18 February 1997 GST/HST Interpretation HQR0000414 - International Cargo Containers

Dear XXXXX

I refer to your letter of August 30, 1996 and attachments, which you addressed to Mr. Rob Allwright of the Department of Finance, concerning the interpretation of the phrase "emergency repair" as it applies to cargo containers used in the transportation of property to and from Canada. Your submission has been referred to me for direct reply. I apolog[i]ze for the lateness of this response.

As you point out in your letter, and as referenced in GST Memorandum 300[-]5, entitled Exports, the Department will generally consider "emergency" to be an unforeseen event or combination of events that calls for immediate action.

In our previous response to you of August 19, 1996, on the same subject matter, we provided you with the following example:

"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."

The above example highlights that the repairs would be undertaken immediately to restore the container to a safe condition before it continues in service. Therefore, such repairs would be of an emergency nature and would qualify for zero-rating pursuant to proposed section 6.2. Moreover, an emergency repair service would in all likelihood be undertaken or performed to correct an emergency situation that occurred while the container was in service, where the situation posed an obvious risk to safety.

Other examples that provide for evidence of risk to safety, whether the container is or is not ordered out of service, would equally qualify for zero-rating by virtue of proposed section 6.2.

Under paragraph 1.1 of the Guide for Container Equipment Inspection IICL-4, under the heading "The Need for Inspection", it is stated:

"The continuing utility of containers requires that they remain in a condition appropriate to their use. It is in the long-term interest of all parties to ensure that proper inspections are carried out and that appropriate repairs of acceptable quality be made."

Furthermore, under paragraph 1.2 of the same Guide, under the heading "Role of the Inspector", it is stipulated:

"The inspector is the most important judge of the container condition ... The inspector should identify wear and deterioration conditions, so that timely repairs can be made which maximize the useful life of the container."

Under the circumstances, it appears that the repair services undertaken which maximize the useful life or the continuing utility of a container would not necessarily be of an emergency nature to preserve or protect the safety of the container, its contents or persons involved in inspecting, loading, unloading or transporting the container.

However, under the Safe Containers Convention Regulations and Regulations Respecting the Packing, Stowing, Carrying, Marking and Inspection of Dangerous Goods on Ships, the repairs undertaken, where there is significant evidence that the condition of the container creates an obvious risk to safety, would be classed as emergency repairs (i.e., evidence that calls for immediate action). It is assumed that under such regulations, the risk to safety is evident while the container is still in service.

Conversely, conditions under which timely repairs are undertaken to preserve the continuing utility of a container or that maximizes its useful life, would not, in themselves, be considered as "emergency repairs" under the current policy.

Therefore, as mentioned earlier, only those repair services that are the result of an unforeseen event or combination of events that calls for immediate action would be seen as emergency repairs.

Furthermore, in determining whether any repair work performed on a container, under the above mentioned regulations or any international container convention, would qualify as "emergency repairs" is a question of fact.

This interpretation is based upon our understanding of the Excise Tax Act and regulations thereunder in their present form. The interpretation does not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.

While we trust our comments are of assistance to you, we would advise that they do not constitute a GST ruling and, in accordance with the guidelines set out in Section 1.4 of the GST Memoranda Series, do not bind the Department in respect of any particular fact situations.

Yours truly,

Daniel E.B. Chamaillard
Senior Policy Officer
Border Issues Unit
General Operations and Border Issues Division
GST Rulings and Interpretations
Policy and Legislation Branch
HQR0000414

Telephone# (613) 954-8585

Fax#: (613)990-1233