24 March 2003 Excise Interpretation 44386 - "Canada Duty Not Paid"

Dear XXXXX:

Thank you for your letter to Steve Mosher XXXXX concerning the continued use of "Canada Duty Not Paid" tear-tape on tobacco products made by XXXXX for delivery to accredited representatives in Canada and on in-bond exports.

From your letter, we understand that XXXXX wishes to continue the use of the "Canada Duty Not Paid" tear-tape on packages of its tobacco products intended for delivery to accredited representatives in Canada and to the "less than XXXXX per cent" export markets, even after the implementation of the new Excise Act, 2001 ("new Act"), in order to use up a high level of this material still in the company's inventories. From Mr. Mosher's telephone conversation with you XXXXX we understand that based on its current rate of usage, XXXXX presently has on hand at least XXXXX years' worth of the "Canada Duty Not Paid" tear-tape which the company would prefer not to discard or destroy.

As you note, the proposed Regulations Respecting the Stamping and Marking of Tobacco Products will require the "Not for Sale in Canada" marking to be printed on, affixed to or attached to tobacco product packages, cartons, and cases that are intended for delivery to the same aforementioned markets. Indeed, such marking is currently prescribed under the Tobacco Regulations under the present Excise Act. However, until now it has been the policy of the Excise Duties and Taxes Division of the CCRA, as stated in the current stamping and marking booklet, to permit the optional use of the "Canada Duty Not Paid" tear-tape in respect of packages of the tobacco products noted above, in addition to the prescribed marking.

As you are aware, exports of Canadian tobacco products under the provisions of the new Act that are within XXXXX per cent of a tobacco licensee's total production of that category for the previous calendar year will be subject to a refundable "special duty", imposed under section 56 of that Act. That special duty will replace the excise tax currently imposed under subsection 23.13(1) of the Excise Tax Act.

Under the new Act, the term "tobacco marking" is defined at section 2 to be "... prescribed information that is required ... to be printed on or affixed to a container of tobacco products that are not required ... to be stamped". On the other hand "stamped" is defined, to indicate "... that duty, other than special duty, has been paid on the product". Also, the absence of stamping on a tobacco product will be treated under section 36 of the new Act as "... notice to all persons that [excise] duty has not been paid". Therefore, a prescribed tobacco marking on a tobacco product will be regarded as an indication of non-payment of excise duty only.

Although the new Act and its regulations will not require the "Canada Duty Not Paid" tear-tape to be attached to the packages of tobacco products that a tobacco licensee produces and exports within the said XXXXX per cent quantity limits or delivers to accredited representatives in Canada, we have no objection to XXXXX continued use of this tear-tape beyond the new Act's implementation date. It is our view that the use of such tear-tape on tobacco product packages otherwise marked "Not For Sale in Canada" would not contradict the provisions of the new legislation or its regulations. Moreover, should such products return to Canada for any reason, their presence on such packages would indeed assist as notice to travellers and our own customs officers that the tobacco products they contain have not been excise duty paid.This ruling is based on the current provisions of the new Excise Act, 2001, which is scheduled to be implemented on July 1, 2003. Any future amendments to the new Act could affect the information contained herein.

Should you require further information on this matter, please do not hesitate to contact me at (613) 957-8154 or Steve Mosher, at (613) 941-1497.

Sincerely,

Preston Gallant, CGA
Manager
Excise Duty Operations
Excise Duties and Taxes Division

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