Skechers USA Canada, Inc. v. Canada (Border Services Agency), 2021 FC 879

Date: 20210825

Docket: T-81-21

Citation: 2021 FC 879

Toronto, Ontario, August 25, 2021

PRESENT: Madam Prothonotary Martha Milczynski

BETWEEN:

SKECHERS USA CANADA, INC.

Applicant

and

CANADA BORDER SERVICES AGENCY

Respondents

ORDER AND REASONS

[1] The within application for judicial review relates to four requests for administrative relief made by Skechers USA Canada, Inc., which were denied by the Canada Border Services Agency (CBSA). CBSA brings the within motion to strike the application in its entirety on the grounds that CBSA’s refusals to grant the administrative relief are not “decisions” amenable to judicial review, and that Skechers must, in any event, avail themselves to the statutory appeal regime established under the Customs Act.

[2] For the reasons below CBSA’s motion is granted. The decisions identified in Skechers’ Notice of Application are not decisions that are subject to review by the Federal Court. They may “sound like administrative law matters”, but upon closer scrutiny they clearly relate to matters whose “essential character” are that which Parliament has intended to be determined within the comprehensive and multi-level redetermination and appeal process established under the Customs Act. This process includes by virtue of the Act and section 28 of the Federal Courts Act, final recourse only to the Federal Court of Appeal.

[3] The Customs Act regulates the importation of goods into Canada and provides for a voluntary self-reporting scheme to be followed by importers. Pursuant to section 32 of the Act, importers are required to account for goods they import, declare their value for duty and pay any required duties on those goods.

[4] Section 32.2(2) of the Customs Act requires that an importer of goods shall, within 90 days after having a “reason to believe” that their declaration of value for duty is incorrect, correct their declaration and pay any amount owing as duties plus interest that results from the correction. Where a correction must be made, the obligation ends four years after the importer originally accounted for the goods.

[5] One way an importer may come to have a “reason to believe” that their declaration of value for duty is incorrect, is by way of a CBSA trade compliance verification, conducted pursuant to section 42.01 of the Customs Act. CBSA will review declarations made by importers during a particular verification period and also review the importer’s declared value for duty. The verification process will result in an Interim Report. Following receipt of any submissions from the importer, a Final Report is issued.

[6] Where a compliance verification determines that corrections are required during the verification period, the importer must correct its declarations for goods imported during the verification period, and in years prior – up to a maximum of four years back from the date of the Final Report. Such corrections are a re-determination of value for duty and additional monies may become owing. If an importer does not file the corrections required under section 32.2, CBSA may impose the re-determination (section 59(1) (a)) and in addition may impose a penalty. Whether completed by the importer or CBSA, a redetermination results in the issuance by CBSA of a “detailed adjustment statement” (DAS) that sets out the total additional duties payable, based on the corrections submitted by the importer or the re-determinations made by CBSA.

[7] Upon the issuance of a DAS, the Customs Act requires the importer to pay the amounts set out therein immediately, subject to the importer posting security for the amounts to allow the importer to commence a challenge of the DAS (sections 59(3),(4)) by way of a re-determination or further re-determination by the President of the CBSA (section 60). The Customs Act then provides for an appeal to the Canadian International Trade Tribunal (CITT, section 67(1)) and then appeal to the Federal Court of Appeal (section 68).

[8] With respect to Skechers, what transpired leading up to the within application being commenced is as follows.

[9] In late 2018, CBSA commenced a compliance verification of the value for duty of goods Skechers imported in the calendar year 2017. Among other things, CBSA inquired about Skechers’ buying agents’ commissions. CBSA had previously made inquiries about value for duty in 2005 where commissions were inquired about but no adjustments made at that time. Other adjustments were made in 2005, however, and following the issuance of a DAS, Skechers challenged the corrections through administrative, tribunal and court proceedings as provided under the Customs Act. From that time, Skechers has been declaring value for duty and paying duties in accordance with the outcome of those 2005-related proceedings.

[10] As noted above, CBSA revisited the buyer agent commissions in its compliance verification of the value for duty of goods imported in 2017 and on August 12, 2020, CBSA issued an Interim Report in which it proposed to determine that agent commissions paid by Skechers to acquire goods for import into Canada, be included in calculating the value for duty of those goods.

[11] Submissions were made by Skechers, arguing that nothing had changed regarding agent commissions since the 2005 verification process and that if subject to be included for calculation of duties, it should only be on a going forward basis. This “going forward” request is “Request #1”denied by CBSA as it affirmed the Interim Report finding that commissions should have been included in the calculation of value for duty in its Final Report dated October 30, 2020, giving Skechers 90 days to make the corrections and remit additional duties on the value of goods imported, plus interest, going back four years from the date of the Final Report – being the date on which Skechers was found to have “reason to believe” its declarations were incorrect. Corrections and payments were thus required for 2017 to 2020 and not just on a going forward basis. CBSA noted that if Skechers disagreed with the results of the verification, it could file a request for a re-determination under section 60 of the Customs Act with an issuance of a DAS.

[12] On December 8, 2020, CBSA confirmed that Skechers needed to make corrections for goods going forward and for goods imported in the four year statutory period, going back from the date of the Final Report (confirming the denial of Request #1). Skechers then made three further requests: (a) that CBSA rescind the Final Report (Request #2); (b) that CBSA extend indefinitely the statutory 90 day window under section 32.2(2) of the Act for making corrections (Request #3) pending what Skechers describes as the resolution of Request #1 to redetermine duties on a going forward basis only; and that CBSA waive or cancel penalties and interest (Request #4) also pending what Skechers describes as the resolution of Request #1.

[13] On December 16 and 22, 2020, CBSA denied the requests, and Skechers commenced the within application for judicial review of the refusals to grant Requests 1-4, described by Skechers as requests for administrative relief that were contemplated/authorized by CBSA policy, and within CBSA’s discretion to grant but withheld in decisions that were unreasonable, procedurally unfair and made in bad faith.

[14] Skechers argues that CBSA has the discretion to determine the reassessment period under the Customs Act and has also published a policy (D11-6-10) which sets out the circumstances in which it will exercise that discretion to allow importers to deviate from the statutory requirement of making corrections for the four year statutory reassessment period. CBSA submits that when an applicant has no statutory right to the relief it requests, and an administrative body has no duty to act on it, the refusal of the requested relief is not amenable to judicial review.

[15] The test on this motion to strike is a high one (Canada (National Revenue) v. JP Morgan Asset Management (Canada) Inc., 2013 FCA 250). Applications for judicial review are summary proceedings meant to proceed expeditiously, with motions to strike granted in exceptional cases/circumstances. CBSA has the burden of establishing that it is clear and without doubt that the application is “so clearly improper as to be bereft of any possibility of success” – where there is “an obvious, fatal flaw striking at the root of this Court’s power to entertain the application.”

[16] Sections 18(1) and 18.1 of the Federal Courts Act provide the Federal Court with broad jurisdiction to hear any application for relief from decisions of federal boards, commissions or other tribunals. Section 18.1(4) states that the Federal Court may grant relief if it is satisfied that the federal board, commission or other tribunal:

(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;

(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;

(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;

(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;

(e) acted, or failed to act, by reason of fraud or perjured evidence; or

(f) acted in any other way that was contrary to law.

a) a agi sans compétence, outrepassé celle-ci ou refusé de l’exercer;

b) n’a pas observé un principe de justice naturelle ou d’équité procédurale ou toute autre procédure qu’il était légalement tenu de respecter;

c) a rendu une décision ou une ordonnance entachée d’une erreur de droit, que celle-ci soit manifeste ou non au vu du dossier;

d) a rendu une décision ou une ordonnance fondée sur une conclusion de fait erronée, tirée de façon abusive ou arbitraire ou sans tenir compte des éléments dont il dispose;

e) a agi ou omis d’agir en raison d’une fraude ou de faux témoignages;

f) a agi de toute autre façon contraire à la loi.

[17] Notwithstanding these broad powers of review granted the Federal Court, Parliament has also prohibited the Federal Court from dealing with certain matters. Section 18.5 of the Federal Courts Act states:

18.5 Despite sections 18 and 18.1, if an Act of Parliament expressly provides for an appeal to the Federal Court, the Federal Court of Appeal, the Supreme Court of Canada, the Court Martial Appeal Court, the Tax Court of Canada, the Governor in Council or the Treasury Board from a decision or an order of a federal board, commission or other tribunal made by or in the course of proceedings before that board, commission or tribunal, that decision or order is not, to the extent that it may be so appealed, subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with, except in accordance with that Act.

18.5 Par dérogation aux articles 18 et 18.1, lorsqu’une loi fédérale prévoit expressément qu’il peut être interjeté appel, devant la Cour fédérale, la Cour d’appel fédérale, la Cour suprême du Canada, la Cour d’appel de la cour martiale, la Cour canadienne de l’impôt, le gouverneur en conseil ou le Conseil du Trésor, d’une décision ou d’une ordonnance d’un office fédéral, rendue à tout stade des procédures, cette décision ou cette ordonnance ne peut, dans la mesure où elle est susceptible d’un tel appel, faire l’objet de contrôle, de restriction, de prohibition, d’évocation, d’annulation ni d’aucune autre intervention, sauf en conformité avec cette loi.

[18] Thus it is essential to identify the essential character or real essence of the application for judicial review so as to determine the extent to which the decision proposed to be under review is really a decision in respect of which there already exists a statutory right of appeal. Justice Stratas in The Minister of National Revenue and Canada Revenue Agency v. JP Morgan Asset Management (Canada) Inc. 2013 FCA 250, paras. 49-50 offers critical guidance:

Armed with sophisticated wordsmithing tools and cunning minds, skilful pleaders can make Tax Court matters [or in the present case CITT or Federal Court of Appeal matters] sound like administrative law matters when they are nothing of the sort. When those pleaders illegitimately succeed, they frustrate Parliament’s intention to have the Tax Court exclusively decide Tax Court matters. Therefore, in considering a motion to strike, the Court must read the notice of application with a view to understanding the real essence of the application.

The Court must gain “a realistic appreciation” of the application’s “essential character” by reading it holistically and practically without fastening onto matters of form…

[19] Skecher’s Notice of Application states that the decisions to deny Requests #1, 2, 3 and 4 each suffer from the same issues:

• - CBSA failed to address any of Skechers’ reasons for its request
• - CBSA made the decision without regard to the material put before it
• - CBSA took irrelevant factors into account
• - CBSA unlawfully fettered its discretion
• - CBSA denied Skechers procedural fairness
• - The decisions lacked justification, transparency and intelligibility
• - The decisions fell outside the range of possible acceptable outcomes; and
• - The decisions were unreasonable.

[20] With respect to Request #1, (to permit corrections on a going forward basis only), Skechers argues that the denial was unlawful, as CBSA failed to exercise its discretion and properly consider Skechers particular set of factual circumstances – that it had been audited in 2005, the exceptionally long duration from the verification period to the Final Report, its ability to recoup additional costs etc. Skechers also alleges in its application that CBSA has deviated from its policies and how it treats other importers. Skechers points to a settlement agreement referred to in Pier 1 Imports (U.S.) Inc. v. Minister of Public Safety and Emergency Preparedness 2018 FC 963 regarding a method for determining value for duty on a going forward basis. Skechers submitted at the hearing of the motion that all it seeks is to be treated fairly and get what Pier 1 got, seemingly relying on the decision as evidence or indication that CBSA could do the same for it.

[21] I would note, however, that the settlement agreement is described in the decision as one entered into between Pier 1 and the Canada Customs Revenue Agency in 2003 (then administering the Customs Act) while the parties were litigating before the Canadian International Trade Tribunal. The Pier 1 decision itself concerns the Minister’s motion to strike the application and whether Pier 1 could judicially review a 2017 decision of the CBSA that directed it to adopt a new method to assess value for duty. Pier 1 sought to rely on the earlier settlement agreement. Justice Grammond reviews JP Morgan and section 18.5 of the Federal Courts Act and finds:

Para. 22 –The [Customs] Act provides a multi-step mechanism to challenge customs duty assessments, including issues regarding the determination of value for duty and the choice of valuation method. Section 58 provides for an initial determination of “the origin, tariff classification, and value for duty of imported goods” by a customs officer. Section 59 allows for a re-determination by another officer, whereas section 60 gives an importer the right to request a further determination by the CBSA President. To these internal appeals, section 67 adds a right of appeal to the CITT. Lastly, a decision of the CITT may be appealed to the Federal Court of Appeal – not the Federal Court – under section 68.

23 The provisions governing each level of internal appeal include a privative clause (sections 58(3), 59(6) and 62)….

24 Thus, where a litigant seeks a remedy that could be obtained through the process set forth in the Act, or raises a question that can be addressed through that process, section 18.5 of the Federal Courts Act deprives our Court of jurisdiction to hear the matter. Moreover, under basic administrative law principles, this would be considered a situation where an adequate alternative remedy exists, which is a factor that usually weighs against hearing an application for judicial review…

25 The Federal Court of Appeal discussed the Federal Court’s lack of jurisdiction to review decisions made under the Act in Fritz Marketing Inc. v. Canada, 2009 FCA 62…In that case, the importer alleged that DASs issued by CBSA were invalid because they were based on evidence obtained in a manner contrary to the Canadian Charter of Rights and Freedoms. Speaking for the Court, Justice Sharlow held that the privative clauses mentioned above “deprive the Federal Court of the jurisdiction to set aside a detailed adjustment statement for any reason”…She noted that there was no reason why the CITT could not consider the importer’s Charter argument and exclude evidence if necessary.

26 Similar issues were canvassed inCanada (Border Services Agency) v. CB Powell Limited 2010 FCA 61….In that case, the importer challenged a decision before the CBSA President, who ruled that there was, in the circumstances, no decision that could be the subject of an appeal. Instead of appealing that ruling to the CITT, the importer sought a declaration from the Federal Court. The Federal Court of Appeal held that the Federal Court had no jurisdiction to issue such a declaration. Justice Stratas wrote:

The Act contains an administrative process of adjudications and appeals that must be followed to completion, unless exceptional circumstances exist. In this administrative process, Parliament has assigned decision-making authority to various administrative officials and an administrative tribunal, the CITT, not to the courts. Absent extraordinary circumstances, which are not present here, parties must exhaust their rights and remedies under this administrative process before pursuing any recourse to the courts, even on so-called “jurisdictional” issues. (CB Powell at para. 4)

[22] Reviewing Skechers’ Notice of Application and taking a “holistic” approach, I cannot conclude that there is a decision or decisions amenable to review, or extraordinary circumstances that would engage the Federal Court’s jurisdiction. Skecher is dissatisfied that CBSA conducted the 2018 compliance verification and revisited the matter of agent commissions in determining the method for calculating value for duty, after not requiring commissions to be included in its 2005 review. Skechers appears to be content, or at least is prepared to accept that methodology on a going forward basis. Skechers submits that other importers have received the treatment it now seeks and alleges that CBSA’s refusals to grant its Requests 1, 2, 3 and 4 were made unfairly and improperly. Skechers essentially states CBSA has effectively fettered or arbitrarily exercised its discretion by not applying the policy Skechers submits exists and could be applied to grant the relief it seeks.

[23] There is no basis, however, to conclude that the Federal Court has jurisdiction to weigh in. As Justice Stratas in JP Morgan notes, a failure to follow policies is not, by itself, an abuse of discretion. Policies do not have the force of law and administrative decision-makers can depart from them (para. 108). The matters disclosed by Skechers’ Notice of Application concern the methodology for determining value for duty and Skechers obligations flowing therefrom under the Customs Act. Skechers is also at a very early stage of the Act’s adjudicative process established by Parliament. A DAS has not issued and Skechers has yet to seek re-determination or further re-determination. Skechers can put its arguments concerning CBSA decisions, policies and discretion (as the importer in Fritz Marketing could advance Charter arguments) to the President of the CBSA, the CITT and Federal Court of Appeal.

[24] In Jockey Canada Company Limited v. Minister of Public Safety and Emergency Preparedness 2010 FC 396, Justice Mandamin considered Jockey Canada’s application for judicial review from a decision, (similar to Skechers’ Request #2) denying Jockey’s request to rescind a CBSA instruction letter relating to the proper method for Jockey to determine value for duty and when it had “reason to believe” its method was incorrect. Jockey argued that CBSA’s actions constituted a breach of natural justice and procedural fairness. Jockey also argued that CBSA had conducted its value for duty review in an unfair and prejudicial manner. Justice Mandamin granted the motion to strike and dismissed the application on the grounds that the Federal Court did not have jurisdiction, or in the alternative because the Customs Act regime constituted an adequate alternate remedy. I likewise find on this motion and accordingly, the motion will be granted and the application struck.

ORDER in T-81-21

THIS COURT ORDERS that:

1. The Notice of Application dated January 7, 2021 is hereby struck.

2. In the event the parties cannot agree on the costs of this motion, written submissions no longer than 2 pages in length may be submitted within 15 days of the date of this Order.

"Martha Milczynski"

Prothonotary

FEDERAL COURT

SOLICITORS OF RECORD

STYLE OF CAUSE:

SKECHERS USA CANADA, INC. v CANADA BORDER SERVICES AGENCY

PLACE OF HEARING:

HELD BY VIDEO CONFERENCE

DATE OF HEARING:

June 29, 2021

ORDER AND REASONS:

MILCZYNSKI P.

DATED:

August 25, 2021

APPEARANCES:

Allison Blackler

Thang Trieu

For The Applicant

Roger Flaim

For The Respondents

SOLICITORS OF RECORD:

KRMP Law LLP

Barristers and Solicitors

Toronto, Ontario

For The Applicant

Attorney General of Canada

Toronto, Ontario

For The Respondents