April 21, 1936

LIB

George Washington McPhee

Liberal

The CHAIRMAN (Mr. McPhee):

Section 5 now becomes section 3. Shall section 3 carry?

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

I think the minister

and the committee should give some consideration to the observations made by the hon. member for St. Lawrence-St. George (Mr. Cahan).

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

I agree with the right

hon. leader of the opposition that the criticism of the hon. member for St. Law-renee-St. George is readily understandable, but I want to say just a word about these three sections, 35, 36 and 43. We aTe not dealing with section 35 but it is the basis of our valuations for duty purposes.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

It is the first that deals

with valuations.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

Yes, and it is the basis.

In ninety-nine cases out of 100, in 999 cases out of 1,000, the value will be fixed under section 35, and this is what the section says:

Whenever any duty ad valorem is imposed on any goods imported into Canada, the value for duty shall be the fair market value thereof, when sold for home consumption, in the principal markets of the country whence and at the time when the same were exported directly to Canada.

Sections 36 and 43 are modem sections. They are applied only in exceptional cases.

Customs Act

The normal method of valuation for duty purposes is under section 36. We try to arrive at the fair market value of the goods when sold for home consumption in the principal markets of the country of origin at the time the goods are exported directly to Canada. The hon. member for St. Law-rence-St. George was quite right when he said that the minister's decision was final on the question as to what was the fair market value of the goods in the country of origin.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

That is under section

35.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

Exactly, and it is clear that it is final when the provisions of section 38, subsection 4, which the hon. gentleman read to the committee, are consulted. There is under section 38, subsection 4, an appeal to the tariff board, but the determination of the tariff board-, called the board of customs, under section 38, subsection 4, is subject to the approval of the minister. That is the normal course.

When we come to sections 36 and 43, it is true that we are departing from what has been the rule in the past. The rule in the past has been that under sections 36 and 43 the minister's decision as to value shall be final. We are changing that. That is a concession which we are making to the United States and to Japan. It is a concession which I do not think should cause any apprehension.

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CON
LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

The hon. gentleman takes

the position that we did not make it by the note to the United States, but I submit that the provisions of the note to the United States to which the hon. gentleman referred are subject to two interpretations. It was stated in the note:

Opportunity will be afforded for appeal to the tariff board respecting any such value in order to ascertain and make public the finding whether to what extent and for what period such value may be required to prevent the importation of the goods into Canada from prejudiciously or injuriously affecting the interest of Canadian manufacturers and producers.

I am quite confident that -the addressee of that letter would take it that we would consider ourselves bound by the finding of the tariff board, even if we did not say so in express terms; at least that is the whole spirit of the provision. I do not think it was meant that there would be merely an idle appeal which would have the effect of giving some publicity to the matter. I think it meant that there was to be an effective 12739

appeal, and if there was to be an effective appeal, a provision such as this is necessary in order to make the appeal effective.

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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

But that is an entire reversal of the policy that has prevailed under every government in Canada since the time when we first imposed customs duties. I can understand an appeal being made in order that all the facts may be elicited and brought to the attention of the government, through the minister, for the final consideration of the government or of parliament, but I certainly do not place upon this section the same interpretation which the hon. gentleman does.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

The section may be ambiguous in that respect. It is an extraordinary section. It gives the minister power to make arbitrary valuations.

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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

An extraordinary section,

and therefore it makes an extraordinary precedent.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

It gives him power to make arbitrary valuations that do not necessarily have any relation whatsoever to the fair market value of the goods or their cost of production. The minister or the government may, if they wish, increase the protection a thousandfold to protect certain interests in this country without any rhyme or reason or principle at all. I was not engaged in the negotiations between this country and the United States, but I assume that the negotiators of the United States said: If you are going to continue to retain this power to fix these values we want a judicial tribunal to have the last say as to their necessity.

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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

I think if that suggestion

were really made to any minister of the Canadian government- there is a full and complete retort. That criticism in respect of fixing values for duty purposes never could emanate from a minister of the government of the United States who had any respect for the example which that country sets to other countries.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

May I suggest to the

minister that it must be taken for granted that when this letter was under consideration as a matter of negotiation, those advising the United States had full knowledge of what our decisions were. As the law stood there was the right of appeal to the tariff board because the act creating the tariff board substituted it for the old board of customs. Therefore it must be taken for granted that those who negotiated for the United States knew that they had the right of appeal to the board of customs on appraisals and matters of that sort, that board now being the tariff board

Customs Act

of Canada under the statute. We have a decision on that point by the Supreme Court of Canada. It is not -intended by the statute to confer either legislative powers or powers of finality upon the tariff board. That board exercises its powers subject to the approval of the minister.

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LIB
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

That is the point I am

trying to make-and my hon. friend will say it is not unsound; I think it is the rule that governs the courts-that when two parties are negotiating and there have been decisions on the subject matter under negotiation, it is taken for granted that both know what construction has been placed by the courts of their respective countries upon the subject matter, and therefore it must be taken to be known by those who negociated for the United States that the Supreme Court of Canada had decided that the tariff board acting as a board of customs or a board of review, if you will, had no power of finality in dealing with these matters, but that that power rested with the government. As the minister says, under section 35, it is subject to the approval of the minister, which means the government, because all this is an extraordinary power, and it is predicated upon the assumption that it is used to give effect to the policy of the government with respect to particular matters. That is what has been giving me concern.

I think the second point made by the hon. member for St. Lawrence-St. George was a far more important one. It will be seen that the section which now becomes section 36 contains the words "goods of the same class or kind in the country of export." We all know that even in the days of free trade with Great Britain the export and domestic prices of goods were not the same. The reason given by whoever wrote the explanation to this bill is the reason which was always given in Great Britain, namely, that advertising charges and matters of that sort are cared for by the importer abroad and therefore the exporter is relieved from the burden. In connection with his trade at home he does a certain amount of advertising and has other overhead charges to meet, but when he ships abroad he is able to sell cheaper than he does at home. The explanation given in the bill goes into this rather fully and makes it quite clear. The hon. gentleman knows to what I refer. The explanation given to section 7 is as follows;

The change consists in the addition of the words underlined. As an example of conditions different though not unusual, an exporter may sell in the home market to consumers, dealers or wholesalers only, while for export he may sell to distributors, jobbers or dealers

who undertake certain marketing expenses not borne by the purchasers in the home market, but borne by the manufacturer, and in consequence the exporter may sell at a lower price and claim such lower price as a fair market value though it is not a value as actually sold for home consumption.

I think the point raised by the hon. member for St. Lawrence-St. George with respect to this matter was a perfect one. This becomes a matter of some significance when one considers possible competition with the home producer. If the standard of measurement is to be the price to the exporter, you have one set of considerations; if the domestic consumer's price is to be the standard, you have another set of considerations. The use of the word "export" in the last line of this section 36 would seem to me to indicate that the basis of price for comparison purposes is to be the export price from the United States to Canada of these goods. If that is so, it appears to me that the point raised is worthy of careful consideration.

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CON

John Ritchie MacNicol

Conservative (1867-1942)

Mr. MacNICOL:

I should like to make an observation or two in connection with this section. I have in mind at the moment the great number of companies in the United States which are equipping their plants with more advanced and much faster machinery. The manufacturers of these machines have still on hand a large number of new and unused machines of the same type as those that are now being thrown out of United States plants. Naturally, these can be sold at a lower price for export to this country and Canadian companies have brought in such machines which, they believe, will take care of the amount of production they have. In many cases the machines being imported are obsolete to a certain extent, especially when compared with the high speed equipment being installed on the other side of the line. As I understand this section, these machines would still be estimated for duty purposes at the cost of manufacture in the United States notwithstanding that they are obsolete to a certain extent.

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LIB

James Lorimer Ilsley (Minister of National Revenue)

Liberal

Mr. ILSLEY:

Is the hon. member referring to new or unused machinery?

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CON

April 21, 1936