donald Barker, in his capacity as a "Client Services Officer" issued two DASs to the applicant concerning the import of turbo-jet engines. The first DAS represented a decision to re-determine the tariff classification, for the period January 1, 1997 to December 31, 1997, from turbo-jet engines, (tariff item 8411.12.00.90) to gas turbines (tariff item 8411.82.90.90) pursuant to subsection 61(e) of the Act as it read prior to amendments effective January 1, 1998. As a result of this re-determination, the Department claimed outstanding duties owing from Rolls Wood in the amount of $4,261,337.61.
[7] The second DAS covered Rolls Wood's imports for the period from January 1, 1998 to January 15, 1999. Pursuant to paragraph 59(1)(a) of the Customs Act, R.S.C. 1985 (2nd Supp.), c.1, as am. by S.C. 1997, C.36, s.166 ("Amended Act"), the Minister re-determined the tariff classification of the turbo-jet engines to gas turbine engines as it had in the first DAS. As a result of this re-determination, the Department claimed further outstanding duties owing from Rolls Wood in the amount of $10,707,078.70 for a total amount owing of $14,968,416.31.
[8] On April 13, 1999, Rolls Wood posted a security bond with the Department in the amount of $14,968,416.31 and filed re-determination requests for both DASs with the Deputy Minister of National Revenue.
[9] On May 3, 1999, in response to a request by Rolls Wood, the Department stated it had relied on ministerial criterion 3 of Appendix C to Departmental Memorandum D-11-6-1 ("D-Memo") as the basis for the decision to apply the re-determination retroactively for two years. Criterion three reads:
| When goods were imported under a tariff item or code different from that set-out in departmental published directives and policies. |
[10] On May 27, 1999, the Department advised Rolls Wood that the person who signed the January 15, 1999 DASs held the position of "Tariff Values Administrator" and his designation as "Client Services Officer", which appeared on the DASs, was merely to identify where Mr. Barker could be reached.
[11] On May 28, 1999, the applicant issue a Notice of Application for, inter alia, an order quashing the purported decision dated May 3, 1999.
[12] On August 9, 1999 the applicant issued an Amended Notice of Application for an order quashing the first DAS dated January 15, 1999.
Issues
[13] The applicant raised two issues on the application for judicial review. First, whether the decision in the first DAS of January 15, 1999 was made by a person authorized by the Minister to make such a decision. In the alternative, if the decision in the first DAS was made by a person duly authorized to make the decision, did the decision-maker err in law in invoking ministerial criterion 3 as the basis to re-determine the tariff classification retroactively for two years.
Authority of the designated officer to make the decision
[14] Before addressing the issue of the decision-maker's authority, it is necessary to consider a preliminary issue raised by the respondent as to whether this application for judicial review is properly before the Court. The respondent submits the Act, in particular sections 63 and 67, provides a comprehensive scheme for appeals from determinations and re-determinations. Section 63 provides for a review by the Deputy Minister of the decision, and section 67 provides for an appeal to the Canadian International Trade Tribunal from the Deputy Minister's decision. Accordingly, decisions made pursuant to subsection 61(e) of the Act are subject to statutory rights of review and appeal, and thus are precluded from judicial review pursuant to section 18.5 of the Federal Court Act.
[15] Section 18.5 of the Federal Court Act precludes judicial review by the Federal Court of Canada of a decision or order of a Federal Board, Commission, or other Tribunal to the extent that there already exists a statutory right of appeal to one of the courts or bodies named in the section.
[16] In the present case, the applicant has sought a review by the Deputy Minister of the re-determination of the tariff classification itself pursuant to section 63 of the Act. The question remains, however, as to whether a review under section 63 can encompass a review of the decision-maker's authority. The respondent submits section 63 is open to such an interpretation. The relevant provisions of section 63 state:
63(1) Any person may,
| (a) within ninety days after the time the person was given an advance ruling under section 43.1, notice of a marking determination under section 57.01 or notice of a decision under section 60 or 61, or |
...
| request a review of the advance ruling, a re-determination of the marking determination, a further re-determination of the tariff classification or marking determination or a further re-appraisal of the value for duty re-determined or re-appraised under section 60 or 61. |
...
(3) On receipt of a request under this section, the Deputy Minister shall, with all due dispatch, affirm, revise or reverse the advance ruling, re-determine the marking determination or tariff classification or re-appraise the value for duty, as the case may be, and give notice of his decision to the person who made the request.
63.(1) Toute personne peut demander le réexamen de la révision:
| a) dans les quatre-vingt-dix jours suivant l'avis de la décision anticipée prise en vertu de l'article 43.1, de la décision sur la conformité des marques prise en vertu de l'article 57.01 ou de la décision prise en vertu de l'aticle 60 ou 61; |
...
(3) Sur réception de la demande prévue au présent article, le sous-ministre procède dans les meilleurs délais au réexamen et donne avis de sa décision au demandeur.
[En vertu du paragraphe 94(2) de la Loi de mise en oeuvre de l'Accord de libre-échange nord-américain L.R.C. 1985 (2e supp.), c.1 seulement le texte anglais a été abrogé et remplacé.]
[17] Upon a request for a review by an importer pursuant to section 63, the Deputy Minister may affirm, revise, or reverse the tariff classification. In my view, the language of section 63 contemplates a review of the merits of the decision made pursuant to subsection 61(e), but not of the decision-maker's authority. In the present case, the applicant is not seeking judicial review of the re-determination of the tariff classification itself. The applicant questions only the authority of the person who made the decision, which is properly the subject of judicial review by this Court.
[18] Both parties agreed, when considering the question of Donald Barker's authority to make the decision contained in the first DAS, the appropriate standard of review is "correctness".
[19] The respondent submits the authority of a designated officer to re-determine tariff classifications pursuant to section 61 is derived from section 59 of the Act which provides:
| 59. Any officer, or any officer within a class of officers, designated by the Minister for the purposes of this section (in sections 60 and 61 referred to as a "designated officer") may make re-determinations of tariff classifications or re-appraisals of value for duty under section 60 and 61. |
59. La révision du classement tarifaire et de l'appréciation de la valeur en douane est confiée à un agent chargé, ou à un agent appartenant à une catégorie d'agents chargée, part le ministre de l'application du présent article, dit agent désigné aux articles 60 et 61. |
[20] Although the first DAS indicates Donald Barker signed as a Client Services Officer and the May 27, 1999 letter from the Department states he held the position of Tariff Values Administrator, Mr. Barker's affidavit states on the date he issued the DAS in question, he held the position of Compliance Verification Officer, Trade Administration Services. He further deposed that a ministerial document dated December 31, 1997 authorized a person holding this designation to make re-determinations pursuant to section 61 of the Act.
[21] The relevant portions of the December 31, 1997 document in which the Minister designated Compliance Verification Officers for the purposes of section 61 of the Act states:
| I hereby designate, under the provisions of subsections 35.02(2), 42.1(1), 43.1(1), 57.01(1), 58(1), 59(1) and sections 42.01 and 59 of the Customs Act officers within the classes of officers indicated in the attached schedule, for the purposes of carrying out those provisions of the Act that are specified in the schedule. The designations issued on December 24, 1993 are replaced by the designations set our herein, effective this date. |
| SCHEDULE I |
| Designation of officers or classes of officers authorized to perform certain duties of functions of the Minister of National Revenue in respect to goods accounted for under section 32 of the Customs Act prior to January 1, 1998. ...[emphasis added] |
| (6) Section 59 Officers who may redetermine the tariff classification or reappraise the value for duty of imported goods under section 60 of section 61 of the Act. |
| ... |
| REGIONAL POSITIONS... |
| Compliance Verification Officer, Trade Administration Services Division |
| SCHEDULE II |
| Designation of officers or classes of officers authorized to perform certain duties or function of the Minister of national Revenue in respect of goods accounted for under section 32 of the Customs Act on and after January 1, 1998. |
| (8) Section 59(1) (a) Officers who may redetermine a decision respecting the origin, tariff classification or value for duty or imported goods made under section 58 of the Act. |
| REGIONAL POSITIONS |
| Compliance Verification Officer, Trade Administration Services Division (Application Record at 152) |
[22] As Donald Barker was a Compliance Verification Officer on the relevant date, the respondent maintains he had the authority to issue the first DAS.
[23] The applicant takes issue with the authority of the Minister to make these designations on December 31, 1997. The applicant argues the designations in the December 31, 1997 document are an attempt on the part of the Minister to delegate the powers and duties specifically conferred on the Minister which is contrary to paragraph 164(1)(a) of the Act, which provides:
| 164.(1) The Governor in Council may make regulations (a) authorizing a designated officer or class of officers to exercise powers or perform duties of the Minister, including judicial or quasi-judicial functions of the Minister, under this Act; |
164. (1) Le gouverneur en conseil peut, par règlement : a) autoriser un agent désigné ou une catégorie d'agents à exercer les pouvoirs et fonctions conférés, y compris en matière judiciaire ou quasi judiciaire, au ministre ne vertu de la présente loi; |
[24] To fully appreciate the applicant's argument, it is necessary to have regard to paragraph 164(1)(a) of the Act in the light of certain amendments to the Act. Pursuant to amendments contained in the Income Tax Amendment Act, 1997 S.C. 1998, c.19 ("ITAA"), paragraph 164(1)(a) of the Act was repealed and replaced by subsection 2(4) of the Customs Act ("Amended Act"). Subsection 262.(1) of the ITAA provides:
| 262.(1) Section 2 of the Customs Act is amended by adding the following after subsection (3): (4) The Minister may authorize an officer or a class of officers to exercise powers or perform duties of the Minister, including any judicial or quasi-judicial powers or duties of the Minister, under this Act. |
| 262.(1) L'article 2 de la Loi sur les douanes est modifié part adjonction, après le paragraphe (3), de ce qui suit: (4) Le ministre peut autoriser un fonctionnaire ou une catégorie de fonctionnaires à exercer les pouvoirs et fonctions, y compris les pouvoirs et fonctions judiciaires ou quasi-judiciaires, qui lui sont conférés en vertu de la présente loi. |
Subsection 262.(2) of the ITAA further provides:
| 262.(2)Any power or duty of the Minister of National Revenue delegated to an officer or a class of officers by an order made under section 134 of the Act, or a by a regulation made under paragraph 164(1)(a) of the Act, before the day on which this Act is assented to continues to be delegated to that officer or that class of officers until an authorization by the Minister made under subsection 2(4) of the Act, as enacted by subsection (1), changes the delegation of that power or duty. |
262.(2) Les pouvoirs et fonctions du ministre du Revenue national qui ont été délégués à un fonctionnaire ou à une catégorie de fonctionnaires par règlement pris en application de l'article 134 de la même loi, ou par disposition réglementaire prise en application de l'alinéa 164(1)a) de la même loi, avant la date de sanction de la présente loi continuent d'être ainsi délégués jusqu'à ce qu'une autorisation du ministre, prévue par le paragraphe 2(4) de la même loi, édicté par le paragraph (1), change cette délégation. |
[25] Thus, it can be seen that the object of the amendments to the Act was to give the Minister the authority to delegate the powers and duties specifically conferred on the Minister, rather than having to make the delegations by regulation. These amendments received Royal Assent on June 18, 1998.
[26] It appears from a reading of the December 31,1997 document, the Minister is designating officers to act on his behalf under both the Act and the Amended Act. Clearly, the references to subsection 59(1) and section 42.01 point to the Amended Act, since these provisions do not exist elsewhere, but both the Act and the Amended Act contain the remaining provisions with the exception of section 59, which is found in the Act only.
[27] While the Minister could designate officers pursuant to section 59 of the Act for the purposes of section 61, he could not delegate those powers and duties specifically conferred on the Minister under the Act. As noted earlier, this could be done only by the Governor in Council pursuant to paragraph 164(1)(a) of the Act. The applicant argues the specific wording of Schedules I and II, namely, "to perform certain duties or functions of the Minister of National Revenue" leads to the conclusion that this document reflects a delegation of those powers and duties specifically conferred on the Minister as opposed to a designation of certain officers for the purposes of various provisions of the legislation.
[28] The applicant quite rightly points out that this ministerial document predates by six months the coming into force of section 262 of the ITAA, which created subsection 2(4) of the Amended Act, which in turn grants the Minister the authority to delegate the duties and functions specifically conferred on him in the legislation. On this basis, the applicant argues the designation of Compliance Verifications Officer for the purpose of subsection 61(e) of the Act is invalid.
[29] The respondent argues that although the document is an example of poor drafting and despite the wording in the preambles to Schedule I and II, this document is limited to those designations which the Minister was authorized to make at the time.
[30] In this respect, I agree with the respondent's submissions. With the exception of subsection 61(e) which will be discussed later in these reasons, each of the provisions of the Act referred to in the December 31, 1997 document and included in Schedule I, specifically authorize the Minister to designate officers for the stated purposes.
[31] However, I do not agree that the inclusion in the December 31, 1997 document of Compliance Verification Officer as an officer designated for the purposes of section 61 is a complete answer for the respondent.
[32] Section 61 of the Act provided for the re-determination of a tariff classification within 90 days of the release of imported goods from Customs or in certain circumstances within two years of release. The DAS in question was a decision to re-determine the tariff classification under subsection 61(e) of the Act as it read prior to amendments on January 1, 1998. The relevant portions of section 61 provided:
| 61. A designated officer may, after imported goods have been released, (a) within ninety days, (b) where it was not possible for an officer to make a determination or an appraisal under subsection 58(1) because of insufficient information, within two years, (c) where, on the basis of an audit or examination under section 42 or a verification of origin under this Act, the designated officer deems it advisable, within two years, (d) in the case of a verification of origin under this Act where an election to average has been made under the regulations made pursuant to section 13 of the Customs Tariff, such further time as may be prescribed, or (e) where the Minister deems it advisable, within two years after the time a marking determination was made in respect of the goods under section 57.01 or a determination or an appraisal was made in respect of the goods under section 58, re-determine the marking determination, re-determine the tariff classification or re-appraise the value for duty of the goods and, where the designated officer makes such a re-determination or re-appraisal, the designated officer shall immediately give notice of that decision to |
| 61. L'agent désigné peut, après le dédouanement de marchandises importées, procéder à la révision de la décision sur la conformité des marques de celles-ci prise en application de l'article 57.01 ou de leur classement tarifaire ou de l'appréciation de leur valeur en douane effectués en application de l'article 58 dans les délais indiqués ci-après à compter de la décision, du classement ou de l'appréciation : a) quatre-vingt-dix jours; b) deux ans, lorsqu'un agent n'a pas été en mesure, faute de renseignements suffisants, de procéder au classement ou à l'appréciation prévus au paragraphe 58(1); c) deux ans, lorsqu'il l'estime souhaitable d'après les résultats de la vérification ou de l'examen visés à l'article 42 ou de la vérification de l'origine prévue par la présente loi; d) de délai plus long prévu par règlement, lorsqu'il y a eu choix, pour les fins de la vérification de l'origine prévue par la présente loi, d'établir le calcul des coûts en fonction de la moyenne aux termes des règlements d'application de l'article 13 du Tarif des douanes; e) deux ans, lorsque le ministre l'estime souhaitable. |
[33] The applicant submits the addition of the words "where the Minister deems it advisable" in subsection 61(e), which are not found in the preceding subsections, requires that if a re-determination is to apply retroactively for two years, the decision to do so must be made by the Minister or an officer designated by regulation pursuant to paragraph 164(1)(a) of the Act.
[34] The respondent argues the addition in subsection 61(e) of the words "where the Minister deems it advisable" does not change the fact that the authority to re-determine still resides with the designated officer in accordance with the opening words of section 61. According to the respondent's interpretation, a designated officer may make a re-determination where the Minister deems it advisable. Further, the authority given to the Minister in subsection 61(e) refers to the establishment of criteria a designated officer should consider when deciding to impose the re-determination retroactively for two years. These are the criteria established by the Minister contained in Appendix C of the D-Memo.
[35] The respondent also argues paragraph 164(1)(a) is applicable only to statutory powers specifically conferred upon the Minister. As the words "where the Minister deems it advisable" in subsection 61(e) merely indicate the circumstance in which a designated officer can invoke that subsection, paragraph 164(1)(a) does not govern the designation of officers as contemplated by subsection 61(e) of the Act.
[36] As noted earlier, section 61 of the Act provides for a re-determination within ninety days and under certain circumstances within two years. Although subsection 61(b), (c) and (e) all provide for re-determinations within two years, the additional words "where the Minister deems it advisable" are only found in subsection 61(e).
[37] The regulations created pursuant to paragraph 164(1)(a) of the Act delegate to certain officers or classes of officers the authority to exercise the powers and perform the duties of the Minister of National Revenue under the Act. In particular, officers or classes of officers are specifically designated for the purposes of subsection 61(e). These include certain Director Generals, Directors, Managers, Supervisors, and Tariff and Values Administrators. However, Compliance Verification Officers are not included in these regulations.
[38] If, as argued by the respondent, the words "where deemed advisable by the Minister" refer only to the criteria established by the Minister, then there would be no need to designate officers in the regulation specifically for the purpose of subsection 61(e). The respondent's argument would render these references meaningless, since there would be no need for a delegated authority.
[39] The respondent also submits the regulations are relevant only to the extent that these are the officers delegated with the ministerial authority to establish the criteria. In my view, to suggest that the numerous officers with delegated authority under the regulation are those officers who may determine the criteria is illogical, since the Minister did in fact establish the criteria contained in Appendix C of the D-Memo.
[40] The express reference to the Minister in subsection 61(e) requires that either the Minister, or an officer designated by the Governor in Council by regulation, pursuant to paragraph 164(1)(a), must make a re-determination of a tariff classification under this subsection of the Act.
[41] For these reasons, I conclude that Donald Barker did not have the authority to issue the first DAS on January 15, 1999. Having reached this conclusion, it is not necessary to consider the alternative argument raised by the applicant.
[42] Accordingly, the decision contained in the first Detailed Adjustment Statement is quashed.
"Dolores M. Hansen"
J.F.C.C.
Ottawa, Ontario
January 11, 2001