The Queen (Plaintiff)
v.
Milan Imported Shoes Inc. (Defendant)
Trial Division, Decary J.—Montreal, October 25;
Ottawa, December 7, 1977.
Customs and excise — Amount to be included in value of
imported shoes for calculation of duty — Sum paid for
market intelligence during 13 month period — No direct link
between source of information and shoe supplier — Whether
or not amount paid for market intelligence should be included
in value of shoes imported during that period for purposes of
tax calculation — Customs Act, R.S.C. 1970, c. C-40, s. 36.
ACTION.
COUNSEL:
Jean-Marc Aubry for plaintiff.
Irvin S. Brodie, Q.C., for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Brodie, Polisuk & Luterman, Montreal, for
defendant.
The following are the reasons for judgment
rendered in English by
DECARY J.: The case before me raises the ques
tion as to whether or not an amount of $88,580.25
paid to an Italian modelist, Ivano Benetti, has to
be included in the value of the shoes imported by
the defendant for the purposes of computing the
duties and the sales tax under the Customs Act
and under the Excise Tax Act.
The plaintiff has determined the value as being
$590,378.25 and the amount of duties, tax and
penalty at $48,430.
There are 13 invoices from Benetti's firm, cover
ing a period of 13 months, that is, from April 1971
to May 1972. They show that Benetti is known as
a modelist for ladies' and children's shoes and also
for sport shoes. The invoices are written in Italian
and Mr. Caporicci, president of defendant, has
translated them while depositing.
In none of the 13 invoices is there any mention
of sales of shoes, but there is mention of export
and of design. The conclusion that should be
drawn from these facts is that Benetti's firm is one
of modelist and not of manufacturer of shoes. To
be modelist, in my view, includes design and
market intelligence.
The president of defendant had been, for quite a
number of years, a mechanic in the shoe business
when he decided to start his own business of
importing shoes; his experience then was only one
of technician. In 1971, his business not being as
successful as he wished, he turned to Mr. Benetti
for advice, to wit, know-how, design and market
intelligence. Within a short time the business took
a turn for the better. Mr. Caporicci did not, since
then, have to have recourse to Mr. Benetti to
increase the sales by a much greater appeal to the
public.
Market intelligence advice from Benetti's firm
had not been used and the witness said that being
told to avoid a blunder may be as important as
using a most successful design.
Because Mr. Benetti's services had no direct link
with the shoes imported during the period does not
have for effect that the amount expended should
not be included in computing the value of the
shoes imported.
If these expenses had been incurred by an Ital-
ian firm, they would have been reflected in the
price of sale to similar purchasers in Italy and that
price being the fair market value is the value for
duty as required by section 36 of the Customs Act.
Defendant should hereby be ordered to pay
plaintiff the sum of $48,430 less any amount paid
at time of trial, plus interest and 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.