Erroneous rulings by Canada's customs officers have cost the federal treasury about half a million dollars.

The Trudeau cabinet recently authorized $495,000 in rebates already paid to five companies that imported jewelry into Canada between 2006 and 2012.

The companies paid Canadian duties on the imports, but later smelted the jewelry into bullion and sold the precious metals in Canada.

Importers of jewelry must pay customs duties but between 2006 and 2012, five companies benefited from duty rebates that the CBSA now says it was wrong to provide. (Stephanie Wiebe/CBC) Under an obscure section of the customs tariff, a company can recover any duties paid if it can prove the imported goods were destroyed after being declared obsolete or surplus.

The five companies smelted their imported jewelry on 39 occasions over seven years, and the Canada Border Services Agency erroneously certified each smelting as "destruction," after a customs officer witnessed each instance.

That certification allowed the companies to recoup their duties paid, and $495,000 was refunded.

"The companies in question correctly followed the processes laid out in statute and policy for claiming a refund of customs duties paid on the goods," says a government document explaining cabinet's decision, released this week.

"The CBSA erred by certifying that the smelting of jewelry constituted destruction. Therefore, it would be unjust to revoke the refund of duties that these companies received."

Order retroactive

The companies had already received their refunds; the cabinet order retroactively certifies the payments.

One additional refund worth $2,992.56 in a 40th smelting incident not covered by the cabinet order is still in process of being paid to one of the five companies.

Gold bullion nearly tripled in value from 2006 to 2012, driven by the global financial meltdown, so the companies were selling into a bullish market for precious metals.

"The CBSA believes that the five companies acted in good faith," said agency spokeswoman Line Guibert-Wolff, who adds the agency no longer considers smelting to be destruction.

Five companies that import jewelry later smelted some of the product into bullion and sold it in Canada — and collected import duty rebates after a mistaken ruling by CBSA. The Vancouver company that received the largest total rebate, IBB International (Canada) Ltd. for $403,728, filed for bankruptcy in 2012.

The second-largest recipient, at $61,932 in rebates, is Montreal-based Arig-Or Jewellery Inc.

Company director Ted Argyris said all jewelry importers "periodically 'smelt' or, in effect, recover the precious metal component of the jewelry they import."

"There can be other reasons as to why this is done, but in the overwhelming majority of cases, it is a result of, as in any fashion industry, outmoded styles that are in surplus and are no longer salable," he said.

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