April 22, 1994
XXXXX
You submitted a fax dated March 9, 1994, to Michael Matthews a case where the fact pattern appeared not to be envisaged by our importer and ITC policy.
The fact pattern is as follows:
1. a registered resident in Canada orders goods from a registered non-resident and the terms of the sale are FOB XXXXX;
2. the registered non-resident is the importer of record for Customs purposes and pays the duties and taxes;
3. the registered non-resident does not charge GST under Division II as the supply is made outside Canada (FOB XXXXX);
Based on the above fact pattern you asked if the registered non-resident is entitled to claim an ITC for the tax paid on importation.
Our Response:
The Department's policy governing imports and ITC specifies that where the person who caused the importation (i.e., the de facto importer) is not identified as the importer of record, that it is necessary that the importer of record by the agent of the de facto importer. In the fact pattern that you provided us with, you identified a situation where the de facto importer was a person different than the importer of record but where these two parties were not engaged in an agency relationship.
If, in that situation, the importer of record is not acting as an agent of the de facto importer, it would appear that our current policy would not premit the actual importer from claiming the ITCs. This situation was not envisaged when our current policy was drafted. Moreover, our policy was developed in order to provide greater relief for importers who are not, or who are incorrectly, identified as the importer of record.
For these reasons, we interpret "agent" in the context of the policy statement as strictly meaning to act as the importer of record of the de facto importer for the limited purpose of accounting for the Division III tax, regardless of whether or not the parties are in an agency relationship for other purposes.
The importer does have the capacity, for Division III tax and duties purposes, to make the de facto importer liable for such tax and duties in the act of accounting: such a capacity to create a liability for another person is an important characteristic of an agency relationship. In effect, as explained in more detail in the policy proposal, the de facto importer has a joint liability for duties and tax payable on the importation with the importer of record. It is for a same liability of the de facto importer that the importer of record is accounting for.
Consequently, if the de facto importer is a person different than the importer of record in respect of an import, the importer of record is necessarily acting as an agent of the de facto importer for the purposes of accounting for tax.
Once it is established that a person is the de facto importer of goods and has imported these goods for use in the course of its commercial activities, that person necessarily meets the condition that the importer of record be the person's agent for the purposes of accounting for tax.
Application to your Fact Pattern
In the fact pattern you submitted, it appears that the de facto importer is the registered resident. Generally, the de facto importer is the person who ordered the goods, as explained more in detail in the legal opinion referred to in the policy proposal. For the only purpose of accounting for tax (only scope of agency interesting the Department for the matters discussed here) the non-resident would be considered as having acted as an agent of the resident.
The supply of the goods having been made outside Canada prior to importation, the goods cannot be considered as being imported by the non-resident for supplying. The recipient of the supply is the only person for which use, consumption or supply of the goods have been imported.
If you require any information, please do not hesitate to contact Raymond Labelle at (613) 952-8815.
M. Matthews
A/Manager
ITC Unit
General Tax Policy
Policy and Legislation/GST
GTP: XXXXX
First draft, April 7, 1994, XXXXX
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