TYCO SAFETY PRODUCTS CANADA, LTD. (FORMERLY DIGITAL SECURITY
PRESIDENT OF THE CANADA BORDER SERVICES AGENCY
Appeal No. AP-2010-055
Decision and reasons issued
Thursday, September 8, 2011
TABLE OF CONTENTS
IN THE MATTER OF an appeal heard on June 14, 2011, pursuant to
subsection 67(1) of the Customs Act, R.S.C. 1985 (2d
Supp.), c. 1;
AND IN THE MATTER OF four decisions of the President of the
Canada Border Services Agency, dated September 30, 2010, with
respect to a request for re-determination pursuant to subsection
60(4) of the Customs Act.
TYCO SAFETY PRODUCTS CANADA, LTD. (FORMERLY DIGITAL
SECURITY CONTROLS LTD.) Appellant
THE PRESIDENT OF THE CANADA BORDER SERVICES
The appeal is allowed in part.
Pasquale Michaele Saroli
Pasquale Michaele Saroli
Place of Hearing: Ottawa, Ontario
Date of Hearing: June 14, 2011
Tribunal Member: Pasquale Michaele Saroli, Presiding Member
Counsel for the Tribunal: Courtney Fitzpatrick
Research Director: Matthew Sreter
Research Officer: Gary Rourke
Manager, Registrar Office: Michael Parent
Registrar Officer: Cheryl Unitt
|Tyco Safety Products Canada, Ltd. (formerly Digital Security
||Jesse I. Goldman
Elliot J. Burger
|President of the Canada Border Services Agency
||Deric MacKenzie Feder
Technical Sales Representative
Altel Electronics Security
Sr. Program Manager, Product Assurance
Sr. Manager, Level 3 Technical Support
CCTV Technical Support Specialist, Tyco
Please address all communications to:
Canadian International Trade Tribunal
Standard Life Centre
333 Laurier Avenue West
1. This is an appeal filed by Tyco Safety Products Canada, Ltd.
(formerly Digital Security Controls Ltd.) (Tyco) with the Canadian
International Trade Tribunal (the Tribunal) pursuant to subsection
67(1) of the Customs Act1 from four decisions made by
the President of the Canada Border Services Agency (CBSA) pursuant
to subsection 60(4).
2. The issue in this appeal is whether certain models of
video-based security systems (the goods in issue) are properly
classified under tariff item No. 8521.90.90 of the schedule to the
Customs Tariff2 as other video recording or reproducing
apparatus, whether or not incorporating a video tuner, as
determined by the CBSA, or should be classified under tariff item
No. 8525.50.00 as transmission apparatus for radio-broadcasting or
television, whether or not incorporating reception apparatus or
sound recording or reproducing apparatus, or, in the alternative,
under tariff item No. 8471.49.00 as other automatic data processing
machines and units thereof, not elsewhere specified or included,
presented in the form of systems, as claimed by Tyco.
3. On July 8, 2010, Tyco, as a result of a verification
conducted by the CBSA, pursuant to sections 42 and 42.1 of the
Act, of certain importations made by Tyco in 2008,
submitted self-adjustments for four importations of the goods
in issue, pursuant to section 59.
4. On September 23, 2010, Tyco requested further
re-determinations of the tariff classification of the goods in
issue, pursuant to subsection 60(1) of the Act.
5. On September 30, 2010, the CBSA issued four decisions that
confirmed the tariff classification of the goods in issue, pursuant
to subsection 60(4) of the Act.
6. On December 24, 2010, Tyco filed the present appeal with the
Tribunal pursuant to subsection 67(1) of the Act.
7. On June 14, 2011, the Tribunal held a public hearing in
8. Mr. Christopher Albin, Mr. Michael Camelia and Mr. Rafael
Gomez appeared as witnesses for Tyco. Mr. Albin was qualified by
the Tribunal as an expert in hardware evolution, storage database
management, digital tools and related software for electronic
security equipment. The CBSA did not call any witnesses.
GOODS IN ISSUE
9. The goods in issue are the following 13 models of video-based
security systems: (i) Intellex Ultra (models ADD600ULP050,
ADD600ULP150 and ADD600ULP100); (ii) Intellex Digital Video
Management System (DVMS) (models ADD800DVD025, ADD6R0DVD075,
ADD6R0DVD050 and ADD600DVS016); (iii) Intellex LT (model
ADD400LTD016); (iv) Intellex IP (model ADD1P100E); and (v)
Electronic Digital Video Recorder (EDVR) (models ADEDVR016032,
ADEDVR004032, ADEDVR004016 and ADEDVR004008).3
10. During the hearing, evidence was presented by the witnesses
to the effect that there are in fact two different
technologies used in the various goods in issue. Therefore, the
Tribunal will treat the nine Intellex models (which include
Intellex Ultra, Intellex DVMS, Intellex LT and Intellex IP) and the
four EDVR models separately.
11. Three preliminary issues were addressed by the Tribunal at
the beginning of the hearing.
12. First, in addition to the above 13 models, Tyco sought to
have model ADD5R0DVD075 included in the goods in issue, for which a
notice of appeal had not been filed within the 90-day period
mandated by subsection 67(1) of the Act.
13. Second, Tyco sought to have an additional 20 models
(ADD400LTPV025, ADD400LTPV050, ADD600DVDV050, ADD600DVDV100,
ADD600DVPV50, ADD600DVSV025, ADD600DVSV050, ADD600LTPV025,
ADD600LTPV050, ADD600ULPV100, ADD600ULPV300, ADD6R0DVD100,
ADD6R0DVDV150, ADD800DVDV050, ADD800DVDV100, ADD800DVSV050,
ADD800LTPV025, ADDIP100, ADEDVR009016 and ADEDVR009064) included in
the goods in issue, in respect of which the President of the CBSA
had held its decisions under section 60 of the Act in
abeyance pending the disposition of the current appeal.
14. Third, on the morning of the hearing, Tyco sought to file an
item as a physical exhibit in these proceedings.
15. By letter dated May 31, 2011, the Tribunal invited
submissions from the parties on whether (i) an appeal in respect of
the classification of model ADD5R0DVD075 and related Detailed
Adjustment Statement (DAS) was time-barred by operation of law and
(ii) the additional 20 models should be joined to the current
appeal, notwithstanding the fact that they had not yet been the
subject of decisions by the President of the CBSA under section 60
of the Act.
16. Having considered these issues with the benefit of views
submitted by both parties, the Tribunal read its rulings into the
record at the outset of the hearing.4
17. With regard to the first issue, the Tribunal noted that
subsection 67(1) of the Act provides that a person
aggrieved by a decision of the President of the CBSA made under
section 60 or 61 of the Act must file a notice of appeal
within 90 days after the time notice of that decision was
18. Subsection 67.1(1) of the Act authorizes the
Tribunal, upon application, to make an order extending the time to
make an appeal, subject to any terms that it considers just, and
provided all the conditions set out in subsection 67.1(4) have been
19. Turning to the specific conditions set out in subsection
67.1(4) of the Act, there is no question that Tyco’s June
6, 2011, application for an extension of time was made within one
year of the expiration of the 90-day period set out in subsection
67(1) for the filing of a notice of appeal from a decision of the
President of the CBSA under section 60, which, in this case, was
made on September 15, 2010 (being the date on which the DAS in
respect of this product model was issued). Accordingly, the
Tribunal found that the application met the first condition for the
granting of a time extension, as set out in paragraph
20. The Tribunal did not, however, accept as sufficient the
explanation offered by Tyco as to why it did not file a notice of
appeal in respect of this model in the normal course and within the
time period specified in subsection 67(1) of the Act. In
particular, the Tribunal was not satisfied that, during the
relevant period, Tyco evinced a bona fide intention to
appeal, as required under subparagraph 67.1(4)(b)(i).
Specifically, in its reply submission of June 6, 2011,5 Tyco cited
ongoing discussions with the CBSA to obtain its consent to simply
add this model to the existing appeal, given its purported
similarity to the goods in issue. The Tribunal noted, however, that
the correspondence filed by Tyco in support of this assertion was
dated April 15, 2011, which was well beyond the 90-day period
set out in subsection 67(1).
21. In any event, and as correctly noted by the CBSA in its
submission in reply to the Tribunal’s letter,6 it is not
open to a party to disregard legislated time frames for the filing
of notices of appeal or to circumvent the statutory requirements
and procedures on extensions of time for appealing. In this regard,
subsection 67.1(1) of the Act i) confers authority
for the granting of such extensions to the Tribunal,
ii) establishes mandatory requirements and procedures for the
making of such applications and iii) sets out conditions that must
be met before any such extension can be granted.
22. Finally, with a notice of appeal in respect of purportedly
similar goods having been filed on December 24, 2010, the Tribunal
was not satisfied that the application for an extension of time
(which was not filed until June 6, 2011) was made as soon as
circumstances permitted, as required by
subparagraph 67.1(4)(b)(iii) of the Act.
23. For the foregoing reasons, the Tribunal found that it was
unable to grant either an extension of time for the filing of a
notice of appeal or the related request to have the decision in
respect of model ADD5R0DVD075 joined to this appeal.
24. Turning to the second issue concerning the additional 20
models that Tyco sought to have joined to the current appeal, the
Tribunal noted that subsection 67(1) of the Act states
that an appeal lies to the Tribunal from “. . . a
decision of the President made under section 60 or
61 . . . .”
25. In this regard, the CBSA claimed, and Tyco acknowledged in
its reply submission, that the President of the CBSA has not yet
rendered a decision pursuant to section 60 of the Act in
respect of these models, with notice having been given to Tyco by
letter dated April 8, 2011, that the CBSA was holding its requests
for re-determination in abeyance pending the disposition of the
26. As the Tribunal’s jurisdiction under subsection 67(1) of the
Act is predicated on a prior decision of the President of
the CBSA under section 60 or 61, the absence of such a prior
decision effectively deprives the Tribunal of jurisdiction under
subsection 67(1). Indeed, as explained by the Tribunal in C.B.
Powell Limited v. President of the Canada Border Services
Agency,8 as affirmed by the Federal Court of Appeal
(FCA) in C.B. Powell Limited v. Canada (Border Services
Agency)9 and cited with approval by the FCA in its
decision in Wolseley Engineered Pipe Group v. Canada Border
Services Agency,10 “. . . acceptance of
the present appeals under the purported authority of subsection
67(1) of the Act, when no ‘decision’ had been made (either
in actuality or by necessary implication) by the President of the
CBSA, as the authority designated under subsection 60(1) to make
such decisions, would result in the Tribunal exceeding its intended
jurisdiction under the statutory scheme.”11
27. Given these jurisdictional limitations and other
considerations, such as adequate prior notice of the description of
the goods, the Tribunal found that the additional 20 models could
not be joined to the current appeal, a point subsequently conceded
by Tyco in its letter of June 13, 2011, to the
28. The Tribunal therefore decided that the current appeal would
be confined to the 13 models identified in paragraphs 1 and 4 of
Tyco’s submission13 and the CBSA’s brief14
29. Regarding Tyco’s request for permission to file a physical
exhibit on the morning of the hearing, the CBSA argued that the
proposed exhibit should not be accepted for late filing, noting
that, under paragraph 34(3)(b) of the Canadian
International Trade Tribunal Rules,15 physical exhibits
must be filed not less than 10 days prior to the hearing and that
notice must be given to the other parties. The CBSA further noted
that the proposed exhibit was not the same model as any of the
models of the goods in issue and that this fact, together with the
lack of notice of intention to file a physical exhibit, would be
prejudicial to the CBSA, were the exhibit to be accepted on to the
30. Tyco countered that the filing of the proposed exhibit would not be prejudicial to
the CBSA. While Tyco acknowledged that the proposed exhibit was not
one of the goods in issue, it noted that the only difference was
that it was a rack-mount unit as opposed to a table-top unit. Tyco
added that the proposed exhibit was for reference or display
31. While purported to be similar to the goods in issue, the
model number indicated that the proposed exhibit was in fact not
one of the goods in issue. Given the procedures set out at
paragraph 34(3)(b) of the Rules, Tyco’s failure
to provide the required advance notice to the CBSA of its intention
to file a physical exhibit, the CBSA’s objection to the late filing
of the proposed exhibit and the requirements of procedural
fairness, the Tribunal found that it was inappropriate to accept
the late filing of the proposed exhibit.18
32. In appeals pursuant to section 67 of the Act
concerning tariff classification matters, the Tribunal determines
the proper tariff classification of the goods in issue in
accordance with prescribed interpretative rules.
33. The tariff nomenclature is set out in detail in the schedule
to the Customs Tariff, which is designed to conform to the
Harmonized Commodity Description and Coding System (the Harmonized
System) developed by the World Customs Organization.19 The
schedule is divided into sections and chapters, with each chapter
containing a list of goods categorized in a number of headings and
subheadings and under tariff items. Sections and chapters may
include notes concerning their interpretation. Sections 10 and 11
of the Customs Tariff prescribe the approach that the
Tribunal must follow when interpreting the schedule in order to
arrive at the proper tariff classification of goods.
34. Subsection 10(1) of the Customs Tariff provides as
follows: “. . . the classification of imported goods
under a tariff item shall, unless otherwise provided, be determined
in accordance with the General Rules for the Interpretation of
the Harmonized System and the Canadian Rules set
out in the schedule.”
35. The General Rules comprise six rules structured in
sequence so that, if the classification of the goods cannot be
determined in accordance with Rule 1, regard must be had to Rule 2,
and so on, until classification is completed.22
Classification therefore begins with Rule 1, which provides as
follows: “. . . for legal purposes, classification
shall be determined according to the terms of the headings and any
relative Section or Chapter Notes and, provided such headings or
Notes do not otherwise require, according to the following
provisions.” The next provision to consider, if necessary, is Rule
2 (a), which notably provides the following additional guidance:
“Any reference in a
heading to an article shall be taken to include a reference to that
article incomplete or unfinished, provided that, as presented, the
incomplete or unfinished article has the essential character of the
complete or finished article.”
36. Section 11 of the Customs Tariff provides as
follows: “In interpreting the headings and subheadings, regard
shall be had to the Compendium of Classification Opinions to the
Harmonized Commodity Description and Coding System and
the Explanatory Notes to the Harmonized Commodity Description and
Coding System, published by the Customs Co-operation
Council (also known as the World Customs Organization), as amended
from time to time.” Accordingly, unlike chapter and section notes,
the Explanatory Notes are not binding on the Tribunal in
its classification of imported goods. However, the Federal Court of
Appeal has stated that these notes should be respected, unless
there is a sound reason to do otherwise, as they serve as an
interpretive guide to tariff classification in Canada.25
37. Once the Tribunal has used this approach to determine the
heading in which the goods should be classified, the next step is
to determine the proper subheading and tariff item, applying Rule 6
of the General Rules in the case of the former and Rule 1
of the Canadian Rules in the case of the latter.
Relevant Provisions of
the Customs Tariff and Explanatory Notes
38. The provisions of the Customs Tariff, which Tyco
claims to be relevant and applicable to the goods in issue, are as
MACHINERY AND MECHANICAL APPLIANCES;
ELECTRICAL EQUIPMENT; PARTS THEREOF;
SOUND RECORDERS AND REPORDUCERS, TELEVISION IMAGE
AND SOUND RECORDERS AND REPORDUCERS, AND PARTS
AND ACCESSORIES OF SUCH ARTICLES
. . .
ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS
SOUND RECORDERS AND REPORDUCERS,
TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND
PARTS AND ACCESSORIESOF SUCH ARTICLES
. . .
85.25 Transmission apparatus for radio-broadcasting or
television, whether or not incorporating reception apparatus or
sound recording or reproducing apparatus; television cameras,
digital cameras and video camera recorders.
8525.50.00 - Transmission apparatus
39. The relevant section notes to Section XVI provide as
3. Unless the context otherwise requires, composite machines
consisting of two or more machines fitted together to form a whole
and other machines designed for the purpose of performing two or
more complementary or alternative functions are to be classified as
if consisting only of that component or as being that machine which
performs the principal function.
. . .
5. For the purpose of these Notes, the expression “machine”
means any machine, machinery, plant, equipment, apparatus or
appliance cited in the headings of Chapter 84 or 85.
40. The relevant Explanatory Notes to Section XVI
provide as follows:
(VI) MULTI-FUNCTION MACHINES AND COMPOSITE
(Section Note 3)
. . .
Where it is not possible to determine the principal function,
and where, as provided in Note 3 to the Section, the context does
not otherwise require, it is necessary to apply General
Interpretative Rule 3 (c); . . . .
41. In the alternative, should the Tribunal find that the goods
in issue are not classifiable in heading No. 85.25, Tyco
claims that the goods in issue fall to be classified in heading No.
84.71 (a heading which falls under Section XVI), with the relevant
provisions of the Customs Tariff being as follows:
NUCLEAR REACTORS, BOILERS, MACHINERY
AND MECHANICAL APPLIANCES; PARTS THEREOF
. . .
84.71 Automatic data processing machines and units
thereof; magnetic or optical readers, machines for transcribing
data onto data media in coded form and machines for processing such
data, not elsewhere specified or included.
. . .
- Other automatic data processing machines:
. . .
8471.49.00 - -Other, presented in the form of
42. The relevant note to Chapter 84 provides as follows:
5. . . .
(E) Machines incorporating or working in conjunction with an
automatic data processing machine and performing a specific
function other than data processing are to be classified in the
headings appropriate to their respective functions or, failing
that, in residual headings.
43. The provisions of the Customs Tariff, which the
CBSA considers to be relevant and applicable to the goods in issue,
are as follows:
8521 Video recording or reproducing apparatus, whether
or not incorporating a video tuner.
. . .
. . .
8521.90.90 - - -Other
44. Tyco claims that the goods in issue form a complete
microprocessor-based closed-circuit television (CCTV) system
(excluding cameras) and should be classified according to their
principle function. While Tyco acknowledges that the goods in issue
have a recording function, it contends that the transmission
capabilities of the goods take functional precedence over any
recording or video-playback features. Tyco submits that the goods
in issue ought to be classified in heading No. 85.25 as
“transmission apparatus”, as, in its view, that definition
corresponds to principle function.
45. In the alternative, Tyco submits that the goods in issue are
classifiable in heading No. 84.71 and, more specifically, under
tariff item No. 8471.49.00 as other automatic data processing
machines and units thereof, not elsewhere specified or included,
presented in the form of systems. In this regard, Tyco argues that
the goods in issue are, at their core, computers.
46. In response to the CBSA’s re-determination that the goods in
issue are properly classified in heading No. 85.21 as video
recording or reproducing apparatus, Tyco argues that recording was
not the principal function of the goods, as the design capabilities
of the goods included, in addition to the recording of video and
sound, multiplexing for the transmission of live video CCTV
signals, live CCTV video transmission over the Internet, video
decoding and encoding, video camera control (pan, tilt, zoom) and
recording security events with alarm-triggered dome
47. Tyco further argues that the goods in issue are
distinguishable from the goods in Pelco Worldwide Headquarters
v. President of the Canada Border Services
Agency,27 thereby rendering the Tribunal’s decision
in that case inappropriate as a benchmark for tariff classification
in the present case. In this regard, Tyco submits that the goods in
Pelco “. . . approached security imaging
from a ‘recording first’
philosophy . . .”,28 with the less
sophisticated live video monitoring capabilities of the goods in
that case limiting their ability to transmit live video images to
remote locations, thereby reducing live monitoring to a function
ancillary and subordinate to that of recording. By contrast, Tyco
argues that the goods in issue are multi-function systems that
focus on proactive “real-time” enhanced video surveillance, with
the recording function being secondary to the generation,
transmission, display, remote control and triggered recording of
live images in response to specific surveillance requirements and
48. The CBSA, for its part, argues that the goods in issue are
multi-function or composite machines and that, in accordance with
note 3 to Section XVI, are to be classified in the heading which
describes their principal function. The CBSA claims that the
marketing, design and best usage of the goods in issue point to
recording as their principal function, which renders them properly
classifiable in heading No. 85.21.
49. The CBSA contends that the goods in issue are similar to the
goods in Pelco, in that (i) both are used in CCTV security
surveillance, (ii) both are able to receive video signals from
multiple cameras, (iii) both allow for the real-time
monitoring of images and for the playback of recorded video, and
(iv) both allow for the display of images from multiple sources on
one screen, the recording of multiple images on a computer hard
disk and the transmission of multiple images to remote locations.
Accordingly, the Tribunal should similarly find that the principal
function of the goods in issue is that of recording.
50. The CBSA further argues that the compression technology
embedded in the goods in issue, which is referred to as “Active
Content Compression” (ACC), principally benefits the recording
function by reducing file size and thereby allowing more recorded
images to be stored on the hard drive.29
51. In response to Tyco’s submission that the goods in issue are
much more technologically advanced than the goods in
Pelco, the CBSA argues that advanced technology or
sophistication does not change the principal function, which
remains that of recording.
of the Goods in Issue
52. Rule 1 of the General Rules provides that
“. . . classification shall be determined according
to the terms of the headings and any relative Section or Chapter
Notes . . . .”
53. The Tribunal, having regard to the specific terms used in
the tariff headings at issue, finds that the goods in issue,
whether as “apparatus” of heading No. 85.21 or 85.25 or “machines”
of heading No. 84.71, are “machines” within the meaning of that
term in note 5 to Section XVI.
54. The parties agree, and the Tribunal accepts, that the goods
in issue are machines30 designed to perform two or more
complementary or alternative functions, in particular, the
recording and transmission of digitized video images.
55. In this regard, while heading No. 85.21 describes machines
that perform a video recording function and heading No. 85.25
describes machines that perform a video transmission function,
neither heading describes, eo nomine, machines that
perform both functions. The Tribunal therefore finds that the goods
in issue are not described as such in either heading No.
85.21 or heading No. 85.25, with each of these headings referring
to only part of the goods in issue.
56. In such circumstances, the normal application of the
General Rules, which are applied sequentially, would
eventually take one to Rule 3 (a), which provides that
“. . . when two or more headings each refer to part
only of the materials or substances contained
in . . . composite
goods . . . those headings are to be regarded
as equally specific in relation to those goods, even if one of them
gives a more complete or precise description of the goods”, and, in
turn, to Rule 3 (b), which provides that
“. . . composite
goods . . . made up of different
components . . . which cannot be classified by
reference to Rule 3 (a), shall be classified as if they consisted
of the material or component which gives them their essential
character, insofar as this criterion is applicable.”
57. However, note 3 to Section XVI directs that
“. . . composite machines consisting of two or more
machines fitted together to form a whole and other machines
designed for the purpose of performing two or more complementary or
alternative functions are to be classified as if consisting only of
that component or as being that machine which performs the
principal function.” [Emphasis added]
58. In this regard, the parties agree and the Tribunal accepts
that, in so doing, note 3 to Section XVI effectively equates the
“essential character” of composite machines to their “principal
function”, such that the component which, in the application of
Rule 1 of the General Rules, is determined to perform the
“principal function” of the goods in issue is also considered to be
the component that confers to those goods their “essential
character”, thereby rendering the essential character criterion in
Rule 3 (b) inapplicable.31
59. Finally, for those situations where the principal function
of a multi-function machine cannot be determined, the
Explanatory Notes to Section XVI provide for direct
recourse to Rule 3 (c) of the General Rules, pursuant
to which the goods in issue are to be classified in the heading
which occurs last in numerical order among those headings which
equally merit consideration:
(VI) MULTI-FUNCTION MACHINES AND COMPOSITE
(Section Note 3)
Where it is not possible to determine the principal
function, and where, as provided in Note 3 to the Section, the
context does not otherwise require, it is necessary to apply
General Interpretative Rule 3 (c).
60. As mentioned above, both parties agree that the goods in
issue are composite machines and that, accordingly, classification
is governed by note 3 to Section XVI. The Tribunal will therefore
conduct a “principle function” analysis of the goods in issue in
order to determine in which of the competing headings the goods in
issue fall to be classified.
Principal Function Analysis—Intellex Models (Intellex)
61. The determination of principal function involves an
assessment of the importance of each function relative to that of
each of the other functions performed by a multi-function machine.
In this regard, the relative importance of each function is
dependent, in large part, upon the demands of the marketplace and
the level of technology involved in the performance of that
62. It therefore follows that the principal function of a
multi-function machine should not be viewed as a static
determination, but rather as one that is subject to change over
time and with successive versions of the machine. In particular,
shifting customer demands in the marketplace and technological
advancements over time can lead to a specific function acquiring
greater prominence relative to the other functions performed by a
– The Effect of Changes in Market Demand on Principal
63. The evidence indicates and the Tribunal accepts as
inherently logical that, since the horrific events of September 11,
2001, there has been an increasing demand on the part of customers
for real-time surveillance capabilities to enable proactive
responses to security events, as opposed to the purely reactive
responses enabled by the review of recorded data.32
64. In this regard, the evidence indicates that Intellex has
evolved to include specific features and functionalities that allow
for more robust real-time surveillance and for such activities to
be consolidated in a centralized command and control centre (or
hub) that covers multiple security points of interest, which may be
spread across a wide geographic area (i.e. zone of
65. The Tribunal accepts that this centralization of command and
control functions has in turn allowed for the realization of cost
efficiencies of scale in overall surveillance
activities.34 In this regard, in describing the
proprietary ACC algorithm contained in Intellex,35 Mr.
Camelia explained as follows:
It also has an extremely beneficial effect [in] that it produces
a smaller total stream in terms of the number of bits that are
necessary for transmission of a stream.
That compression algorithm opened the door for us to truly
expand the usefulness of a video management system for many
purposes beyond simply recording. . . .
This compression algorithm can sense, detect and then remove the
effect of noise, reducing the size of the transmitted video which
is so important to bandwidth.36
66. Mr. Camelia further explained how some of Tyco’s clients
that have multiple sites spread across a large geographic area have
bandwidth constraints because of their need also to transmit a
variety of other data types (e.g. point-of-sale activity, data for
inventory controls). The ACC algorithm allows for remote
surveillance that “. . . can fit [the clients’]
objectives of getting that video that has been compressed
and . . . transmitted to a remote location for
corporate review . . . and not interfere with
the normal transmission of [other] data that they need for running
their business.”37 In addition to allowing for the
cost-efficient transmission of live video feeds through the
reduction of bandwidth utilization, Intellex has other features
that are conducive to more effective real-time
– The Effect of Technological Advancements on Principal
67. The Tribunal understands that these goods in issue form the
core of a complete CCTV surveillance system. Mr. Camelia described
the basic operational schematic of Intellex as follows:
Analogue video cameras, which do not form part of the goods in
issue, are strategically placed at points of interest within a
geographic zone of interest which can be local, regional, national
or international. The analogue video signal transmissions are fed
into an off-the-shelf computer which includes a daughter card that
allows these signals to be digitized, compressed (using the
proprietary ACC algorithm) and combined for transmission to a
network interface. The signals can then be re-transmitted to
different network destinations, e.g. computer monitors, laptops,
mobile phones, external storage devices.39
68. The Tribunal accepts that the technologies incorporated into
Intellex have served to enhance the economic/operational
feasibility and centralization of real-time surveillance.
69. In particular, the proprietary daughter card is designed to
accept incoming video streams and process (i.e. digitize and
compress) them for transmission to destinations designated by the
70. In this regard and as already noted, Intellex employs a
proprietary ACC algorithm which, by reducing the bandwidth
footprint of digitized video streams, has rendered their
transmission to multiple (including remote) destinations
economically and operationally feasible. When asked to explain the
importance of bandwidth efficiency, Mr. Albin stated the following:
“The importance of bandwidth efficiency is because this is a
transmission device, [and] a lot of my customers don’t have the
luxury of having a dedicated
network . . . . Some of them are forced to
use their security system over a network where they do their
day-to-day commerce. So it’s extremely important for
them . . . to keep bandwidth [usage] to a
minimum . . . .”41 Mr. Camelia stated
the following: “Many of our customers will complain if we do
anything that would consume more bandwidth. Large retailers, for
example, have a fixed bandwidth capability between their multitude
of stores. So bandwidth considerations for the ACC compression was
extremely important because of the benefit it has for reducing the
burden for transmission.”42
71. Finally, the virtual matrix switching capability, which the
Tribunal understands to be unique to Intellex,43 allows
for the compilation, organization and display, on a single or
multiple screens of selected live video streams from multiple
camera sources,44 and for the operator to transmit camera
control commands (i.e. tilt, pan, scan, etc.) during live
72. The Tribunal concludes that these goods in issue differ
significantly from those in Pelco. The goods in that
case did not offer the advanced capability of the ACC
algorithm present in the goods in issue,46 had a reduced number
of live remote client connections47 and used a multiplexer
(as opposed to a virtual matrix, as in the case of the goods in
issue).48 Indeed, the Tribunal notes the CBSA’s
acknowledgement that these goods in issue are more technologically
advanced than the goods in Pelco.49
73. On the basis of the evidence, the Tribunal finds that the
technological advancements embedded in these goods in issue allow
them to effectively “quarterback” the entire surveillance system by
accepting and processing video streams for their re-transmission to
designated destinations in the manner directed by the operator of
the surveillance system.50
74. The importance of the transmission function of these goods
in issue does not however detract from their recording function.
Indeed, the Tribunal notes that, as part of the toolkit of their
surveillance system, these goods in issue allow, among other
things, for video recording, video playback, pre-programming of
recording schedules and alarm-triggered automatic
75. The Tribunal agrees with the CBSA’s observation that Tyco’s
ACC white paper focuses heavily on the benefits of the proprietary
ACC algorithm to the recording function. Albeit that this may be
attributable, in large part, to the fact that this promotional
literature may have been tailored to a particular audience, it is
nonetheless indicative of a significant commercial market
demographic that ascribes continued importance to the local (i.e.
hard-drive) recording function.52
76. Indeed, the evidence on record shows that the internal
hard-drive capacities of various models of the goods in issue have
been increasing over time. While Tyco contends that this is largely
due to the independent product design decisions of the computer
manufacturers themselves, the Tribunal is not convinced on the
evidence that Tyco could not have procured computer boxes with
smaller or stripped-out hard drives, if such were indeed better
suited to its purposes and to the demands of its
77. Furthermore, Tyco acknowledges that compression technology
has also benefited the recording function though file
78. Additionally, many of the purchasers of these goods in issue
are mandated, by local law, to record. In this regard, Mr. Camelia
testified that “[t]here are . . . requirements
in airports for mandatory recording”55 and that
“. . . casinos . . . in various
locales, have a mandatory requirement for recording.”56 Mr.
Camelia also testified that “[m]any airports have TSA
[Transportation Security Administration] requirements for
79. While the aforementioned speaks to the continuing importance
of the recording function, the overall evidence indicates that
local recording is but one of many destination options for the
compressed digital video transmitted by these goods in issue.
80. Moreover, the evidence indicates that there has been a shift
in certain segments of the market towards the transmission of
compressed digitized video to more robust offsite storage
platforms. Mr. Albin stated that, from his perspective, he views
the local recording function of Intellex as a liability, rather
than an asset, because it is highly susceptible to failure, and
notes, in this regard, that, if the unit needs to be removed for
repairs, the video information “[is] . . . out
of the hands of the end-user.”58 Mr. Albin further
testified that he recommends to customers that they
“. . . negate the hard drives that are in those
Intellex DVMS units . . . and take the video
information and funnel that thorough to offsite third party
archiving platforms which are highly fault
tolerant . . . .”59
81. Mr. Camelia testified that the ACC compression technology,
by minimizing bandwidth consumption, is also conducive to the
transmission of recorded video to remote storage locations and
noted that “. . . the retransmission of that video
to storage is just like . . . sending [it] to a
remote command centre . . . it has a very
beneficial effect on the ability to transmit storage to remote
locations which is more
secure . . . .”60
82. On the basis of the above analysis, the Tribunal agrees with
Mr. Albin’s view that the principal function of these goods in
issue is as a transmission device to accommodate customer
requirements for real-time surveillance.61
83. The Tribunal therefore finds that the Intellex models of the
goods in issue fall to be classified in heading No. 85.25 and in
particular, applying Rule 6 of the General Rules and Rule
1 of the Canadian Rules, under tariff item No. 8525.50.00
as transmission apparatus for radio-broadcasting or television,
whether or not incorporating reception apparatus or sound recording
or reproducing apparatus.
Principle Function Analysis—EDVR Models
84. Appeals before the Tribunal concerning tariff classification
proceed de novo,62 with such proceedings not
being in the nature of a lis, but rather, an inquiry, with
the overall burden of proper classification residing with the
85. That being said, each party does bear the onus of
establishing, on a prima facie basis, its specific claims
in respect of the proper classification of the goods in issue,
which claims are subject to rebuttal by parties opposite.
86. Accordingly, it is incumbent upon Tyco, as the appellant, to
establish, on a prima facie basis, its claim that each of
the models of the goods in issue was improperly classified by the
CBSA and fall to be classified in the manner in which it
87. The cornerstone of Tyco’s argument is that the low bandwidth
transmission capability associated with its proprietary ACC
algorithm has allowed it to respond to the market’s demand for
cost-effective live surveillance capabilities65 and,
in the process, has helped elevate video transmission to the
principal function of the goods in issue.
88. However, the following exchange between counsel for the CBSA
and Mr. Camelia indicates (i) that the EDVR models of the goods in
issue do not use the ACC algorithm, (ii) Tyco’s uncertainty as to
the compression technology actually employed in these EDVR models
(although it suggested that it might be the so-called JPEG type,
which is more appropriate for smaller businesses) and (iii) that
the EDVR models of the goods in issue are not suitable for larger
enterprises, being principally aimed at the low end of the
MR. MACKENZIE-FEDER: What sort of compression do the EDVR models
MR. CAMELIA: The EDVR does not use active content
compression, to the best of my knowledge. I don’t believe they
do. That product is a product that we provide to a down market
type of application.
MR. MACKENZIE-FEDER: In fact, I think in the documents it
uses motion JPEG compression. Is that right?
MR. CAMELIA: That is very likely. In fact, motion JPEG
is, as I mentioned earlier, one of those off-the-shelf kinds of
compression. That particular product is not intended to be
enterprise level. It is more appropriate for a more moderately
sized smaller business.66
89. Mr. Camelia also testified that other compression
technologies available on the market did not produce the same
bandwidth efficiency as Tyco’s own proprietary ACC algorithm and
stated the following:
A number of competitors use more off-the-shelf compression
because it’s quite expensive and requires large-scale resources to
develop your own compression algorithms. There are a number of
compression techniques that are used. In fact, the white paper
mentions MPEG and others that are used and competitors who
select those don’t achieve the same compression that we have for
both bandwidth transmission as well as for
90. The Tribunal is of the view that the smaller businesses that
populate the lower end of the security market are likely to have
different and more modest surveillance requirements than large
enterprises. In this regard, the recording function (for which less
efficient compression technology may be perfectly adequate for the
bandwidth compression of stored video files)68 is
likely to be relatively more important to a small business than to
a large enterprise, whose security requirements may call for the
centralization of live surveillance of multiple and geographically
dispersed security points of interest. Indeed, the evidence on the
record indicates that the industry recognizes that a certain
segment of the market remains principally interested in the
91. That being the case, and having regard to the above evidence
on the record, the Tribunal does not find that Tyco has
established, on a prima facie basis, that video
transmission has overtaken video recording as the principal
function of the four EDVR models of the goods in issue. The
Tribunal therefore finds that the EDVR models of the goods in issue
are properly classified in heading No. 85.21 and, in particular,
applying Rule 6 of the General Rules and Rule 1 of the
Canadian Rules, under tariff item No. 8521.90.90 as other
video recording or reproducing apparatus.
for Tariff Classification in Heading No. 84.71
92. The Tribunal does not feel compelled to address Tyco’s
alternative claim for classification of the goods in issue in
heading No. 84.71 and, specifically, under tariff item No.
8471.49.00 as other automatic data processing machines and units
thereof, not elsewhere specified or included, presented in the form
93. Suffice it to say that, by virtue of note 5 (E) to Chapter
84, classification in heading No. 84.71 is not possible, the
Tribunal having already determined that the goods in issue are
properly classified, by virtue of principal function, in
heading No. 85.21 in the case of the EDVR models and in heading No.
85.25 in the case of the Intellex models.
94. For the foregoing reasons, the Tribunal finds that the four
EDVR models (ADEDVR016032, ADEDVR004032, ADEDVR004016 and
ADEDVR004008) are properly classified under tariff item
No. 8521.90.90 as other video recording or reproducing
apparatus and that the nine Intellex models (ADD600ULP050,
ADD600ULP150, ADD600ULP100, ADD800DVD025, ADD6R0DVD075,
ADD6R0DVD050, ADD600DVS016, ADD400LTD016 and ADD1P100E) should be
classified under tariff item No. 8525.50.00 as transmission
apparatus for radio-broadcasting or television, whether or not
incorporating reception apparatus or sound recording or reproducing
95. The appeal is allowed in part.
1 . R.S.C. 1985 (2d Supp.), c. 1
2 . S.C. 1997, c. 36.
3 . Tribunal Exhibits AP-2010-055-06A at para.
1, AP-2010-055-09, AP-2010-055-10A at para. 4.
4 . Transcript of Public Hearing, 14
June 2011, at 11-15.
5 . Tribunal Exhibit AP-2010-055-20A.
6 . Tribunal Exhibit AP-2010-055-21A.
7 . Tribunal Exhibit AP-2010-055-20A at
8 . (11 August 2010), AP-2010-007 and
AP-2010-008 (CITT) [C.B. Powell].
9 . 2011 FCA 137 (CanLII).
10 . 2011 FCA 138 (CanLII).
11 . C.B. Powell at para. 41.
12 . Tribunal Exhibit AP-2010-055-23. This
exhibit was accepted into the record with the consent of the CBSA
during the public hearing. Transcript of Public Hearing,
14 June 2011, at 5.
13 . Tribunal Exhibit AP-2010-055-06A.
14 . Tribunal Exhibit AP-2010-055-10A.
15 . S.O.R./91-499 [Rules].
16 . Transcript of Public Hearing,
14 June 2011, at 7-8.
17 . Ibid.
18 . Ibid. at 8-9.
19 . Canada is a signatory to the
International Convention on the Harmonized Commodity
Description and Coding System, which governs the Harmonized
20 . S.C. 1997, c. 36, schedule [General
21 . S.C. 1997, c. 36, schedule.
22 . Rules 1 through 5 of the General
Rules apply to classification at the heading level (i.e. to
four digits). Pursuant to Rule 6 of the General Rules,
Rules 1 through 5 apply to classification at the subheading level
(i.e. to six digits). Similarly, the Canadian Rules make
Rules 1 through 5 of the General Rules applicable to
classification at the tariff item level (i.e. to eight digits).
23 . World Customs Organization, 2d ed.,
Brussels, 2003 [Classification Opinions].
24 . World Customs Organization, 4th ed.,
Brussels, 2007 [Explanatory Notes].
25 . Canada (Attorney General) v. Suzuki
Canada Inc., 2004 FCA 131 (CanLII), at paras. 13, 17.
26 . Tribunal Exhibit AP-2010-055-06A at
27 . (27 September 2007), AP-2006-016 and
AP-2006-018 (CITT) [Pelco] at para. 2. The goods in
Pelco were described as digital video recorders.
28 . Tribunal Exhibit AP-2010-055-06A at
29 . Tribunal Exhibit AP-2010-055-10A, tab
30 . Tribunal Exhibit AP-2010-055-6A at
paras. 73, 74, 86; Tribunal Exhibit AP-2010-055-10A at para.
31 . Transcript of Public Hearing,
14 June 2011, at 174, 191, 203-204.
32 . Ibid. at 88-89; Tribunal
Exhibit AP-2010-055-15A at para. 26.
33 . Transcript of Public Hearing,
14 June 2011, at 34, 36, 43.
34 . Ibid. at 43-44.
35 . The Tribunal notes that certain models
of the goods in issue (EDVR models) do not utilize the proprietary
ACC algorithm; rather these particular models utilize a Motion
Joint Photographic Experts Group (M-JPEG) compression system which
is not proprietary to Tyco, and is available on the commercial
market. Transcript of Public Hearing, 14 June 2011, at
36 . Transcript of Public Hearing,
14 June 2011, at 38-39.
37 . Ibid. at 105.
38 . Transcript of Public Hearing,
14 June 2011, at 27-30. Mr. Gomez provided the Tribunal with a
demonstration of how Intellex functions as a live video
surveillance tool, with the ability to remotely enable or disable
the system recording functions, or to realign or adjust camera
39 . Transcript of Public Hearing,
14 June 2011, at 100-104, 177-78. Mr. Camelia also testified that
Intellex treats all connected peripherals as a location or
destination to which processed video can be transmitted.
Transcript of Public Hearing, 14 June 2011, at 31-32.
40 . Transcript of Public Hearing,
14 June 2011, at 31, 74, 83.
41 . Ibid. at 144.
42 . Ibid. at 39-40.
43 . Ibid. at 77-79.
44 . Ibid. at 37, 79-80, 83-87.
45 . Ibid. at 29-30.
46 . Ibid. at 36-37, 136.
47 . Ibid. at 159.
48 . Pelco at para. 9;
Transcript of Public Hearing, 14 June 2011, at 75-79.
49 . Tribunal Exhibit AP-2010-055-10A at
50 . Transcript of Public Hearing,
14 June 2011, at 24, 36, 176.
51 . In cross-examination, Mr. Camelia
stated that the goods in issue receive video signals from multiple
cameras, allow images to be recorded and viewed in real time and
playback, have programmable recording schedules, have options to
record with a motion detection function and allow for recording at
different rates. Transcript of Public Hearing, 14 June
2011, at 71-74.
52 . Tribunal Exhibit AP-2010-055-10A, tabs
14, 15, 16, 17, 18.
53 . Transcript of Public Hearing,
14 June 2011, at 147. When asked by counsel for the CBSA about the
development of the storage capacity of the goods in issue since
1997, Mr. Albin stated that “[o]ver the years, that archiving did
grow. . . . They did follow along with the hard
drive manufacturers in regard to storage.”
54 . Transcript of Public Hearing,
14 June 2011, at 68.
55 . Ibid. at 45.
56 . Ibid. at 48.
57 . Ibid. at 92.
58 . Ibid. at 132.
59 . Ibid. at 133.
60 . Ibid. at 40.
61 . Ibid. at 130.
62 . Toyota Tsusho America Inc. v.
Canada (Canada Border Services Agency, 2010 FC 78 (CanLII) at
para. 24; Toyota Tsusho America Inc. v. President of the Canada
Border Services Agency (27 April 2011), AP-2010-063 (CITT) at
63 . GFT Mode Canada Inc. v. Deputy
M.N.R. (18 May 2000), AP-96-046 and AP-96-074 (CITT).
64 . Evan A. Swim Limited v. Deputy
M.N.R.C.E. (18 April 1990), AP-89-175 (CITT) at 3;
Original New York Seltzer of Canada Limited v. Deputy
M.N.R.C.E. (18 April 1990), 2820 (CITT) at 2. In each of these
cases, the appeal was dismissed, “. . . as the
appellant failed to discharge the onus of showing that the goods in
issue were not properly classified by the respondent”.
65 . Tribunal Exhibit AP-2010-055-06A at
para. 21; Transcript of Public Hearing, 14 June 2011, at
66 . Transcript of Public Hearing,
14 June 2011, at 119-20.
67 . Ibid. at 116.
68 . Ibid. at 41, 91, 207-208.
69 . Ibid. at 50. Mr. Camelia
stated that “. . . [recording is] important
certainly where it’s required by law or for those customers who
wouldn’t buy our products certainly if it didn’t have recording
capability, so it is important to us for those obvious