8 September 2017 Interpretation 180362

NRCo, a registered non-resident corporation registered for the GST/HST, has (before any shipments described below occur) entered into a one-year agreement with a Canadian purchaser ("CanCo") for the delivery to CanCo of fuel oil in marine vessels under ICC Incoterms (2010) "Delivery ex ship (DES)" at a delivery point in a Canadian port. The purchaser (CanCo ) takes possession of the fuel oil prior to its release by the CBSA and, as importer of record, pays any applicable taxes and duties to obtain release.

Would such supply be considered to be made outside Canada by virtue of s. 144? CRA responded:

One of the requirements of section 144 is that the goods be imported before the supply is made. Under section 133, the supply of the goods is deemed to be made when the agreement for the supply of the goods is entered into. … The relevance of the timing of when a supply is made under section 133 to the application of section 144 is reflected in the wording of the definition of "specified supply" of goods under subsection 178.8(1) … [which] distinguishes between a supply of goods that are imported after the supply is made, and a supply of goods that have been imported in circumstances in which section 144 deems the supply to have been made outside Canada. …

[S]hipments of fuel oil to CanCo commenced only after the agreement for the supply was reached … . Since section 133 deems the supply to have been made at the time of the agreement, the importation of the fuel oil occurs after the supply by [NRCo] to CanCo. Accordingly, section 144 would not apply in this case since the fuel oil was not imported before the supply was made.

S. 144 provides that “a supply of goods that have been imported … but have not been released [by the CBSA] before the goods are delivered … to the recipient of the supply, shall be deemed to be made outside Canada,” so that even if the vendor is a registrant, it is not required to charge GST/HST. CRA considered that s. 144 does not apply if the goods were supplied by the vendor before they were imported and, in this regard, applied s. 133, which deems goods to be supplied at the time that the sale agreement is entered into. Accordingly, in an example where a registered non-resident enters into a somewhat long-term agreement for the supply of fuel oil to Canco, and thereafter delivers the fuel oil to Canco at a Canadian port, CRA considered that s. 144 does not relieve the non-resident from the requirement to charge GST/HST notwithstanding that the fuel oil has not yet been released at the time of its delivery in Canada. In this regard, CRA stated:

Under section 133, the supply of the goods is deemed to be made when the agreement for the supply of the goods is entered into. … The relevance of the timing of when a supply is made under section 133 to the application of section 144 is reflected in the wording of the definition of "specified supply" of goods under subsection 178.8(1) … [which] distinguishes between a supply of goods that are imported after the supply is made, and a supply of goods that have been imported in circumstances in which section 144 deems the supply to have been made outside Canada. …