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 and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 191127
Dear [Client]:
Subject: EXCISE INTERPRETATION
[Shipping of a tobacco product to a location outside Canada]
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the shipping of a tobacco product to […][ABC] at its […][location X, Country X] warehouse and the application of the Excise Act, 2001. You also attached […] a purchase order and a pro-forma invoice of cigarettes under the brand “[…][Product 1]” to show the address of [ABC].
All legislative references are to the Excise Act, 2001 (Act) and the regulations therein, unless otherwise specified.
We understand that […]([…][the company]) is a tobacco licensee and is manufacturing the “[…][Product 2]” brand tobacco products, specifically […][packaged manufactured tobacco other than cigarettes and tobacco sticks]. The brand “[Product 2]” is listed in Schedule 1 to the Regulations Respecting Prescribed Brands of Manufactured Tobacco and Prescribed Cigarettes and Schedule 1 to the Regulations Relieving Special Duty on Certain Tobacco Products (both referred to as the Prescribed Brands Regulations). The “[Product 2]” brand is considered to be a brand “prescribed” for the purposes of subsections 38(3) and 58(1) of the Act, which relieves the brand from the marking and special duty requirements under the Act.
We also understand that you will be exporting the tobacco product to [ABC], at their [location X, Country X] warehouse. [ABC] is a Duty Free operator in […][foreign countries] and is a division of […][XYZ] which operates more than [#] duty free stores in […][Country X and other foreign countries] ([…][ABC and XYZ websites]).
INTERPRETATION REQUESTED
You would like to know if you can ship the “[Product 2]” [packaged manufactured tobacco other than cigarettes and tobacco sticks] to [ABC] at its [location X, Country X] warehouse, without payment of the excise duty.
INTERPRETATION GIVEN
Based on the information provided, if [the company] intend to export “[Product 2]” brand manufactured tobacco ([packaged manufactured tobacco other than cigarettes and tobacco sticks]) for delivery to a foreign duty free shop, the tobacco product must be stamped and packaged with prescribed information. In addition, this tobacco product will be subject to excise duty at the rate set out in section 3 of Schedule 1 to the Act.
A tobacco product that is “Canadian manufactured tobacco” or “foreign brand tobacco” cannot be removed from the excise warehouse for delivery to a foreign duty free shop or as foreign ships’ stores.
“Canadian manufactured tobacco” is defined in subsection 50(1) and, for the purpose of section 50, means manufactured tobacco that is manufactured in Canada and does not include partially manufactured tobacco or foreign brand tobacco.
“Foreign brand tobacco” is also defined in subsection 50(1) and, for the purpose of section 50, means manufactured tobacco in respect of which the special duty imposed under section 56 is relieved because of section 58. (Commonly referred to as “prescribed brand”).
Prescribed brands fall within the definition of foreign brand tobacco. Subsection 50(8) allows for the removal of foreign brand tobacco from the excise warehouse of the tobacco licensee who manufactured it only if it is exported by the licensee and not for delivery to a foreign duty free shop or as foreign ships’ stores.
“Foreign duty free shop” is defined in section 2 of the Act, and means a retail store that is located in a country other than Canada and that is authorized under the laws of that country to sell goods free of certain duties and taxes to individuals who are about to leave that country.
“Foreign ships’ stores” is also defined in section 2, and means tobacco products taken on board a vessel or aircraft while the vessel or aircraft is outside Canada and that are intended for consumption by or sale to the passengers or crew while the passengers and crew are on board the vessel or aircraft.
Section 37 requires manufactured tobacco or cigars manufactured in Canada that are not stamped to be immediately entered into the excise warehouse. Removals from the warehouse are permitted under limited conditions, such as, for specifically authorized exports or re-work or destruction, or for delivery to an accredited representative. In particular, paragraph 50(4)(a) permits “Canadian manufactured tobacco” to be removed from the warehouse for export, but it does not permit its delivery to a foreign duty free shop or as foreign ships’ stores. Similarly, subsection 50(8) permits “foreign brand tobacco” (prescribed brands) to be exported, and also does not permit its delivery to a foreign duty free shop or as foreign ships’ stores.
As an operator of duty free stores, Canadian manufactured tobacco and foreign brand tobacco cannot be delivered to [ABC], unless it is stamped and packaged with prescribed information. […]. Currently, the rate [of excise duty specified by section 3 of Schedule 1] for the tobacco product you wish to supply to [ABC], is $7.45425 per 50 grams or fraction of 50 grams contained in any package. Prescribed information can be found at http://laws-lois.justice.gc.ca/eng/regulations/SOR-2003-288/page-1.html#h-3 and consists of the words “not for sale in Canada” and “vente interdite au Canada” in addition to the tobacco licensee’s name and address, licence number, or if the tobacco product is packaged by the licensee for another person, the person’s name and the address of their principal place of business.
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 to the Act, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
Should you require a formal Ruling, please refer to GST/HST Memorandum 1.4, Goods and Services Tax Rulings, which can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/1-4/excise-gst-hst-rulings-interpretations-service.html.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7359.
Yours truly,
Matthieu Emery
Excise Duty Operations - Tobacco Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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