19 October 2007 Excise Interpretation 90961 - Information on Excise Tax Drawback Claims

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 XXXXX concerning the application of the Excise Act, 2001 to imported tobacco products delivered to duty free shops for sale to persons leaving Canada. We apologize for the delay in our response.

All legislative references are to the Excise Act, 2001, and the regulations therein, unless otherwise specified.

Further to our previous e-mails and telephone conversations, we understand that, from time to time, duty free shops purchase imported tobacco products for resale. The cases in which the products are transported are marked for excise duty purposes in accordance with the Stamping and Marking of Tobacco Products Regulations (the Regulations). The packages and cartons containing the products may incorporate certain marking information, even though they are not required under the regulations to be marked.

Duty free shops resell the imported tobacco products to persons leaving Canada. These persons may or may not be residents of Canada. From time to time, these persons may return to Canada with some or all of the tobacco products purchased from the duty free shop.

Interpretation Requested

You want to know how imported tobacco products intended for delivery to a duty free shop are to be stamped or marked and, after they are sold by duty free shops to individuals leaving Canada, how they will be treated for excise duty purposes if the individual returns to Canada with some or all of the products.

Interpretation Given

Stamping and marking requirements

Before imported tobacco products ^[i]footnote 1 intended for the "duty-paid market" ^[ii]footnote 2 may be released into Canada, they must meet certain requirements. In particular, subject to certain exceptions, they must be properly packaged ^[iii]footnote 3 and stamped ^[iv]footnote 4.

Imported tobacco products intended for delivery to duty free shops are not intended for the duty-paid market. Consequently, they are not subject to the stamping requirements that would otherwise apply.

Nevertheless, these products must meet certain other requirements. In particular, the cases ^[v]footnote 5 in which these products are transported must have printed on or affixed to them certain "tobacco markings" ^[vi]footnote 6 and other information. Individual packages and cartons of these products do not have to be marked, but there is nothing in the legislation precluding them from incorporating marking information if a manufacturer chooses to do so.

Duty free shops are not permitted to stamp or mark tobacco products.

Imposition of duty on imported tobacco products (other than cigars) delivered to a duty free shop

Most imported tobacco products are subject to excise duty unless an exception applies. One such exception relieves excise duty on tobacco products that are not stamped. Since imported tobacco products intended for delivery to a duty free shop are not stamped, they are not subject to excise duty upon importation.

Nevertheless, with the exception of cigars, imported tobacco products intended for delivery to a duty free shop are subject to special duty upon delivery to the duty free shop. Cigars are not subject to special duty. Duty free shops must be licensed before they are permitted to possess and sell tobacco products that are subject to this special duty. The special duty is payable by the duty free shop licensee when the tobacco products are delivered to the duty free shop.

Importation of unstamped tobacco products by individuals who previously acquired the products from a duty free shop when leaving Canada

Unstamped tobacco products imported by an individual are generally relieved of excise duty when the quantities imported do not exceed the quantities that may be imported under Chapter 98 of the Customs Tariff without payment of duties or taxes (generally, quantities not exceeding 50 cigars, 200 cigarettes, 200 tobacco sticks and 200 grams of manufactured tobacco).

Although tobacco products imported in these circumstances are relieved of excise duty upon importation, they may be subject to a special duty. This special duty applies to tobacco products classified under tariff item No. 9804.10.00, 9804.20.00, 9805.00.00, or 9807.00.00 in the List of Tariff Provisions set out in the schedule to the Customs Tariff (or that would be classified under one of these tariff items had the value for duty specified in that item not been exceeded). These tariff items generally deal with personal exemptions for residents, temporary residents, and former residents of Canada who are returning to Canada after travelling or residing abroad. Should you require additional information about the classification of tobacco products under these tariff items, we ask that you contact the Canada Border Services Agency at their toll-free Border Information Services line: 1-800-461-9999.

Please note that an individual may only import unstamped tobacco products in quantities that do not exceed a prescribed limit. The prescribed limit is five units of tobacco products. A unit of tobacco products consists of:

a) 200 cigarettes;

b) 50 cigars;

c) 200 tobacco sticks; or

d) 200 grams of manufactured tobacco

Where the quantity of unstamped tobacco products to be imported by an individual exceeds the prescribed limit, the products must be entered into a sufferance warehouse for the purpose of being stamped before they may be imported.

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 Services, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the Excise Act, 2001, regulations, or our interpretative policy could affect this interpretation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Services.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 941-0915.

Yours truly,

John W. Smith
Excise Duty Operations - Tobacco Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2007/07/10 — RITS 86372 — Requirement to be Licensed