Note: Following an origin audit of imported goods, the Canada Border Services Agency (CBSA) (Agency) issued 16 redetermination decisions to Tre Maiali Fashion Group (Applicant), an importer of clothing, declaring that it was not entitled to tariff preferential treatment under NAFTA. Applicant subsequently instructed Milgram and Company (Broker) to file for further redeterminations with Agency.

The applicable regulations required that security be provided before a request for redetermination could be lodged. The regulations provided that "[l]etters of credit will not be accepted as security deposits for bonded revenue transactions." Notwithstanding the regulation, Broker sent a standby letter of credit issued by Applicant's bank, Toronto-Dominion Bank (Issuer), for the sum of US$ 322,880 to Agency to secure the payment of outstanding customs duties so that it could proceed with the applications for further redeterminations. Agency rejected the letter of credit, stating that it was not an acceptable security because it did not cover interest owed and was time-limited, with an expiry date within one year without provisions for automatic extension. When Applicant stated that it could not provide the required bond, Agency rejected the Applicant's requests for further redetermination of the origin of the imported goods because of the lack of payment of the outstanding duties or satisfactory security.

Applicant thereafter submitted an application for judicial review of the Agency's decision and sought a writ of mandamus. Applicant claimed that Agency "fettered their discretionary authority and acted in an arbitrary, capricious and illegal manner" when it rejected Applicant's letter of credit. The Federal Court, Shore, J., dismissed the application for judicial review and denied the writ of mandamus. The Judge stated that the Agency followed the overall intent of federal security regulations when it rejected Applicant's letter of credit because it was conditional (limited in time) and did not secure an amount which included interest owed to the Agency.

The Judge noted that

[t]he CBSA Manager did not refuse the Letter of Credit outright on the sole basis that it was a Letter of Credit; he considered the Letter of Credit, itself, and determined that the Letter of Credit, as submitted by the Applicant, was not 'satisfactory to the Minister'. It is recognized by the Court that the Letter of Credit was conditional, as it was limited in time. [Emphasis in original.]



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.