Canada: NAFTA Origin Of Used RVs – CITT Fails To Check Its Rearview Mirror

Last Updated: June 26 2007

Article by Greg Kanargelidis and Gail Lai, © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on International Trade, June 2007

The Canadian International Trade Tribunal (CITT) recently issued two decisions both dealing with whether used recreational vehicles imported into Canada qualify for duty-free treatment pursuant to the North American Free Trade Agreement (NAFTA). The CITT denied preferential tariff treatment in each of these cases and, in doing so, has created uncertainty where none existed before.

Importers with Certificate of Origin Denied NAFTA Treatment

The cases in question are Duhamel & Dewar Inc. (AP-2005- 046) and Western RV Coach Inc. (AP-2006-002). In both cases, the importer had the requisite NAFTA Certificate of Origin (CO) in its possession at the time of importation of the recreational vehicle, but NAFTA treatment was denied by the Canada Border Services Agency (CBSA), leading to a liability for customs duties imposed on the importer.

In Duhamel & Dewar Inc. (D&D), the importer purchased a used 2000 Monaco Signature motor home from a company called Buddy Gregg Motor Homes Inc. (Buddy Gregg) in Knoxville, Tennessee. Buddy Gregg initially provided a completed and executed CO to the importer, but after the CBSA commenced a NAFTA verification audit and requested further details from Buddy Gregg to support its CO, Buddy Gregg responded by withdrawing the CO. The producer of the recreational vehicle in question, Monaco Coach Corporation (Monaco), did provide its own CO for the vehicle, which was rejected by the CBSA. As a result, duty-free treatment was denied and the importer was required to pay customs duties on the imported vehicle at the "Most-Favoured Nation" rate of duty of 6.1%. The CITT upheld the CBSA’s actions and dismissed the importer’s appeal.

In Western RV Coach Inc. (Western RV), the importer purchased a used 1995 Royale Coach motor home from a company called Marathon Coach Inc. (Marathon) in Florida. Marathon provided a completed and executed CO to the importer. The CBSA commenced a NAFTA verification and requested further support for its CO from Marathon. In response, Marathon provided a copy of a "certificate of origin for a vehicle" issued by the manufacturer, Monaco, to the original purchaser of the recreational vehicle at issue. This was not acceptable to the CBSA which asked for additional documentation to support the NAFTA origin claim. Monaco, the manufacturer, indicated it could not provide further documentation as the supporting documentation was no longer available since the year of production was some eight or nine years earlier. As a result, the CBSA denied duty-free treatment and the importer was also required to pay customs duties on the imported vehicle at "Most-Favoured Nation" rates of duty. The CITT upheld the CBSA’s actions and dismissed the importer’s appeal.

Conditions For Making NAFTA Claims

Pursuant to the NAFTA, all goods imported into Canada that qualify as "originating goods" are eligible for importation free of any customs duties. The NAFTA provisions, incorporated into Canadian law largely pursuant to the Customs Act, Customs Tariff, as well as a number of regulations, provide detailed rules of origin for the determination of when any imported goods qualify as "originating goods" for these purposes. The NAFTA also specifies rules regarding the "proof of origin" that must be available or be supplied by the importer who claims the benefits of the NAFTA upon importation of any goods from another NAFTA party.

Pursuant to subsection 24(1) of the Customs Tariff, goods are entitled to a preferential tariff treatment only if: a) proof of origin of the goods is given in accordance with the Customs Act; and b) the goods are entitled to that tariff treatment in accordance with regulations.

For purposes of satisfying the proof of origin requirement set out in paragraph 24(1) of the Customs Tariff, an importer must refer to subsection 35.1(1) of the Customs Act, which provides among other things that "proof of origin, in the prescribed form containing the prescribed information ... shall be furnished in respect of all goods that are imported". The Proof of Origin of Imported Goods Regulations must next be considered. Pursuant to subsection 6(1) of the Regulations, "where the benefit of preferential tariff treatment under NAFTA ... is claimed for goods, the importer or owner of the goods shall, for the purposes of section 35.1 of the Act, furnish to an officer, as proof of origin, at the times set out in section 13, a Certificate of Origin for the goods, completed in English, French or Spanish". Section 13 provides that the CO must be furnished, among other times, "at any time when requested by an officer."

For purposes of satisfying the requirement in paragraph 24(1)(b) of the Customs Tariff that the goods are entitled to the NAFTA preferential tariff treatment claimed by the importer, the importer must refer to the NAFTA Rules of Origin Regulations (NAFTA Regulations). The NAFTA Regulations specify the various ways in which particular goods may qualify as "originating goods" for NAFTA origin purposes. The NAFTA Regulations set out four principal rules ranging from goods that are "wholly obtained" within a NAFTA country, to goods produced in a NAFTA country of imported materials, so long as the imported materials meet certain other requirements, such as shifts in tariff classification or a minimum regional value content test.

CITT Veers Off Course of Existing Jurisprudence

The CITT came to the correct result in both the D&D and Western RV cases. However, it appears that the CITT skidded out of control when applying the legislative tests for determining qualification for NAFTA origin claims.

In this connection, the CITT previously had before it similar facts in Buffalo Inc. (Buffalo) (AP-2002-023). In Buffalo, the Tribunal was asked to consider whether certain imported laces were entitled to NAFTA treatment. The CBSA had rejected the importer’s NAFTA treatment claim on the basis that (1) the importer had not provided proper proof of origin and (2) the goods did not qualify for NAFTA treatment. The CBSA appeared to base its conclusion on the fact that the CO was not entirely consistent with the facts and certain other supporting information provided by the exporter and producer of the goods at issue.

The Tribunal rejected the CBSA’s position and held that a valid CO was provided by the importer. Therefore, the Tribunal turned to the second issue before it, namely, whether the goods in issue were entitled to preferential NAFTA treatment. In this connection, the Tribunal once again disagreed with the CBSA’s position and held that there was ample evidence before the CBSA to support the NAFTA treatment claim.

In contrast, in D&D, a CO was initially provided by the exporter of the goods, but was later withdrawn. The original producer of the goods subsequently provided a CO. However, the CBSA argued that this was not sufficient because, among other things, a CO can only be supplied by the "exporter" and not the "producer" of the goods. In support of this position, the CBSA relied on section 97.1 of the Customs Act. However, section 97.1 deals with the obligations of an exporter within Canada and not with the obligations of an exporter of goods to Canada. The CITT was careful to note in D&D that the CBSA’s "decision ... says nothing of the validity of the certificate of origin per se. It makes no reference to whether a certificate of origin from the producer was acceptable or not in the circumstances under examination".

Thus, the Tribunal left open the issue of whether a CO provided by the producer rather than the exporter could be acceptable "proof of origin" for purposes of the Customs Tariff and Customs Act. The Tribunal went on to consider whether there was sufficient evidence to support a NAFTA claim. In this connection, the Tribunal considered the lack of detailed evidence and instead made specific reference to a letter from Monaco to the CBSA in which Monaco noted that the vehicle at issue was made in the same facility as other vehicles that were considered to qualify for NAFTA treatment. However, the subject vehicle was manufactured in 1999 while the NAFTA qualifying vehicles were manufactured in 2002. The Tribunal correctly – in the writers’ opinion – decided that there was not sufficient evidence to support the NAFTA claim. What is not clear from the D&D decision is whether the Tribunal based its decision on the failure by the importer to satisfy paragraph 24(1)(a) of the Customs Tariff (i.e., the proof of origin requirement), paragraph 24(1)(b) of the Customs Tariff (i.e., proof that the good qualified for preferential treatment), or both.

In Western RV, a CO was provided by the exporter. However, once again the CBSA rejected the CO and the NAFTA treatment claim. The Tribunal appeared to follow its previous decision in D&D in dismissing the importer’s appeal: "The Tribunal finds the above case [D&D] to be consistent with the present appeal on this point."

In Western RV, the Tribunal set out the "four things" that the importer was required to prove in order for the vehicle in issue to qualify for NAFTA treatment. The first of the four things was as follows: (1) that the imported good, including its component parts and traced materials, met the statutory proof-of-origin requirement, i.e., that a certificate of origin accompanied by the statements required by the regulations was tendered for the vehicle.

The Tribunal noted that "since the [4] tests are cumulative, failure to meet any one of the four requirements will result in the failure of the appeal on the first issue". Following its analysis of the evidence and argument, the Tribunal stated that "the good in issue did not meet the statutory proof-of-origin requirement for preferential tariff treatment. Therefore, the Tribunal determines that the good in issue is not entitled to preferential tariff treatment."

The Tribunal’s decision in Western RV appears to be inconsistent with its previous decision in Buffalo or, in the alternative, appears to read into the legislation an additional requirement for the satisfaction of the proof-of-origin requirement. It is arguable that the "proof of origin" requirement is satisfied upon presentation by the importer of a CO completed and signed by the exporter (or possibly, by the producer). However, since it appears that the CO was indeed tendered by the importer in Western RV, the Tribunal’s decision makes unclear what more, in addition to the CO, the importer must do in order to satisfy its "proof of origin" requirement. It is hoped that the Tribunal will clarify its position in subsequent decisions on NAFTA origin claims.

NAFTA Certificate Does Not Immunize Importers From Duty Assessments

Regardless of the criticisms of the manner in which the Tribunal set out its reasons for decision in D&D and Western RV, the message from the two decisions is clear: the existence of a CO does not protect an importer from duty assessments where the CO is not ultimately supported by additional documentation from the exporter and/or producer of the goods. Also, in the case of "used goods", information provided by the exporter is arguably of greater evidentiary weight than from the producer, since the producer’s information will not include evidence of any alterations or repairs made to the vehicle following initial production and sale. Based on the decisions in D&D and Western RV, an importer buying a used good from an exporter who offers a CO should, to the extent possible, obtain as much information as possible from the exporter concerning alterations or repairs to the vehicle from the date of original manufacture to the date of sale.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
30 Oct 2019, Other, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions