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CUSTOMS AND EXCISE - Customs - Exports - Origin of goods

Monday, April 30, 2018 @ 8:30 AM  


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Appeal by U.S company from assessment of $32,582 export charges for softwood lumber. The Minister assessed the appellant on the grounds softwood lumber exported from B.C. to the U.S. was not exempt from charges under s. 11(1)(b) of the Softwood Lumber Products Export Charge Act. The appellant was a corporation resident in the U.S. that manufactured reclaimed softwood lumber products. The appellant purchased salvaged wood products in Canada and exported them to the U.S. for processing at its Montana facility. The products were comprised of building materials made from softwood lumber reclaimed during the demolition of buildings and structures in Canada. The appellant testified it was impossible to know where the wood was originally processed, so it chose Yukon, given its zero rate. The appellant argued export charges under SLPECA were premised on being able to determine the origin of wood, so when this could not be done, there was no charge. The respondent argued the appellant’s interpretation would frustrate the purpose of SLPECA and place Canada in a position of non-compliance with its obligations under the Softwood Lumber Agreement (SLA). SLPECA was enacted to satisfy Canada’s obligations under the SLA to impose an export charge. The appellant did not dispute the Minister’s calculation of the charges, only the applicability.

HELD: Appeal dismissed. The term softwood lumber products referred to those described in s. 1 of Annex 1A to the SLA. As SLPECA was enacted to implement Canada’s obligations under the SLA, this was the first place to look to determine the purpose and intent. The language in the SLA was clear and unambiguous. Nothing in it suggested Canada and the U.S. intended to exclude reclaimed softwood lumber from the scope of the SLA. Had this been the intention, it would have been a simple matter to explicitly exclude such products in Annex 1A. Given SLPECA simply adopted the meaning of softwood lumber products in the SLA, there was no basis to conclude it intended a narrower meaning. The parties’ desire for certainty was highlighted by paragraphs two and three of article one of the SLA, which precluded reclassification, additional or removal of products from Annex 1A and that any dispute must be submitted to a technical working group. The appellant did not argue the exclusions in s. 11 of SLPECA applied to its wood. The appellant admitted it might be possible, with effort and time to determine the origin of the wood. It was at least in a better position than the Minister was to do so, and the Minister’s assumptions were accepted unless demolished by the appellant. The Minister assumed the wood originated from B.C. The Minister made no assumptions on where the wood was first processed, and there was no evidence of where this was, so the default deeming rule in s. 12(2) did not apply and reality prevailed. The reality was that the wood was recovered from sites in B.C. and then shipped to Montana. The wood was exported by the appellant from B.C. to the U.S. The fact that reclaimed softwood recovered in an exempt region and exported would not be subject to an export charge was simply a reflection of the circumstances in which the exclusions in s. 11 applied and the negotiations that occurred between Canada and the U.S. That the place of export in this case was the actual location from which the wood was exported did not make the result arbitrary.

Montana Reclaimed Lumber Co. v. Canada, [2018] T.C.J. No. 31, Tax Court of Canada, J.R. Owen J., March 12, 2018. Digest No. TLD-April302018002