The Canadian International Trade Tribunal’s (“CITT”) recent decision in ContainerWest Manufacturing (CITT File Nbr. AP-2014-025) points to the possibility that the Canada Border Services Agency (“CBSA”) has taken action which may violate Canada’s WTO obligations. While the issue before the CITT concerned the question of whether the Appellant in that case filed documents required to benefit from General Preferential Tariff (“GPT”) treatment, the admissions the CBSA made in the case point to an administrative practice that may violate the WTO’s Most Favoured Nation (“MFN”) requirement set out in GATT 1994 Article I:1.
The ContainerWest appeal concerned the CBSA’s decision to reject ContainerWest’s request for GPT treatment for 22 import transactions relating to 1,678 containers purchased by ContainerWest from its Hong Kong supplier. The issue before the CITT was whether ContainerWest’s importations complied with the “direct shipment” requirement that must be met for GPT treatment. Pursuant to Customs Act Section 17(1), ContainerWest had to provide a through bill of lading to prove direct shipment of goods to Canada.
At paragraph 26 of its Statement of Reasons, the CITT noted that the CBSA argued that the GPT Regulations and the Customs Tariff both require a through bill of lading to prove direct shipment to Canada. At paragraph 56, the CITT noted that the CBSA agreed that the MFN Regulations also require that goods be conveyed on a through bill of lading. Consequently, pursuant to regulatory requirements, entitlement to GPT and MFN tariff treatment could only be accorded to importers who filed the required through bill of lading.
Notwithstanding these regulatory requirements, at paragraph 29 of its Statement of Reasons, the CITT noted that the CBSA indicated that it has adopted an administrative exception with respect to the MFN tariff that allows importers to be accorded MFN tariff treatment regardless of whether they have the through bill of lading required by the Regulations. Regardless of whether this administrative practice is consistent with the regulatory requirements, the result is that, due to the CBSA’s administrative practice, importers seeking MFN tariff treatment are granted the treatment regardless of whether they met the regulatory requirement of filing a through bill of lading while importers seeking GPT tariff treatment are not.
The CBSA’s apparent inconsistent application of the law was raised before the CITT but was rejected on the basis that the CBSA’s administration of the MFN tariff is not relevant to its administration of the GPT tariff. While this may be sufficient to address the apparent inconsistency in application from the perspective of domestic law, it is not clear that the CBSA can avoid problems with respect to international trade obligations and, specifically, whether it can avoid the MFN requirement incorporated into the WTO.
GATT 1994 sets out the trade in goods obligations in the WTO Agreement. GATT 1994 Article I:1 provides, in relevant part,
With respect to customs duties and charges of any kind imposed on or in connection with an importation … and with respect to all rules and formalities in connection with importation … any advantage, favour, privilege or immunity granted by any contracting party to any product originating in … any other country shall be accorded immediately and unconditionally to the like product originating in … the territories of all other contracting parties.
The MFN obligation in Article I:1 is straightforward. The phrase “advantage, favour, privilege or immunity” used in the Article can be understood to refer to preferential treatment writ large. Consequently, if Canada accords preferential treatment to any imported goods with respect to the application of customs duties, it is required to grant that same preferential treatment to all other like products imported from any other countries.
In this case, the CBSA’s apparent inconsistent administration of the GPT and MFN tariffs may violate the MFN obligation on the following basis. Goods entering Canada seeking MFN tariff treatment are not required to provide a through bill of lading to be accorded MFN tariff treatment because of the CBSA’s decision to grant an administrative exception in this case. Like goods entering Canada from any other WTO Member State that seek GPT tariff treatment do not benefit from the same administrative exception and must file the through bill of lading to receive GPT tariff treatment. Therefore, goods seeking GPT tariff treatment do not receive the same benefit accorded to goods seeking MFN tariff treatment. To the extent that this preference is accorded to like goods imported from different WTO Member States, the CBSA’s failure to accord the preference to importers seeking GPT tariff treatment for their imports would arguably violate the MFN obligation.
Those taking a different view may argue that the MFN obligation would only apply within the specific tariffs so that only a failure to extend the same preference to all importers seeking MFN tariff treatment for goods from WTO Member States would violate the MFN obligation. While this argument may win the day, it is important to note that the MFN obligation does not draw a distinction between different tariffs administered by WTO Member States and nor does Canadian law. As clearly described in the CITT’s Statement of Reasons, the same obligations apply equally to the MFN and GPT Tariffs through the obligations in the Customs Act, the GPT Tariff Regulations and the MFN Tariff Regulations.
So far as we can tell, this specific issue has not been addressed by a Dispute Settlement Panel and a Panel may find that Canada is permitted to apply different regulatory standards in the administration of its different tariffs, but inconsistent application of laws and regulations often lead to questions and these questions can lead to potential trade disputes. Rather than adopt administrative exceptions to get around regulatory requirements, it would be better for the CBSA to either extend the same exception to all importers seeking any tariff treatment or to impose the strict requirements of the law. Either way, the CBSA administrative practices would clearly conform to WTO obligations and importers would benefit from certainty of consistent application of requirements.
