Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise Duties and Taxes Division
Place de Ville, Tower A, 9th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 189408
Dear [Client]:
Subject: EXCISE INTERPRETATION
Type of Excise Stamp Required for Tobacco Product known as Blunt Wraps
Thank you for your [correspondence] […] of [mm/dd/yyyy] and our telephone conversations of [mm/dd] and [mm/dd], [yyyy] concerning the federal stamping requirements for a tobacco product known as “blunt wraps.”
All legislative references are to the Excise Act, 2001 (Act) and its regulations, unless otherwise specified.
We understand that [ACo] is considering importing blunt wraps into the Canadian duty-paid market. For purposes of this interpretation, blunt wraps are wrappers of natural or reconstituted leaf tobacco, similar to wrappers used in cigars. They are not intended to be smoked on their own; rather, blunt wraps are used by consumers as a wrapper formed around tobacco, cannabis, or other smoking material (referred to in the remainder of this document as “additional smoking material”). Blunt wraps are consumed through smoking once combined with the additional smoking material. The consumer must obtain the additional smoking material from other sources as the packages [ACo] imports will contain only blunt wraps. We understand that blunt wraps can be packaged and sold as unsealed, hollow spirals of natural or reconstituted tobacco or can be packaged and sold in other ways, such as stacked flat one on top of another. Blunt wraps have no other use other than for consumers to add additional smoking material and consume them through smoking.
INTERPRETATION REQUESTED
You would like to know the type of excise stamp that must be affixed to a package of blunt wraps to be entered into the Canadian duty paid market. You would also like to know if different packaging methods impact the type of excise stamp required, such as whether packaging the blunt wraps as unsealed, hollow spirals of natural or reconstituted tobacco or stacked flat would impact the type of stamp required.
INTERPRETATION GIVEN
Whether packaged as unsealed, hollow spirals of natural or reconstituted tobacco or stacked flat one on top of another, blunt wraps are classified as “manufactured tobacco other than cigarettes and tobacco sticks” under Schedule 1 to the Act, for the purpose of applying the excise duty imposed on tobacco products under section 42 of the Act. As such, blunt wraps are required to be stamped with a “tobacco” excise stamp and are subject to excise duty of $7.45425 (Footnote 1) for each 50 grams or fraction of 50 grams contained in any package. Tobacco excise stamps are currently available in denominations of 50, 100, 150, 200, 250 and 400 grams.
Analysis
Duty is imposed under section 42 of the Act on tobacco products manufactured in Canada or imported and on imported raw leaf tobacco at the rates set out in Schedule 1 to the Act.
Schedule 1 to the Act contains excise duty rates for five categories of tobacco (cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, cigars, and raw leaf tobacco). The terms cigarette, tobacco stick, cigar, manufactured tobacco and raw leaf tobacco are among the terms defined in Section 2 of the Act. The rate of excise duty that applies to a particular tobacco product, and the excise stamp that must be affixed to the product, depends on the category that the product falls under in Schedule 1. This determination is based largely on how the product is classified in respect of the definitions in section 2 of the Act.
With respect to the five categories of tobacco in Schedule 1:
Blunt wraps are not a cigar (Footnote 2) as they do not contain a filler or a binder, and they are not a cigarillo or cheroot, which are types of cigars. They are not raw leaf tobacco because a number of steps are taken to manufacture (Footnote 3) the blunt wraps from raw leaf tobacco including stemming the raw leaf tobacco.
Blunt wraps are manufactured tobacco (Footnote 4) as they are an article, other than cigars or packaged raw leaf tobacco, that are manufactured in whole or in part from raw leaf tobacco by a process.
Manufactured tobacco must be further categorized as cigarettes, tobacco sticks, or manufactured tobacco other than cigarettes and tobacco sticks to determine which rate in Schedule 1 applies.
Tobacco sticks are a specific type of tobacco product normally comprised of a solid cylinder of tobacco and a separately included paper overwrap and filter. The consumer inserts the solid cylinder of tobacco into the paper overwrap and filter portion to assemble a cigarette. Tobacco sticks were developed by the tobacco industry to be identical to cigarettes once assembled by the consumer. In 2008, the excise duty rate for tobacco sticks was increased to be equivalent to the rate for cigarettes.
Cigarettes are also a solid cylinder of tobacco that is wrapped in paper and normally attached to a filter. The definition of cigarette in section 2 of the Act is consistent with the general industry meaning of the term. The definitions of cigarette and tobacco stick refer to a “roll or tubular construction” intended for smoking. In this context, “roll or tubular construction” refers to a solid cylinder of manufactured tobacco. Although blunt wraps may be sold as unsealed, hollow spirals of natural or reconstituted tobacco, they do not constitute a “roll or tubular construction” of tobacco and do not meet the definition of cigarette or tobacco stick in section 2 of the Act.
Blunt wraps are best described as sheets of natural or reconstituted tobacco, or tobacco leaf similar to leaf used as a cigar wrapper, that may be sold stacked flat or as unsealed, hollow spirals of natural or reconstituted tobacco. Blunt wraps are categorized as “manufactured tobacco other than cigarettes and tobacco sticks” in Schedule 1 for purposes of applying the excise duty imposed under section 42 and determining the type of excise stamp that must be affixed to the product. Presenting the sheet or leaf as unsealed, hollow spirals of natural or reconstituted tobacco or stacked flat doesn’t impact its classification for excise duty or stamping purposes.
Please note that in addition to an excise stamp, packages of imported blunt wraps must also contain the prescribed information specified in section 3.1 of the Stamping and Marking of Tobacco Products Regulations. There may also be additional requirements impacting the importation and sale of blunt wraps in Canada under provincial legislation or other federal legislation, such as legislation administered by Health Canada.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes or amendments to the Act, if enacted, or to the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7281.
Yours truly
Chris White
Excise Duty Operations - Tobacco Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 […].
2 According to section 2 of the Act, cigar includes
(a) a cigarillo or cheroot; and
(b) any roll or tubular construction intended for smoking that consists of a filler composed of pieces of natural or reconstituted leaf tobacco, a binder of natural or reconstituted leaf tobacco in which the filler is wrapped and a wrapper of natural or reconstituted leaf tobacco.
3 According to section 2 of the Act, “manufacture,” in respect of a tobacco product, includes any step in the preparation or working up of raw leaf tobacco into the tobacco product. It includes packing, stemming, reconstituting, converting or packaging the raw leaf tobacco or tobacco product.
4 According to section 2 of the Act, “manufactured tobacco” means every article, other than a cigar or packaged raw leaf tobacco, that is manufactured in whole or in part from raw leaf tobacco by any process.
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