6 February 2008 Excise Interpretation 102018 - Security for Non-Resident Exporters of Softwood Lumber

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 the subject noted above. Our comments are set out below.

INFORMATION PROVIDED

1. XXXXX a company located in XXXXX, buys salvaged industrial timber from demolition contractors in Canada and exports these timbers to XXXXX

2. To comply with the security requirements for non-resident exporters of softwood lumber products, as required by the Softwood Lumber Products Export Charge Act, 2006 (Act), XXXXX tried to obtain a surety bond from a number of Canadian surety companies which are approved by the Canadian Government for issuing these bonds. No Canadian company contacted by XXXXX would issue a bond, on the grounds that they do not issue bonds for non-Canadian companies.

3. XXXXX then contacted a number of foreign surety companies approved by the CRA for issuing surety bonds. None of these companies has responded to XXXXX inquiries.

4. Other forms of security are not an option for XXXXX (i.e. cash, certified cheque or money order) due to its own cash needs or service limitations of the XXXXX banks with which it deals.

QUESTION

You have asked if the CRA can recommend alternatives to the approved surety companies or if it can get a bond through its own insurance company.

ANSWER

(Note: For the purposes of this response, we assume that XXXXX is not a deemed Canadian resident, pursuant to section 7 of the Act, and that XXXXX has no permanent establishment in Canada. "Permanent establishment" means a fixed place of business, including a place of management, a branch, an office, a factory, or a workshop or any timeberland.)

Security Required

In accordance with subsection 22(5) of the Act, exporters of softwood lumber products who are not residents of Canada or who do not have a permanent establishment in Canada must provide security for amounts payable under the Act. Further information is set out in Export Notice No. SWLN–4, titled "Security Requirements for Non-Resident Persons and Persons Without a Permanent Establishment in Canada" (Export Notice).

The Export Notice states that security must be in Canadian funds and it may be in the form of cash, certified cheque, money order or bond. The Export Notice also lists acceptable types of bonds and approved bond issuers.

Other Arrangements

We acknowledge that you have attempted to obtain security and that, for a number of reasons, you have not yet been able to do so. We note that the surety bond companies listed in the Export Notice are also used in other Canadian Government programs and that they issue bonds without problems in these programs. Therefore, you may wish to contact a listed company again, if you decide on a bond as a security option.

We must advise that the applicable legislative and administrative authorities, discussed above, do not provide the CRA with the discretion to allow any other arrangements for security. That is, there is no provision for the CRA to establish unique security requirements for individual exporters.

As a result, only exporters registered with the CRA can ship softwood lumber products to XXXXX, either in the course of their own business or on behalf of unregistered exporters. (Note: In the latter case, the registered exporters would still be liable for the export charge under the Act.)

The foregoing comments represent our views on the application of the Act to your inquiry. Any changes to the wording of the Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the CRA with respect to a particular situation.

If you require clarificiation with respect to any of the issues discussed in this letter, please call XXXXX, Senior Rulings Officer, directly, at 613-941-1933.

Yours truly

Ron Hagmann, C.G.A.
Manager
Softwood Lumber Unit
Excise Duty and Tax Division
Excise and GST/HST Rulings Directorate

2008/03/10 — RITS 100968 — Excise Tax and the Government of the NWT