Frito-Lay: CITT Lays Down the Law

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Explore:  CITT Imports NAFTA Tariffs

The Canadian International Trade Tribunal decision in Frito-Lay v. President of the CBSA, AP-2010-002 (December 21, 2012), reasons January 8, 2013, teaches Canadian importers and the CBSA a number of important lessons. Three are of particular importance: (1) burden of proof, (2) jurisdiction of the CITT in cases of the President’s failure to respond without delay to requests for further re-determination, and (3) limitation periods applicable to claims of NAFTA tariff preference.

The President challenged the importer’s appeal (trial de novo) on the basis that a spreadsheet of data presented in support of the appeal summarizing impacted importations contained errors and was therefore not reliable. While the CITT has recently (Jockey Canada) made clear that the burden of proof, other than that an importation took place, rests with the importer, the CITT flexibly accepted that clerical errors had either been corrected by the importer or were of no substantive importance to the appeal, and found the President’s complaints to constitute bald assertions. The President was not able to take advantage of the burden of proof argument in this case.

The jurisdiction of the CITT was challenged by the President on the basis that the appeals before the CITT had not been the subject of Presidential decisions. However, the CITT noted the obligation of the President to respond (with rationale) to requests for re-determination without delay had not been fulfilled. What may constitute reasonable delay will vary from case to case, but here the CITT found the delay caused the President to have made “non-decisions” or “negative decisions” that were subject to appeal to the CITT.

Finally, the limitation period for seeking refunds based on NAFTA tariff preference, unlike that applicable to customs valuation or tariff classification correction, is regrettably one year. The CITT distinguished refunds allowed for this limited one-year period with importer self-corrections under the Customs Act that must be made covering a much longer period. In the latter case, the CITT noted that the  importer is obliged to correct errors of tariff treatment (or customs valuation or tariff classification) within 90 days of having reason to believe the error was made, and that the corrections are to be applied to the past 4 years of entries (subject to  a shorter period prescribed by CBSA policy in certain circumstances). In the Frito-Lay case, the goods were entered duty free (MFN tariff treatment), that is without tariff preference, on the basis of incorrectly declared tariff classification. The Tribunal upheld the mandatory correction on a duty free basis – while the corrected tariff classification attracted customs duties on an MFN basis, the importer was entitled to rely on (non-challenged, as it happened) NAFTA certificates of origin, claiming and amending the tariff treatment from non-tariff preference (MFN) to a tariff preference (NAFTA), much to the chagrin of the President who had claimed that a one year limitation applied and that duties (MFN) were owing.