12 December 2006 Excise Interpretation 85003 - Acceptable Levels of Concentration of Diethyl Phthalate as a Denaturant in Ethyl Alcohol That is Sold In or Imported Into Canada

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning diethyl phthalate as a denaturant in the making of denatured alcohol under Canadian excise legislation. We are sending this letter to confirm all of the information that was provided to you by Mr. Steve Mosher of this office XXXXX.

Statement of Facts

Our understandings of the facts are as follows:

(1) XXXXX.

(2) XXXXX has its corporate offices in XXXXX.

(3) XXXXX does not hold an excise duty licence or registration under the Excise Act, 2001, and is not a registrant for purposes of the goods and services tax under the Excise Tax Act in Canada.

(4) XXXXX is trying to determine the permissible levels in various countries of diethyl phthalate as a denaturant for ethyl alcohol.

Interpretation Requested

XXXXX has asked the Canada Revenue Agency (CRA) to advise as to what would be an acceptable concentration of diethyl phthalate as a denaturant in ethyl alcohol that is sold in or imported into Canada.

Interpretation Given

The chemical known as "diethyl phthalate" is recognized as a denaturant under the provisions of the Denatured and Specially Denatured Alcohol Regulations, made under the Excise Act, 2001. It is described in the Table of the regulations as "a clear colorless liquid with a minimum purity of 98% by volume at 20ºC". However, it appears only as a component of DAG-2-0, and must be used in combination with two other denaturants, as follows:

250 mL of diethyl phthalate and 700 mg of benzyldiethyl [(2,6 xylylcarbamoyl)methyl] ammonium benzoate (denatonium benzoate) and 40 g of camphor

or

250 mL of diethyl phthalate and 175 g of sucrose octaacetate and 40 g of camphor

If it is used as a sole denaturant of ethyl alcohol, the resulting mixture is not accepted in Canada as a denatured or specially denatured alcohol grade under the provisions of the Denatured and Specially Denatured Alcohol Regulations.

However, for the making of an "approved formulation" (which, like denatured alcohol, is not considered to be "spirits"), diethyl phthalate may be accepted as a sole denaturant, but 250 mL would not be sufficient to adequately denature ethyl alcohol. Any final determination of the "approved formulation" would have to be based on a sample submitted by its importer, in accordance with the CRA publication EDM 1-1-6, and be accompanied by a completed form Y15A. Links to that publication and form have already been sent to you by Mr. Mosher.

Explanation

The term "approved formulation" is defined in the Excise Act, 2001 to mean:

"(a) any product made with alcohol by a licensed user in accordance with a formulation for which the user has approval from the Minister [of National Revenue]; and

(b) any imported product that, in the opinion of the Minister, would be a product under (a) if it were made in Canada by a licensed user." 

The definition of "spirits" under the same Act excludes "approved formulation".

Therefore, if XXXXX were to import into Canada any of its alcohol-based goods that would not otherwise qualify as denatured or specially denatured alcohol, you could apply to the CRA to have a determination made as to whether these goods qualify as approved formulations. However, any company wishing to import your products into Canada would have to make a similar application on their own behalf.

There are no provisions in the Denatured and Specially Denatured Alcohol Regulations that recognize diethyl phthalate as a sole denaturant in the making of any grade of denatured or specially denatured alcohol. Also, there are no CRA guidelines pertaining to the use of this chemical as a sole denaturant in the making of an approved formulation.

As a matter of policy, the CRA will not recommend to any licensee or importer the amount of any denaturant that should be used to make an approved formulation.

If your company intends to make a cosmetic product that also happens to contain diethyl phthalate and ethyl alcohol, and it is subsequently imported for sale in Canada, it would likely be classified by Customs as a cosmetic product of some kind and would not be subject to additional duty equal to excise duty. However, any advice on tariff classification matters must be obtained from the Canada Border Services Agency.

If you propose to add diethyl phthalate as a sole denaturant of ethyl alcohol, you will have to advise us first as to how much of that chemical you want to use with the ethyl alcohol before the Laboratory and Scientific Services Directorate of the Canada Border Services Agency can advise us as to whether it could qualify as an "approved formulation".

We trust that this letter explains our position on the matter you have raised. Should you require further information on this or any other matter pertaining to excise duties in Canada, feel free to contact me XXXXX or Mr. Steve Mosher.

Sincerely,

Preston Gallant, CGA
Manager
Excise Duty Operations - Alcohol
Excise Duties and Taxes Division

2006/12/12 — RITS 82624 — [Approved Formulation of Denatured Alcohol]