29 June 2000 GST/HST Interpretation 25615 - Application of Section 180

This is in reference to your Memorandum of February 22, 2000 and attachments, addressed to Mr. Ivan Bastasic, Manager of the Border Issues Unit, and to my telephone conversation with XXXXX, concerning the application of section 180 of the Excise Tax Act to certain transactions undertaken XXXXX. I have been asked to respond to your Memorandum.

According to the information included in the above attachments, XXXXX[.] The storage agreements XXXXX respectively, provide in substance that XXXXX shall receive, unload, identify, count, store and otherwise control, within each of their respective storage facilities, XXXXX product, according to XXXXX specifications. The agreements also provide that the storage service providers shall undertake the following commercial services:

-    XXXXX

-    Accept purchase orders from XXXXX customers;

-    Arrange for the delivery of XXXXX product to XXXXX customers (i.e. hire common carriers on behalf of XXXXX);

-    Accept warehouse additions (additional product) from XXXXX and monitoring correct delivery of the product to XXXXX facilities[;]

-    XXXXX[;]

-    Invoice XXXXX customers for additional services;

-    Accept purchase orders fromXXXXX customers;

-    Monitoring all incoming product from XXXXX;

-    Tracking, tracing and managing the payment of carrier invoices;

-    Managing the collection function of moneys owed by XXXXX customers.

Furthermore, XXXXX has an agreement with XXXXX a GST/HST registrant, to whom XXXXX directly supplies its product in Canada. XXXXX makes use of the product in the course of its commercial activities of manufacturing XXXXX for the auto industry.

Section 180 of the Act provides for the flow-through of the credit in respect of Division III tax paid or payable by a non-resident, who is not registered for GST/HST, on imported commercial goods (the property), where that non-resident person either makes a supply of tangible personal property to a particular person or transfers physical possession of the property to a registrant for the purposes of having a commercial service performed in respect of the property of the non-resident.

A "commercial service" pursuant to subsection 123(1) of the Act means, in respect of tangible personal property, any service in respect of the property other than a service of shipping the property supplied by a carrier and a financial service.

According to the warehouse agreements mentioned previously, the principal object of the agreements is to store XXXXX goods in Canada for the purpose of making these available in Canada to XXXXX customers. In regards to the terms of delivery included in the storage agreement between XXXXX, XXXXX to the said agreement provides that "the Warehouseman XXXXX) is entitled and hereby authorized by the Storer XXXXX to employ the service of any licensed carrier for the purpose of shipping the stored goods. Upon delivery of the stored goods to the door of the warehouse in which same are stored for collection from such carrier, the Warehouseman's liability in respect of the stored goods ceases and is at an end unless otherwise agreed upon in writing and signed by the Warehouseman."

The supplies of the commercial services supplied by both XXXXX are billed to XXXXX. Documentary proof of delivery of XXXXX product by the common carriers is sent by the service providers to XXXXX, whereupon, XXXXX invoices its Canadian customers. Throughout the delivery process, XXXXX is the person who carries insurance on its property to be transported to its customers in Canada (i.e., f.o.b.destination).

In consideration of the above, and if all of the conditions of section 180 of the Act are met, it appears that XXXXX would have been eligible for the flow through of the Division III tax to either XXXXX[.] However, it must be noted that prior to March, 2000 XXXXX would have had to charge GST/HST in respect of the storage services provided to XXXXX, pursuant to the provisions of section 179 of the Act. Also, subsection 179(1) or subsection 179(2) of the Act is applicable where XXXXX, as the case may be, transferred physical possession of the property to XXXXX consignee in Canada.

In addition, subsection 179(6) would not be applicable, as the storage service made by XXXXX) is not the sole purpose of the supply.

Daniel E.B. Chamaillard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate