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, floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 156690
October 2, 2013
Dear [Client]:
Subject: EXCISE INTERPRETATION
Importation of tobacco product for sale in a Canadian duty free shop
Thank you for your letter of August 30, 2013 concerning the application of the Excise Act, 2001 (Act), regarding the importation of tobacco products for sale to Canadian duty free shops.
Your letter states that you are planning to produce a tobacco product in the U.S. for sale to Canadian duty free shops under a leased brand that is "prescribed" under the Act. This product would be imported by the Canadian duty free shop operator(s).
Under the licensing provisions of the Act, a person who is licensed under the Customs Act to operate a duty free shop may be issued a licence authorizing the person to possess and sell imported manufactured tobacco that is subject to a special duty under section 53.
Section 53 of the Act states that an imported manufactured tobacco product that is not stamped is subject to a special duty at a rate set out in section 1 of Schedule 3. The special duty is payable by the duty free shop licensee. This special duty can then be refunded to the duty free shop licensee under subsection 183(1) if the licensee sells imported manufactured tobacco to an individual who is not a resident of Canada and who is about to depart Canada and the quantities do not exceed 200 cigarettes, 200 tobacco sticks, and 200g of manufactured tobacco (other than cigarettes or tobacco sticks). The refund is subject to a two year time limitation.
The imported manufactured tobacco requires markings and other prescribed information pursuant to subsection 38(2) of the Act. However, subsection 38(3) provides an exemption to these requirements, as long as the brand is not commonly sold in Canada and is prescribed.
Below are provisions of the Excise Act, 2001 dealing with markings, special duty, and refunds. Information regarding excise duty can also be found at www.cra-arc.gc.ca/tx/tchncl/xcsdty-eng.html.
We did not include commentary or subsection 58(1) as it does not apply in your contemplated scenario. Subsection 58(1) is a relieving provision of the imposition of special duty under section 56. Section 56 applies to a tobacco product manufactured in Canada.
22 Issuance of licence - Subject to the regulations, the Minister may, on application, issue to a person who is licensed under the Customs Act to operate a duty free shop a licence authorizing the person to possess and sell imported manufactured tobacco that is subject to a special duty under section 53.
53(1) Special duty on imported manufactured tobacco delivered to duty free shop - A special duty is imposed, at the rates set out in section 1 of Schedule 3, on imported manufactured tobacco that is delivered to a duty free shop and that is not stamped.
53(2) When and by whom duty is payable - The special duty is payable at the time of delivery and is payable by the duty free shop licensee.
38(2) No delivery of imported tobacco without markings - Subject to subsections (2.1) and (3), no person shall deliver a container of imported manufactured tobacco or cigars that does not have printed on it or affixed to it tobacco markings and other prescribed information to
(a) a duty free shop for sale or offer for sale in accordance with the Customs Act;
(b) an accredited representative; or
(c) a customs bonded warehouse.
38(3) Exception for prescribed manufactured tobacco - A container of manufactured tobacco does not require tobacco markings to be printed on or affixed to it if the brand of the tobacco is not commonly sold in Canada and is prescribed.
183(1) Refund of special duty to duty free shop licensee - If a duty free shop licensee who holds a licence issued under section 22 sells, in accordance with the Customs Act, imported manufactured tobacco to an individual who is not a resident of Canada and who is about to depart Canada, the Minister may refund to the licensee the special duty paid under section 53 in respect of that portion of the total quantity of the tobacco exported by the individual on their departure that does not exceed
(a) in the case of cigarettes, 200 cigarettes;
(b) in the case of tobacco sticks, 200 sticks; and
(c) in the case of manufactured tobacco other than cigarettes and tobacco sticks, 200 g.
183(2) Application - No refund shall be paid to a duty free shop licensee in respect of a sale of imported manufactured tobacco unless the licensee applies to the Minister for the refund within two years after the sale.
In general, the Act provides for certain monetary penalties and administrative recourse when dealing with compliance issues. This may include seizure, financial penalty, and licence suspension or cancellation.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the Act, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-4136.
Yours truly,
Matthieu Emery, CGA
Senior Rulings Officer
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