FCA Upholds Decision to Quash CBSA Decisions in Judicial Review

  • June 05, 2021
  • John G. Bassindale and Stuart G. Clark


One of the most frustrating experiences for commercial importers dealing with the CBSA is having it deviate suddenly from longstanding past administrative practices that importers have come to rely on to facilitate their businesses.  Pleas of “but the last CBSA Officer said” or “but you’ve always let us do it this way before” fall on deaf ears.  However, in rare circumstances, the courts have been willing to hold the CBSA accountable for unexplained deviations from past practices.  Such was the case in the recent Federal Court of Appeal (the “FCA”) decision Canada (Attorney General) v. Honey Fashions Ltd., 2020 FCA 64 (CanLII).  There, the FCA upheld, in part, the decision of the Federal Court with respect to certain remission claims submitted by Honey Fashions Ltd. (“Honey Fashions”) which were denied by the CBSA in a reversal of a longstanding administrative practice which caught Honey Fashions by surprise.


Honey Fashions is a Canadian clothing manufacturer based in Montreal.  For a number of years Honey Fashions claimed benefits under various Canadian Textile and Apparel Remission Orders (“TARO”).  While the exact details of the TARO varied over time, generally, named Canadian textile manufacturers (“Eligible Manufacturers”) were entitled to receive a drawback or refund of customs duties paid on the importation of foreign textiles/apparel, up to a certain maximum. 

TARO was introduced in 1988 to assist Canadian textile and apparel manufacturers competing with low-priced imports.  From its inception, however, there were issues with some Eligible Manufacturers not obtaining the full benefit of TARO because they were not importers, and did not want to become involved in importing.  Discussions occurred between the industry and the Department of Finance on possible work-around for these Eligible Manufacturers. 

Eventually the Department of Finance concluded that an Eligible Manufacturer could benefit from TARO so long as they were listed as “importer of record” on the customs paperwork, and regardless whether they owned the goods at the time of import. 

An Eligible Manufacturer could therefore enter into a “partnering agreement” with a Canadian importer and, provided the customs paperwork declared the Eligible Manufacturer as “importer of record”, the Eligible Manufacturer could claim the TARO benefits.

CBSA Quality Assurance Audit

In 2010, the CBSA undertook a quality assurance review of TARO and put a hold on all TARO drawback claims, including claims filed by Honey Fashions for goods imported between 2006 and 2009.  CBSA determined that it had made some errors in administering TARO.  One issue CBSA identified was that it improperly authorized Eligible Manufacturers to increase their maximum entitlement to drawbacks by purchasing entitlement from other Eligible Manufacturers. 

CBSA resolved to correct the issue on a go-forward basis by limiting future transfers, but concluded that it would be unfair to reduce entitlements already acquired since the error was “entirely [CBSA’s] fault”.  It did this by issuing memorandum D8-11-7 explaining that an Eligible Manufacturer’s entitlements under TARO could only be transferred if one company acquired, purchased, or otherwise took control of the operations of an Eligible Manufacturer. 

Additionally, the Textiles and Apparel Remission Order, 2014 (“TARO 2014”) was enacted to ensure that Eligible Importers could claim TARO benefits up to whatever maximum entitlement had been historically authorized by CBSA.  TARO 2014 also covered all importations for the period between January 1, 2008 and December 31, 2012, which was the end of the original TARO.

Honey Fashions’ Drawback Claims

After completing the quality assurance review and enacting TARO 2014, CBSA approved Honey Fashions’ drawback claims from 2006 to 2009. 

Honey Fashions’ 2009 drawback claim was typical of the drawback claims submitted by Honey Fashions throughout the years.  It consisted of a drawback claim plus a request to correct various customs importations documents to name Honey Fashions as the “importer of record” rather than the originally named Canadian importer – which would enable Honey Fashions to benefit from TARO.

While Honey Fashions’ drawback claim for 2009 was accepted, its similar claims for 2011 and 2012 were rejected under TARO 2014 on the basis that Honey Fashions did not clearly establish “…that the name change is the result of an error of the importer or the Canada Border Services Agency or that the terms of Memorandum D17-2-3 have been met.”

Honey Fashions challenged the denial of its drawback claims for 2011 and 2012 in the Federal Court (the “FC”) by way of applications for judicial review.

FC Decision

At the FC, Justice Zinn determined that the CBSA had authority to decide whether Honey Fashions was an importer under the Customs Act and the remission order, and CBSA’s decision was subject to review on the standard of “reasonableness”.

Justice Zinn then considered the individual remission orders within TARO and confirmed that the goods must have been “imported into Canada by the manufacturer” in order to qualify for the remission.  Accordingly, the decision to deny Honey Fashions’ drawback claims “[stood] or [fell] with the decision not to accept the name change to list Honey Fashions as the importer of record.”

In considering the ‘legitimate expectations’ of Honey Fashions, Justice Zinn held that “there was a clear, unambiguous and unqualified regular administrative practice of CBSA that the name change submitted to name an [Eligible Manufacturer] post importation would be accepted and subsequent remission of duties to it would follow”. As a result, Honey Fashions had a grounded legitimate expectation that the name change would be expected and the CBSA’s decision was therefore a breach of CBSA’s duty of fairness. 

Finally, Justice Zinn held that CBSA’s decisions were unreasonable because, the same CBSA decision-maker --faced two cases of identical material facts within a few months of each other -- issued two decisions with different results without any explanation as to why!  On this point Justice Zinn stated:

In my view, if an administrative judge rules “X” on one occasion and then rules “Not X” shortly thereafter on identical material facts, with no explanation for the difference, one cannot but conclude that the decision is arbitrary – it lacks “justification, transparency and intelligibility within the decision-making process.”

Accordingly, the CBSA’s decision was set aside, and the drawback claims remitted back to CBSA, “to be determined afresh by a different decision-maker, if possible”, “but in any event in keeping with the legitimate expectations of Honey Fashions based on the consistent and long-standing practice of the CBSA.”

FCA Decision

On appeal to the FCA the only real issue between the parties was whether the FC had properly applied the reasonableness standard in evaluating the CBSA’s decision. 

The arguments of the parties on this point were supplemented by written submissions with respect to the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, (2019 SCC 65), which was released after the hearing of the appeal but before the rendering of a decision. 

Honey Fashions referred to the majority in Vavilov which “stressed the importance of justification for administrative decision makers…” and noted one of the factors constraining the reasonableness of a decision per Vavilov is “the need to provide explanations when a decision departs from longstanding practices of established internal decisions”.

The FCA also noted that Vavilov requires courts consider reasonableness “in terms of the legal and factual constraints on the decision maker’s discretion” including “the governing statutory scheme, the evidence before the decision maker, past practices and past decisions, and the impact of the decision on the affected individual”. 

In considering the governing statutory scheme, the FCA stated that the CBSA’s decisions were “arguably consistent with the Customs Act and the applicable TAROs.  To that extent, they may be considered reasonable in the abstract.”

In considering past practices and past decisions the FCA rejected the appellant’s argument that there is a distinction between “practices” and “decisions” and states that “if the evidence stablishes that the CBSA has consistently allowed importer name change requests for remission of customs duties without requiring substantiating evidence showing pre-importation partnering agreements, these past decisions amount to past practices.”  While acknowledging that CBSA is not bound by past practices, the FCA stated:

A decision maker cannot deviate from earlier decisions or from a longstanding past practice, especially when it is too late for those affected by these decisions to adjust their behaviour accordingly, without providing a reasonable explanation for that departure.

Accordingly, the FCA agreed that the CBSA’s decisions lacked justification, transparency and intelligibility. 

With respect to the FC’s comments on legitimate expectations, the FCA noted that there was nothing about the duty of fairness in Honey Fashions’ Notices of Application, Memoranda of Fact and Law, or at the hearing.  Accordingly, and given that courts should constrain themselves to the grounds raised by the parties in the pleadings, the FCA held that “it was an error of law for the Federal Court to conclude that the appellant violated Honey Fashions’ legitimate expectations.”  The FCA also agreed with the appellant that “the doctrine of legitimate expectations cannot give rise to substantive rights” and that, since there was no suggestion Honey Fashions was not given a fair procedure, the FC therefore “erred in concluding that the decision by the CBSA not to grant the name change requests were made in breach of its duty of fairness.”

Given the foregoing, the FCA maintained the judgment of the FC, but returned the drawback claims to the CBSA “for redetermination in accordance with these reasons”. 


While the FCA correctly declined to give effect to the doctrine of ‘legitimate expectations’ as it was considered by the FC, the FCA’s decision should be welcome news for importers of all stripes facing a situation where CBSA appears to abandon their ‘longstanding past practices’ in administering various programs.  The general rule that the CBSA must provide a ‘reasonable explanation’ when it decides to deviate from pre-established norms will hopefully have a stabilizing effect going forward—making CBSA think twice before tossing out any historical administrative practices that have come to be relied upon by industry.

That said, Honey Fashions and other companies relying on administrative practices are left with little in the way of a substantive remedy so long as the CBSA can articulate a “reasonable explanation” for their new practice.  This decision, therefore, also serves as a cautionary tale about the risks of relying on administrative practices.  Unlike the legislation and regulations, which provide definitive rules which can be evaluated and upheld by courts, administrative practices leave the court a limited role in the form of judicial review. 

About the authors

John G. Bassindale is a partner at Millar Krekelwetz LLP and a past chair of the OBA Taxation Law Section Executive.  
Stuart G. Clark is a partner at Millar Krekelwetz LLP where he is developing expertise in the area of tax and trade. 

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