Maple Leaf Mills Limited (Suppliant)
v.
The Queen (Respondent)
Trial Division, Pratte J.—Montreal, June 22;
Ottawa, September 1, 1971.
Customs Tariff—Dumping duty—U.S. goods purchased
by U.S. subsidiary company—Sale by subsidiary to parent
company in Canada at higher price—Assessment assumes
subsidiary acted as agent of parent—Onus of proof—Cus-
toms Act, R.S.C. 1970, c. C-40, s. 248.
In 1964 the suppliant purchased goods of a class or kind
not made in Canada from its United States subsidiary at a
price much less than the price paid by the subsidiary to the
Florida manufacturer of the goods. Dumping duty was
imposed under s. 6 of the Customs Tariff, R.S.C. 1952, c.
60, on the ground that the actual selling price of the goods
to the suppliant was less than the fair market value. The
assessment was based on the assumption that the suppli
ant's subsidiary acted as agent for the suppliant in the
purchase of the goods.
Held, dismissing an action for recovery of the duty, in the
absence of evidence that the subsidiary was acting for itself
in making the purchase, the suppliant failed to meet the
burden of proof imposed by s. 248 of the Customs Act.
Rainham Chemical Works Ltd. v. Belvedere Fish
Guano Co. [1921] 2 A.C. 465, applied.
PETITION of right.
Julian C. Chipman for suppliant.
Robert Cousineau and Denis Bouffard for
respondent.
PRATTE J.—The suppliant is a Canadian com
pany having its principal place of business in
Montreal. In 1964, it imported from the United
States substantial quantities of phosphate for
use in the production of animal and poultry
feeds. These goods entered Canada duty-free
under item 633i of the Customs Tariff; how
ever, the Department of National Revenue
(Customs and Excise) required the suppliant to
pay the special or dumping duty then imposed
by s. 6 of the Customs Tariff, R.S.C. 1952, c.
60. Thus, the suppliant paid under protest a sum
of $18,529.29 which, by its petition of right, it
now seeks to recover on the ground that s. 6 of
the Customs Tariff was not applicable to these
importations.
The charging provisions of s. 6 was subsec.
(1) which read as follows:
6. (1) In the case of goods exported to Canada of a class
or kind made or produced in Canada, if the export or actual
selling price to an importer in Canada is less than the fair
market value or the value for duty of the goods as deter
mined under the provisions of the Customs Act, there shall,
in addition to the duties otherwise established, be levied,
collected and paid on such goods, on their importation into
Canada, a special or dumping duty, equal to the difference
between the said selling price of the goods for export and
the said value for duty thereof; and such special or dumping
duty shall be levied, collected and paid on such goods
although not otherwise dutiable.
The position taken on behalf of the suppliant
is that no special duty was payable under s. 6
because:
(1) the phosphate in question was not "of a
class or kind made or produced in Canada";
(2) the suppliant had paid for these goods a
price which was not "less than the fair market
value for duty of the goods as determined under
the provisions of the Customs Act".
Before examining the merits of these two
contentions, it is necessary to recall the provi
sions of s. 248 of the Customs Act, R.S.C.
1952, c. 58, which reads, in part, as follows:
248. (1) In any proceedings instituted ... for the recovery
of any duty under this Act, or any other law relating to the
Customs ... in case of any question ... relating to ... the
doing of ... anything by which such ... liability for duty
would be incurred or avoided, the burden of proof shall lie
upon the owner or claimant of the goods or the person
whose duty it was to comply with this Act or in whose
possession the goods were found, and not upon Her Majes
ty or upon the person representing Her Majesty.
(2) Similarly, in any proceedings instituted against Her
Majesty or any officer for the recovery of any goods seized
or money deposited under this Act or any other such law, if
any such question arises the burden of proof shall lie upon
the claimant of the goods seized or money deposited, and
not upon Her Majesty or upon the person representing Her
Majesty.
In the present case, s. 248 casts upon the
suppliant the burden of proving facts leading to
the conclusion that the duties that it paid were
not due. More precisely, the suppliant, in order
to succeed, had to prove either that the goods
that it imported into Canada were so different
from their Canadian counterpart that they could
not be considered "of a class or kind made or
produced in Canada", or that the price that the
suppliant had paid for these goods was not less
than their value for duty. It is in the light of this
rule that the suppliant's contentions must now
be examined.
I. Were the goods imported by the suppliant
of "a class or kind made or produced in
Canada"?
On this point, no admissible evidence was put
before the Court at the hearing. True, counsel
for the suppliant filed as ex. S-2 a report made
in 1962 by one Edmund Cox, which purported
to state and explain the differences between the
phosphate imported by the suppliant and its
Canadian counterpart; but counsel for the
respondent objected strongly to the production
of this paper mainly for the reason that its
author was not available for cross-examination.
I then reserved my decision on this objection,
after having warned counsel for the suppliant
that it would probably be maintained. Time has
not modified my first impression. Under our
rules of practice, an affidavit prepared by an
expert cannot become part of the evidence if its
author is not available at the trial for cross-
examination. There is no reason why a different
rule should apply to the production of a docu
ment prepared in unknown circumstances by an
unknown person long before the commence
ment of the action. I therefore rule that the
document filed as ex. S-2 is not admissible
evidence and shall not be considered as being
part of the record.
No other evidence having been put before the
Court on this point, one has to refer to the
pleadings and to the admissions that they con-
tain in order to find out whether or not the
imported goods were of "a class or kind made
or produced in Canada". A careful reading of
the pleadings shows that both parties are in
agreement on the following facts:
(a) The suppliant imported into Canada from
the United States some phosphate for use in
the production of animal and poultry feeds;
(b) When these goods were imported, phos
phate for use in the production of animal and
poultry feeds was also manufactured in
Canada;
(c) Both the American and the Canadian
products originated from the same basic raw
material, "phosphate rock", which was
mined, washed, refined and purified;
(d) The American and the Canadian phos
phates were however manufactured by differ
ent processes;
(e) Both the imported and the Canadian prod
ucts and their respective methods of manu
facture are covered by separate patents;
(f) The chemical composition and properties
of the two products are partially different.
These facts lead inevitably to the conclusion
that the two products were not identical. This,
however, does not mean that the imported
phosphate was not "of a class or kind made or
produced in Canada" since various goods,
though not identical, may be of the same class
or kind provided that they be similar. On the
basis of the admission contained in the plead-
ings, it is impossible to say whether or not the
differences between the imported and the
Canadian products were so important and sig
nificant that these goods should not be consid
ered as being of the same class or kind. There
fore, the suppliant has not proved facts showing
that the imported phosphate was not "of a class
or kind made or produced in Canada". Now, as
under s. 248 of the Customs Act, the onus
rested with the suppliant, I conclude that it
must be deemed to have imported "goods of a
class or kind made or produced in Canada".
Let us now turn to suppliant's second conten
tion, namely that it had paid for the phosphate a
price which was not less than its value for duty.
H. Did the suppliant pay for the phosphate
that it imported into Canada a price which was
less than its value for duty?
This is a proper question since, according to
the very terms of s. 6 of the Customs Tariff, the
special or dumping duty was payable only "if
the export or actual selling price to an importer
in Canada is less than the fair market value or
the value for duty of the goods".
When goods exported to Canada were of a
class or kind made or produced in Canada, it
was therefore necessary, in order to know
whether or not the special duty was payable, to
determine both the selling price to the importer
in Canada and the value for duty of the goods.
In calculating the export or selling price to
the importer, subsec.(4)of s. 6 had to be taken
into consideration. According to this subsec. (4)
"export price" or "selling price" means the exporter's price
for the goods, exclusive of all charges thereon after their
shipment from the place whence exported direct to Canada.
As to the value for duty of the goods, s. 6(1)
specifically provided that it was to be "deter-
mined under the provisions of the Customs
Act". And for the purposes of this case, it is
sufficient to mention that, according to the per
tinent sections of the Customs Act, R.S.C.
1952, c. 58, s. 35 and foll. as amended in 1958
by c. 26, the value for duty of goods imported
into Canada is their "fair market value at the
time when and place from which the goods
were shipped directly to Canada".
In the present case, the circumstances in
which the importations were made were such
that the parties disagree on the selling price to
the suppliant.
The imported goods were manufactured at
Coronet, Florida, by Smith-Douglass Company
Inc. However, the suppliant did not purchase
directly from this company; apparently, it pur
chased its supplies of phosphate from a subsidi
ary, Normont Inc., an American company. And
it is the latter which allegedly purchased F.O.B.
Philadelphia the phosphate from Smith-Doug-
lass Company Inc. (at a price substantially
lower than the one that it received from its
parent company). The suppliant admitted in its
petition of right (par. 17) that Normont Inc.
paid Smith-Douglass Company Inc. prices
below the fair market value prevailing at Coro
net, Florida; moreover, it was admitted by
counsel for the respondent at the hearing that
the price allegedly paid by the suppliant to its
subsidiary Normont Inc., was not less than the
fair market value prevailing at Philadelphia, the
place from which Normont allegedly shipped
the goods to the suppliant.
As already mentioned the parties disagree on
the determination of the export or selling price
to the suppliant. According to the suppliant, the
selling price was that allegedly paid by the
suppliant to its subsidiary Normont Inc.;
according to the respondent, the selling price
was that at which the phosphate was sold by
Smith-Douglass Company Inc. to Normont Inc.
At first sight, one might be inclined to say
that the price paid by the suppliant to its Ameri-
can subsidiary was the price that it paid for the
imported phosphate, since the suppliant and its
subsidiary were indeed two distinct entities and
since it was proved at the trial that the phos
phate imported by the suppliant was ordered by
it from Normont Inc., which, in turn, got it from
Smith-Douglass Company Inc. If, however, the
respondent took the position that the price at
which the phosphate was sold by Smith-Doug-
lass Company Inc. was to be deemed the sell
ing price to the suppliant, it is because it was
considered, as alleged in the statement of
defence, that Normont was "a corporation
under the complete direction and control of the
suppliant" and that "in fact and for all practical
purposes, the two corporations were merged"
(par. 27); that Normont Inc. was only acting as
an intermediary between the suppliant and
Smith-Douglass Company Inc. (par. 28); that
the alleged purchase of the product by Normont
from Smith-Douglass Company Inc., and the
resale to the suppliant was not "a commercial
operation", the true character of the operation
being a sale from Smith-Douglass Company Inc.
to the suppliant (par. 29). Briefly, the respond
ent assumed that Normont Inc. was only a sham
and had been acting all along as the agent of the
suppliant. This assumption was known by the
suppliant since it alleged in its petition of right
(par. 22) that "the said officers (of the respond
ent) appear to have ignored the corporate exist
ence of Normont, Inc. and its interposition in
the import transactions here in question on the
basis presumably that Normont, Inc. is a sub
sidiary of the Suppliant (an irrelevant fact, the
Suppliant contends) or possibly on the basis of
some agency relationship between the Suppliant
and Normont, Inc. (a basis erroneous in fact)."
It is true that Normont Inc. and the suppliant
were two separate legal entities. But Normont
Inc. might have acted as a mere agent on behalf
of its parent company and, in such a case, it
seems clear that the price at which the phos
phate was sold by Smith-Douglass Company
Inc. to Normont Inc. should be considered as
the price at which it was sold to the suppliant.
In Rainham Chemical Works, Ltd. v. Belvedere
Fish Guano Co. [1921] 2 A.C. 465 at p. 475,
Lord Buckmaster said:
A company, therefore, which is duly incorporated, cannot
be disregarded on the ground that it is a sham, although it
may be established by evidence that in its operations it does
not act on its own behalf as an independent trading unit, but
simply for and on behalf of the people by whom it has been
called into existence.
The department, in assessing the suppliant as
it did, assumed that Normont Inc. had acted as
the suppliant's agent. As already mentioned, s.
248 of the Customs Act casts upon the suppli
ant the onus of proving that this assumption
was wrong. Now, if the evidence does not show
clearly that Normont Inc. was acting on behalf
of the suppliant, it does not even suggest that
Normont Inc. was acting "on its own behalf as
an independent trading unit". I therefore cannot
help but say that Normont Inc. was acting as
the suppliant's agent and that the officers of the
respondent were right in considering that the
price at which the goods had been sold to
Normont Inc. was the price at which they had
been sold to the suppliant.
Before concluding, I must consider another
point that I have not yet mentioned. Counsel for
the suppliant contended that if Normont Inc.
was merely an agent acting on behalf of the
suppliant, then the suppliant should be consid
ered as having acquired the phosphate by pur
chase made in the United States and as having
later exported it to itself in Canada; he argued
that s. 6 of the Customs Tariff would not then
be applicable since there would be no export
price and no selling price to an importer in
Canada. A similar argument was discussed and
found groundless by President Jackett (as he
then was) in the case of The Queen v. Singer
Mfg. Co. [1968] 1 Ex.C.R. 129. For the reasons
given in that case by the now Chief Justice of
this Court, I am of the opinion that the goods
here in question were exported to Canada by
Smith-Douglass Company Inc., and that the
price at which it sold these goods to the suppli
ant's agent was "the export or actual selling
price to an importer in Canada".
The suppliant's petition of right will be dis
missed with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.