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| Friday, February 01, 2008 |
The Federal Court of Canada has issued a decision in YM (Sales) Inc. versus the Minister of International Trade concerning the denial of the issuance of retroactive import permits for Tariff Preference Level (TPL) entitlement when the importer has been issued Detailed Adjustment Statements (DAS’s) by Canada Border Services Agency (or the former Canada Customs and Revenue Agency).
It has been the policy of the Minister to deny applications for retroactive TPL permits when the importer has had a review of its NAFTA Certificates of Origin by CBSA and they’re found to be unsubstantiated and therefore invalid. In YM’s case, there were a number of importations that had not been DAS’ed and their applications for revised TPL import permits were granted, however the applications for revised TPL permits on importations that had been DAS’ed were denied. Although there was evidence that the Minister had practiced a policy of such denials, it was denied that it was an established policy.
Upon review of the relevant law, the Federal Court found that in accordance with the standard of reasonableness, the Minister’s decision to deny the permit applications was not reasonable. The legislation gives the Minister discretionary powers when granting permits. However, the NAFTA provisions grant importers preferential treatment under TPL and the permit legislation establishes that right. In addition, a specific reason for denying the permit requests was absent and therefore the Court assumed the reason was the denial policy which was shown in the evidence. The Court therefore found the Minister’s decision to deny the requests for revised permits for DAS’ed imports was unreasonable.
The matter was referred back to the Minister to reconsider the requests and consider YM’s supporting documentation that had apparently been disregarded in the previous consideration of the requests. This decision could mean an end to the Minister’s long standing practice for denying requests for revised TPL import permits when the importations have been DAS’ed. This practice has been in place since the beginning of NAFTA in 1989 and has meant that importers who have undergone Customs reviews of their NAFTA Certificates for textile and apparel and then been denied NAFTA tariff treatment have not had this other avenue of getting duty free treatment when they should have. However, it is advisable now that importers who have recently had this kind of decision issued by CBSA against imports of apparel can and should take advantage of the TPL system.
It is also a reminder that it’s important that the importer and vendors be knowledgeable in determining whether their goods qualify for NAFTA and in issuing NAFTA Certificates of Origin in order that they can be supported should there be a Customs review and to avoid the unnecessary costs associated with reassessments when goods are found to be non-qualifying. In YM’s case, although their apparel was cut and sewn in the United States, CBSA denied their NAFTA Certificates of Origin because the yarn and fabric were non-NAFTA originating and the rules of origin say the yarn and fabric must also be NAFTA originating. The TPL system, however, allows for such goods to qualify for duty free treatment as long as the quota level has not been exceeded for the time period.
Making sure the appropriate method is used for claiming duty free treatment for such goods and that it’s substantiated will substantially reduce the risk of reassessments and strained resources in responding to investigations. |
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