19 August 1996 GST/HST Interpretation 11640-3[6] - International Cargo Containers

                                                                        Telephone No.: (613) 957-8224
Fax No.: (613) 990-1233
File No.: 11640-3(cav)
Sch. VI/V/6.2

Dear XXXXX

I refer to your letter dated July 26, 1996 (and attachment) to Mr. Randy Nanner requesting confirmation that repairs made to bring a cargo container into compliance with the requirements of the Safe Containers Convention Regulations SOR/82-1038, as amended, and the Dangerous Goods Shipping Regulations SOR/8l-951, as amended, (as applicable to containers), qualify as 'emergency repair services' for the purposes of new section 6.2 of Part V of Schedule VI of the Excise Tax Act (the Act). The types of repairs in question are summarized and explained in XXXXX[.] You stated that:

1. XXXXX provides storage and repair services for international cargo containers of the kind described in proposed section 6.2 of Part V of Schedule VI, as contained in the Notice of Ways and Means Motion April 23, 1996 amendments.

2. XXXXX inspects containers arriving at its facility to ensure compliance with applicable safety requirements, notes necessary repairs and, after review and approval by the container owner or, where applicable, the shipping company lessee carries out the repairs.

3. You are requesting our concurrence that repairs to bring a container into compliance with the requirements of the above regulations be accepted as emergency repairs because these regulations are directed at safety and structural integrity and because containers which do not meet the requirements of these regulations will be ordered out of service by Transport Canada containers inspectors.

Interpretation Given

As proposed section 6.2 has not, as yet, been passed into law, we are unable to rule that repairs made to bring a container into compliance with the above regulations are zero-rated under this provision. We can, however, provide you with an interpretation of section 6.2 in respect of emergency repairs to cargo containers.

Proposed section 6.2 of Part V of Schedule VI zero-rates a supply to an unregistered non-resident of emergency repair services (or storage services) in respect of empty cargo containers where the container is for use exclusively in the international transport of freight and is classified under specified tariff items. In addition, repair parts supplied with the emergency services are also zero-rated.

As you are aware, the Department's interpretation of the word 'emergency' as set out in Memorandum 300-3-5 is 'an unforeseen event or combination of events that calls for immediate action'. It is my opinion that where a cargo container is ordered out of service because it is unfit for use, and where repairs are undertaken immediately to restore the container's structural integrity and serviceability to a safe condition before it continues in service, such repairs would fall within the ambit of proposed section 6.2 of Part V of Schedule VI to the Act. It should be noted that the application of this section, however, would depend on the facts associated with each situation. Further, on-going maintenance and upkeep that would reasonably allow a container to safely continue its journey would not be considered an emergency repair.

The foregoing comments represent our understanding of the proposed amendment of the Act relating to the subject matter of your letter. This interpretation may change if the final legislation passed into law differs from our understanding of the Notice of Ways and Means Motion tabled on April 23, 1996. These comments are not rulings and, in accordance with the guidelines set out in Section 1.4 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

Should you require further clarification, please do not hesitate to contact Carol Ann Villeneuve at (613) 957-8224 or Randy Nanner at (613) 952-8810.

Yours sincerely,

H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch

Closed September 6, 1996