Date: 20021220
Docket: T-949-01
Neutral Citation: 2002 FCT 1314
BETWEEN:
SVEDALA INDUSTRIES CANADA INC.
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE and
THE ATTORNEY GENERAL OF CANADA
Respondents
[1] For the past nine years, the Applicant has contested a decision which terminated the remission of customs duties which it had been granted under the Machinery Program of the Customs Tariff, R.S.C. 1985, c.41 (the "Act"). Last year the Minister of National Revenue (the "Minister") essentially confirmed that decision. The present application challenges that confirmation.
A. Factual background
[2] The Applicant, Svedala Compaction Equipment AB of Sweden ("Svedala") is a manufacturer of heavy duty equipment. Prior to 1998, Svedala was known as Dynapac Heavy Equipment AB. The Applicant manufactures and exports the CA 301D vibratory compactor which is a rockfill machine used in the compaction of heavy rockfill of up to twenty inch diameter rock as well as compaction of soil, asphalt and concrete. This piece of equipment is the subject of the present application.
[3] In 1990, the Applicant submitted an application for remission of customs duties under the Machinery Program of the Act which is found in s.74(1), s.75 and s.76, and in particular s.76(1), as follows:
| 74.(1) No customs duties are payable in respect of machinery and equipment that, at the time the machinery and equipment is accounted for under section 32 of the Customs Act, is included on the list of machinery and equipment established by the Minister pursuant to subsection 75(1).
75.(1) The Minister may establish a list of machinery and equipment that, in the opinion of the Minister, having regard to the criteria mentioned in subsection (3), is not available from production in Canada.
(2) The Minister shall cause a list established under subsection (1) and every addition thereto and deletion therefrom to be published in the Canada Gazette within sixty days after the establishment, addition or deletion, and a list, addition or deletion so published shall be judicially noticed. (3) For the purposes of subsection (1), the Minister shall have regard to the following criteria:
a) whether a manufacturer has, within his normal operational framework, the full range of technical and physical capabilities necessary for the production in Canada of machinery and equipment reasonably equivalent to the relevant machinery and equipment; and
b) whether a Canadian manufacturer has so produced machinery and equipment as to demonstrate a production competence reasonably equivalent to that required to produce the relevant machinery and equipment.
76.(1) Where an application for remission is made in accordance with subsection (4) in respect of machinery and equipment not included on the list established pursuant to subsection 75(1) and the Minister is of the opinion, having regard to the criteria mentioned in subsection 75(3), that the machinery is not available from production in Canada, the Minister may remit in respect of the machinery and equipment ...
(3) Where the Minister is of the opinion, having regard to the criteria mentioned in subsection 75(3), that machinery and equipment in respect of which remission has been granted under subsection (1) has become available from production in Canada, the Minister may revoke the remission and, notwithstanding the terms and conditions of the remission, it shall cease to apply to machinery and equipment accounted for under section 32 of the Customs Act after the effective date of the revocation.
(4) An application for remission must be accompanied by evidence satisfactory to the Minister that, having regard to the criteria mentioned in subsection 75(3), the machinery and equipment is not available from production in Canada.
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74.(1) Aucun droit de douane n'est exigible sur les machines et appareils qui, à la date de leur déclaration en détail en application de l'article 32 de la Loi sur les douanes, sont inscrits sur la liste de machines et appareils établie par le ministre en application du paragraphe 75(1).
75.(1) Le ministre peut établir, compte tenu des critères visés au paragraphe (3), une liste de machines et appareils qui ne sont pas produits au Canada.
(2) Le ministre fait publier la liste établie en vertu du paragraphe (1), ainsi que toute inscription ou radiation, dans la Gazette du Canada dans les soixante jours suivant l'établissement de la liste, de l'inscription ou de la radiation; la liste, une inscription ou une radiation ainsi publiées sont admises d'office.
(3) Pour l'application du paragraphe (1), le ministre tient compte des critères suivants :
a) le fabricant dispose, dans le cadre habituel de son exploitation, des installations techniques et matérielles propres à la production au Canada de machines et appareils qui sont sensiblement comparables aux machines et appareils visés;
b) le fabricant canadien a ainsi produit des machines et appareils de manière à établir une capacité de production sensiblement comparable à celle qui est nécessaire pour produire les machines et appareils visés.
76.(1) Sur demande présentée conformément à l'article 77, le ministre peut, s'il juge, compte tenu des critères prévus au paragraphe 75(3), que les machines et appareils qui font l'objet de la demande ne sont pas produits au Canada, remettre sur ces machines ou appareils :
...
(3) Le ministre peut, s'il juge, compte tenu des critères prévus au paragraphe 75(3), que les machines et appareils qui font l'objet d'une remise accordée en vertu du paragraphe (1) sont produits au Canada, annuler celle-ci et, malgré ses modalités, elle cesse de s'appliquer aux machines et appareils déclarés en détail, après la prise d'effet de l'annulation, en application de l'article 32 de la Loi sur les douanes.
(4) Les demandes sont assorties des justificatifs que le ministre juge suffisants pour établir, compte tenu des critères prévus au paragraphe 75(3), que les machines et appareils ne sont pas produits au Canada. |
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[4] The Applicant was initially granted relief for the term of 1990-1995, but in November 1993, pursuant to s.76(3) the remission was terminated. The termination opinion was based on evidence of the production capacity of the Canadian firm BNR, subsequently acquired by the firm Champion, with particular reference to its Superpac Model 840 compactor.
[5] Since the remission was cancelled in 1993, the Applicant has been unwilling to accept the opinion at the heart of the decision and, as a result, has continued to try to have the decision reversed.
[6] On May 8, 1995, the Applicant re-submitted the application for remission of duties on the CA-301D for the years 1994 and 1995. The application included a more detailed description of the capacity of the CA-301D and of the 840. The Applicant also provided the Minister's officials with detailed information about the differences between the two models, specifically that the CA 301D is capable of compaction of heavy rockfill, while the 840 is designed and sold for small compaction and small asphalt applications. This application was rejected in 1996.
[7] The Applicant re-submitted the application in 1997, with additional technical information about the two models. In 1998, a Senior Machinery Program Officer met with representatives from both Svedala and Champion to discuss the technical differences between the two compactors. The Applicant was informed on June 2, 1998 that its application had once again been rejected.
[8] In 1999, both parties agreed to an expert assessment. The report, produced by Blackwater, Inc. (the "Blackwater Report"), issued on January 20, 2000, expressed that, while Champion did have the capacity to produce a model like the CA-301D in 1995, it did not do so until 1999 when it released the Champion 8340. On the basis of the Report, the Minister's officials maintained that the equivalent model was available from production in Canada, and the remission would not be allowed.
[9] Nevertheless, the Applicant continued to press for a change in the remission termination decision. On November 23, 2000, Mr. Denis Lefebvre, an Assistant Commissioner in the Customs Branch, provided a further response reiterating reasons for the termination decision. The Applicant persisted and sought a response from the Minister directly. On May 1, 2001, the Minister's duly authorized delegate sent the following confirmation:
The Honourable Martin Cauchon, Minister of National Revenue, has asked me to respond to your letter of February 27, 2001, in which you request confirmation of the decision given to you in a letter of November 23, 2000 from Mr. Denis Lefebvre, Assistant Commissioner, Customs Branch. In that decision, your request for remission of customs duties on vibratory compactors imported by Svedala Industries of Canada (Svedala) of Mississauga, Ontario was denied.
As stated in Mr. Lefebvre's letter, all the issues raised previously were fully considered and the criteria applied in this matter are in accordance with the relevant statutory provisions. It is the position of the Canada Customs and Revenue Agency that SuperPac Compaction of Cambridge, Ontario had the production competence and the range of technical and physical capabilities to produce, during the period in question, compactors reasonably equivalent to the ones imported by Svedala. As such, remission cannot be granted on these compactors under the terms of the former Machinery Program. (Applicant's Application Record, p. 90)
B. The decision under review
[10] I find that the relevant "decision" for the purposes of the present application is contained in the Minister's letter of May 1, 2001. I also find that are no procedural impediments to the bringing of the present application, and, thus, it is properly before me for decision.
[11] The letter from Mr. Lefebvre referred to by the Minister reads as follows:
Under provisions of the former Machinery Program, machines are considered to be reasonably equivalent when they compete in the same market and perform an equivalent function. In this regard, it remains the position of the Canada Customs and Revenue Agency (CCRA) that SuperPac Compaction of Cambridge, Ontario, had the competence and capability to produce reasonably equivalent vibratory compactors during the period in question. It is our opinion that the criteria applied in this matter is appropriate and in accordance with the relevant statutory provisions. As such, there are no grounds on which to base a recommendation for remission under section 76 of the former Customs Tariff.
We reviewed the information presented in your letter and concluded that all the issues raised have already been fully considered. Therefore, the conclusion that has already been conveyed to you must stand. (Applicant's Application Record, p. 87)
[12] It is agreed that both Mr. Lefebvre and the Minister placed reliance on the following passages from the Blackwater Report:
Statement of Work
To provide professional engineering and technical services to determine whether a Canadian Manufacturer (SuperPac Compaction of Cambridge, Ontario) has demonstrated that it had to production competence, at the time the vibrating compactors (Model CA301D Dynapac) were imported into Canada, necessary to produce a vibratory compactor (specifically SuperPac Models 840 and 840P) that would be reasonably equivalent in capacity to the specified imported vibratory compactors. The Importer in this instance was Svedala Industries Canada Inc. The time period used as reference is the year 1995. (Applicant's Application Record, p. 57)
....
Summary
It is our opinion that SuperPac (Champion) possessed a production competence and had the range of technical and physical capabilities necessary to produce a compactor reasonably equivalent to the specified imported Dynapac (Svedala) vibratory compactor, in the year 1995, which would meet the compaction requirements of the construction industry. (Applicant's Application Record, p. 61)
[13] Thus, I find that the "relevant period" referred to by the Minister is 1995. That is, the Minister's 2001 opinion confirms the opinions given by the Minister's officials subsequent to the 1993 remission termination.
C. The Applicant's arguments
[14] The Applicant argues that s.75(3) of the Act requires production in Canada by Champion of a vibratory compactor reasonably equivalent to the CA 301D in order for the Minister to form an opinion that a reasonably equivalent vibratory compactor "has become available from production in Canada". In response, the Respondent relies on the decision in Emerson Electric Canada Ltd. v. Canada (MNR) [1997] F.C.J No. 178, where at paragraph 30 Justice Noël addressed the meaning of s.76(3) as follows:
In addition, it must be borne in mind that, by virtue of section 75(3), the relevant attributes which a Canadian manufacturer must possess, are:
1. The full range of technical and physical capabilities necessary for
production of reasonably equivalent machinery and equipment (section 75(3)(a)); and
2. A demonstrable production competence reasonably equivalent to that required to produce the relevant machinery and equipment (section 75(3)(b)).
It follows that even if it could be said that (the respondent's) products were not, strictly speaking, equivalent, it remained open to the Minister to conclude that the applicant's imports were "available from production in Canada" if he was satisfied that (the Respondent) was in a position to produce reasonably equivalent products. [Emphasis added].
[15] This argument requires careful evaluation.
[16] The Applicant further argues that, in the record created by the Minister's officials leading up to the decision under review in the present application, an incorrect interpretation of the legislation is apparent. In this respect, emphasis is placed on the letter of Mr. M.R. Jordan, the Director General of the Trade Policy and Information Directorate, dated September 25, 2000, written in response to the continued correspondence by the Applicant, in which he says:
According to the Customs Tariff (and as reiterated in the relevant versions of Customs Memorandum D8-5-1), a Canadian manufacturer was required to have had the capability and the competence to produce machinery that was reasonably equivalent to imported machinery. There is no requirement to have actually produced a machine.
(Applicant's Application Record, p. 78) [Emphasis added]
The Applicant argues that the response is evidence that the Minister's officials interpreted s.75(3)(b) as requiring only possession of competence as opposed to demonstration of
competence, the latter term being that used in the provision.
[17] I agree with the Respondent that no importance should be placed on the distinction drawn by the Applicant between the use of the words "possession" and "demonstration" in the present case, as it is no more than one of semantics.
[18] In his letter, Mr. Jordan also stated the following:
Therefore, Canada Customs and Revenue Agency (CCRA) officials have concluded that not only did Superpac have the capability and competence to produce a machine with a 1.4 inch drum; they were producing a machine which according to industry standards was reasonably equivalent to the Dynapac CA301D. Under the circumstances, I am unable to recommend duty remission under the Machinery Remission Program. (Applicant's Application Record, p. 79)
[19] Therefore, it is clear on the evidence that Champion had demonstrated competence by producing the Superpac Model 840, and I find that Mr. Jordan's statements, when considered together, should be read as referring to this fact.
[20] As a result I give no weight to this argument.
D. The correct interpretation of s.76(3) and the standard of review
[21] In my opinion, the correct interpretation of the legislation requires a determination of the sufficiency of the evidence available to the Minister under s.75(3). That is, the evidence must be available on the two criteria in s.75(3) in order that a substantiated argument can be made as to the existence of production capacity.
[22] The Minister is required to "have regard" to the evidence and arguments, including any expert evidence available, in forming an opinion under s.76(1) or s.76(3). I agree with Justice Noël that it is a correct interpretation of the provisions to say that a reasonably equivalent machine need not be produced and available in order for an opinion to be formed under s.76(3).
[23] I differ slightly with Justice Noël's statement in paragraph 30 of Emerson where he says that "a Canadian manufacturer must possess the potential expressed in s.75(3)"; in my opinion, all that is required is that regard must be had to the evidence and argument with respect to the potential. However, I agree with his conclusion in paragraph 30, and also agree with his statements of legislative intent in paragraph 39 as follows:
What this indicates as a matter of legislative intent is that while the eligibility of products for duty remission must be determined in conformity with specified statutory criteria, the decision to remit duties is left to the discretion of the Minister. In Martineau v. Matsqui Disciplinary Institution Board, Dickson J. (as he then was) enunciated the following principle:
A purely ministerial decision, on broad grounds of public policy, will typically afford the individual no procedural protection, and any attack upon such a decision will have to be founded upon abuse of discretion. Similarly, public bodies exercising legislative functions may not be amenable to judicial supervision. On the other hand, a function that approaches the judicial end of the spectrum will entail substantial procedural safeguards. Between the judicial decisions and those which are discretionary and policy-oriented will be found a myriad decision-making processes with a flexible gradation of procedural fairness through the administrative spectrum.
The decision a quo stands at the non-judicial end of this spectrum. In my view, the ultimate power to remit or to not remit duties is vested in the Minister of Revenue in order to enable him to respond to industrial, trade and fiscal concerns of the moment. Such considerations reach beyond the particular concerns of the Applicant and call for an exercise that is essentially of a legislative or policy nature. In so far as the actual decision of the Minister to revoke the remission orders and to collect the appropriate duties is concerned, the only remedy available to the Applicant is political, not legal. [Notes excluded]
[24] As to the intent of Parliament in enacting the provisions under consideration, Justice Noël in Emerson referred to Revenue Canada's Custom's Memorandum D8-5-1, which sets out an interpretation for internal departmental use. However, it also contains the following evidence of legislative intent:
The objective of the Machinery Program is to increase efficiency throughout Canadian industry by enabling users to acquire advanced equipment not available from Canadian production, yet affording Canadian manufacturers tariff protection on the machinery and equipment they produce as soon as they are in a position to supply. (Applicant's Application Book of Authorities, Tab 11)
[25] While the evidence is not conclusive, it is a credible resource available within the law and capable of providing some understanding of the purpose of the legislation (see Flavell v. Deputy M.N.R., Customs and Excise [1997] 1 F.C. 640). It is also important to note that the statement of intention has been supported by Justice Pelletier in Apv Canada Inc. v. Canada (Minister of National Revenue) [2001] F.C.J. No. 1099 at paragraph 16:
The Act in question in these proceedings, the Customs Tariff Act is a complex mix of policy considerations, combining as it does, the protection of Canadian industries and the desire to keep Canadian industries competitive where components cannot be found from Canadian production as well as compliance with Canada's treaty obligations. The Minister must balance the requirements of importers as well as those of manufacturers. The balancing of these interests is a matter best left to the Minister.
[26] No issue was raised in argument respecting the legislative intent expressed in Custom's Memorandum D8-5-1.
[27] Therefore, in my opinion, the opinions coined "not available from production in Canada" and "has become available from production in Canada" in s. 76(1) and 76(3) respectively, are each not based on whether or not an equivalent has been produced or is available for sale; they are policy opinions based on knowledge of production potential.
[28] In my opinion, the standard or review of such a discretionary opinion is reasonableness (see Suresh v. MCI [2002] S.C.C. 1). Thus, the question is: is there sufficient evidence to substantiate a reasonable argument and opinion with respect to the criteria in s.75(3)?
[29] Section 76(4) imposes an evidentiary standard on an applicant attempting to obtain a favourable remission opinion from the Minister. I do not read this provision as allowing the Minister to form an opinion on any evidence; it is the statement of a requirement on an applicant for remission to produce, to the satisfaction of the Minister, sufficient evidence to reach a reasonable opinion.
[30] In the present case, I find that there is ample evidence upon which the Minister could come to a reasonable opinion, which I find he did.
E. Conclusion
The "points in issue" stated by the Applicant are:
1. Did 75(3) of the Act require production in Canada by Champion of a vibratory compactor reasonably equivalent to the CA 301D in order for the Minister to form an opinion that a reasonably equivalent vibratory compactor was available in Canada?
and
2. Did the Minister make an error of mixed law and fact in forming an opinion that a vibratory compactor reasonably equivalent to the CA301D was manufactured in Canada during the relevant period?
In my opinion, on the basis of the above stated analysis, the answer to the first question is "no". I find that the second question and any answer to it is irrelevant to the opinion expressed by the Minister under review in the present application.
O R D E R
Accordingly, I dismiss the Applicant's application.
Costs are awarded to the Respondent.
"Douglas R. Campbell"
_________________________
Judge
OTTAWA
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-949-01
STYLE OF CAUSE: SVEDALA INDUSTRIES CANADA INC.
v. THE MINISTER OF NATIONAL REVENUE and THE ATTORNEY GENERAL OF CANADA
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: December 12, 2002
REASONS FOR ORDER: Campbell J.
DATED: December 20, 2002
APPEARANCES:
Mr. David M. Attwater For the Applicant
Mr. Edward Pundyk
Mr. Derek Rasmussen For the Respondents
SOLICITORS OF RECORD:
Lang Michener
Barristers and Solicitors
Ottawa, Ontario For the Applicant
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Ontario For the Respondents