9 October 2001 GST/HST Interpretation 31799 - Importation of Conveyances

Dear XXXXX:

Thank you for your letter of June 22, 2000, concerning the application of the Goods and Services Tax (GST) to diversions of U.S. owned conveyances used in international commercial transportation. We regret the delay in responding.

Statement of Facts

XXXXX is a non-resident company located in XXXXX, that is not registered for GST/HST purposes.

XXXXX owned conveyance (the conveyance), such as a truck used in international commercial transportation (international service) is temporarily imported into Canada from time to time.

On occasion the conveyance that is used in international service and which has been imported into Canada on a duty and tax-free basis under tariff item 98.01 is diverted from international service. That is, XXXXX rents out or leases the conveyance, from time to time, while the conveyance is in Canada.

XXXXX is a resident and is registered for GST/HST purposes.

Interpretation Requested

1. You wish to know if the GST applies to the importation of a conveyance, classified under tariff Item 98.01, where the conveyance is diverted from international service while in Canada?

2. Is XXXXX entitled to an Input Tax Credit (ITC) in respect of GST paid by XXXXX XXXXX as importer of record in respect of a diversion (as described in Customs Memorandum D3-1-5)?

3. If the GST is paid by XXXXX in respect of a specific diversion, may the conveyance be subsequently imported into Canada without payment of GST?

Interpretation Given

Based on the information provided, we are pleased to provide you with the following interpretation relating to the application of the GST under Division III of the Excise Tax Act (the Act).

When a foreign-based conveyance is temporarily imported into Canada for use in international service under tariff item 98.01, for GST/HST purposes the importation is non-taxable under section 1 of Schedule VII to the Act. This section provides for non-taxable status for goods that are classified under certain headings of Schedule 1 to the Customs Tariff.

On a diversion from international service, GST must be accounted for in respect of the importation of the conveyance into Canada, as outlined in Customs Memorandum D3-1-5. Accounting may be made by XXXXX where the latter has leased or rented the conveyance while the conveyance is in Canada.

Where XXXXX pays the GST in respect of a diversion and is shown as the importer of record on the Customs accounting documents, XXXXX would be entitled to an ITC under section 169 of the Act, to the extent to which XXXXX imported the conveyance for use, consumption or supply in the course of its commercial activities. This would be the case in respect of the diversion of each conveyance[.]

Where XXXXX accounts for GST in respect of the diversion, and is the importer of record on the Customs accounting documents, XXXXX would not be entitled to an ITC in respect of the importation as it is not a registrant for purposes of the Act. However, XXXXX may be able to flow through the ITC to XXXXX under the provisions of section 180 of the Act. This would be the case where XXXXX, a non-resident who is not registered, makes a supply of the goods to a registrant such as XXXXX and delivers the goods or makes the goods available in Canada before the goods are used by or on behalf of the non-resident. These conditions would be met in the circumstances you described, i.e. XXXXX is entitled to rent or lease out the conveyances while the conveyance is in Canada. In such a case, as long as XXXXX provides XXXXX with satisfactory evidence that GST was paid in respect of the importation of the goods, XXXXX would be considered to have paid the tax and thus be able to claim an ITC to the same extent as would have been the case if it had been the importer of record.

You also enquired about XXXXX paying the GST once in respect of each conveyance in its inventory used in international service and importing such a conveyance subsequently without payment of the GST. Generally, goods in respect of which tax has been paid and not recovered may be imported on a tax-free basis only where the following conditions are met:

1. the goods are classified under Tariff Items 98.13 and 98.14, and

2. prior to the importation, the goods were not supplied

•   outside Canada by way of sale,

•   outside Canada by way of lease, licence or similar arrangement,

•   in Canada in circumstances to which Part V of Schedule VI (zero-rated exports) applies, or

•   in Canada to a recipient who claimed, or was entitled to claim, a rebate for tax paid on those goods under subsection 252(1) of the Act, and the goods are being imported for the first time after that supply.

In the present case, since XXXXX does supply the goods outside Canada by way of lease, licence or similar arrangement prior to their importation into Canada, the goods would not qualify for non-taxable status at the time of importation where the goods are classified under items 98.13 or 98.14.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax 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 section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4294.

Yours truly,

Francine Ménard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate