28 August 2002 Excise Interpretation 41681 - Four Letters Requesting Additions to the Lists of Prescribed Tobacco Brands, for Purposes of Export Tax and Marking Exemptions

Dear XXXXX

Thank you for your four letters of XXXXX. In those letters, you requested that certain tobacco products be exempted from the export tax under the Excise Tax Act, and from marking requirements under the Excise Act. Please refer to page 3 for a list of the products for which you have requested this status (prescribed brand).

I understand from the information that you provided that XXXXX has not previously produced these brands in Canada, and that they are not commonly sold in this country. Furthermore, it is not your intention to sell these brands in the Canadian market.

The relief you are requesting is regulated, and subject to approval by the Minister of National Revenue and Governor General in Council.

As you are aware from my letter of XXXXX, and a previous telephone conversation, requests for inclusion cannot be administratively pre-approved. Tobacco products must be specifically identified in Schedule I of the Export Tax Exemption Regulations (Tobacco Products) (brands exempted from export tax), and Schedule II of the Tobacco Regulations (brands exempted from tobacco markings) prior to benefiting from the tax and marking treatment accorded to prescribed brands.

Therefore, while the brands listed above have been recommended for inclusion to the above schedules, production under the prescribed brand provisions can begin only after they are added to these schedules. They could, however, be produced in accordance with the regular provisions of the Excise Act and Excise Tax Act.

As you are no doubt aware, the export tax provisions allow up to 1.5% of a manufacturer's previous year production in each tobacco category to be exported in bond under paragraph 58.1(4) of the Excise Act, although such exports are subject to export tax under section 23.13 of the Excise Tax Act. If you require further information on the export tax provisions, please contact our XXXXX XXXXX Regional Office.

Date of Inclusion in Schedules

We have been advised that the earliest time the necessary regulatory changes can be made will be July 1, 2003, which is when the Excise Act, 2001 will come into force. Therefore, the law and regulations set out under that Act, rather than those in the Excise Act or Excise Tax Act will apply to the production, marking and export of the said brands.

The Excise Act, 2001 provides exemptions for prescribed brands from special duty under subsection 58(1) (Subsection 23.3(1) of the current Excise Tax Act), and an exemption for prescribed brands from marking requirements under subsection 38(4) (Subsection 202(4) of the current Excise Act). Prescribed brands must be listed in a schedule to the Regulations Exempting Certain Tobacco Products from Special Duty, or a schedule to Regulations Respecting the Stamping and Marking of Tobacco Products for the purposes of the marking exemption, and must otherwise meet the provisions of sections 38 and 58 of the new Act.

Should any of the brands listed above be offered for sale in the Canadian duty-paid market at any time in the future, except as provided for in subsections 38(3) and 58(1), the exemptions from the tobacco marking requirements and the payment of special duty would no longer apply.

Should you require any further information, please contact me at (613) 954-4208 or Richard Crompton at (613) 957-4156.

Sincerely,

Preston Gallant, CGA
Manager
Excise Duty Operations
Excise Duties and Taxes Div.

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