Dear XXXXX
A copy of your letter XXXXX to Ms. Shelagh Heatlie, of the Customs Branch of the Canada Customs and Revenue Agency (CCRA), has been referred to us for clarification of certain questions you have raised on the Excise Act and Excise Tax Act (Part III) treatment of tobacco products destined for use by XXXXX.
The Excise Duties and Taxes Division will provide comments in response to questions numbered 1, 3, and 4 of your letter. Questions related to your company's GST liability for these shipments of tobacco products will be provided XXXXX directly to you by the Border Issues unit of the General Operations and Border Issues Division of our Excise and GST/HST Rulings Directorate.
Facts:
A ships' chandler submits a purchase order to a Canadian manufacturer for the delivery of tobacco products directly to the XXXXX. The products ordered are "black stock" tobacco products, namely, cigarettes, tobacco sticks, and "fine cut" tobacco that are stamped "Canada Duty Paid", but do not display any provincial tobacco tax markings on their cases, cartons, and packages.
Issues:
What is the tax treatment of tobacco products destined for shipment to XXXXX? Can they be regarded as ships' stores?
We understand that the tobacco products for use by XXXXX would be shipped by your company to XXXXX for subsequent direct shipment in military transport planes to overseas points. For the purposes of the Ships' Stores Regulations, made pursuant to the Customs Tariff and the Excise Tax Act (ETA), tobacco products destined for one of the designated uses set out in those regulations may be regarded as ships' stores. In this case the Customs Branch has determined that these tobacco shipments are ships' stores. As such, the Excise Duty and Taxes Division will abide by their determination.
On that basis, any production of cigarettes, tobacco sticks, and "fine cut" tobacco destined for delivery to XXXXX, through the auspices of XXXXX, must be entered into consumption and be excise duty paid. These products must also be stamped "Canada Duty Paid" in accordance with the provisions of the Tobacco Ministerial Regulations.
As well, excise tax on duty-paid tobacco products delivered to XXXXX as "ships' stores" is then applicable at the time these goods are delivered to XXXXX, at the rates set out in subsection 23.11(2) of the ETA and as announced in the Ways and Means Motion of June 17th, 2002.
Do the purchaser and recipient of tobacco products, that are destined for ships' stores, have to be the same person?
For the purposes of the Excise Tax Act, the recipient of tobacco products destined for use as ships' stores need not be the purchaser thereof. Paragraph 23.11(1)(c) of the ETA calls for the tobacco products to be "delivered to a person for use as ships' stores in accordance with the regulations made under this Act and the Customs Tariff", but makes no mention of title to the goods at the time of delivery.
Similarly, where the tobacco products are intended for use as ships' stores but are delivered first to a customs bonded warehouse (CBW), paragraph 23.11(1)(b) of the ETA calls for the goods to be "delivered to a bonded warehouse licensed as such under the Customs Tariff;" without mention of any requirement concerning the title of the goods at the time they are entered into the CBW.
If tobacco products destined for XXXXX were delivered to a CBW, proof of their delivery to such a location by means of a signed receipt by the CBW operator and a copy of the bill of lading would be sufficient for excise tax purposes. The invoices for these goods and the associated shipping documents must also show full details of the quantities and brands so delivered, as well as your company's markings on the shipping cases.
If the tobacco products are delivered to a ships' chandler who does not have a CBW, the same details concerning the quantities and brands delivered, and tobacco company markings on the shipping cases (similar to the information that was required to appear on the B60s for ships' stores tobacco prior to April, 2001) should appear on these documents. Your company must obtain from the ships' chandler documents such as air waybills or other transportation manifests that have been signed by him to show clearly that the same goods they have received have left the country as ships' stores.
What is the excise tax liability of a tobacco manufacturer in respect of ships' stores?
Given the above documentary requirements, a tobacco manufacturer in respect of tobacco products destined as ships' stores will be allowed to use the lower excise tax rates as outlined in subsection 23.11(2) of the ETA.
Where tobacco products shipped to XXXXX for subsequent delivery to XXXXX are not first delivered to a CBW, these goods must be supported by an air waybill or air cargo manifest signed off by the ships' chandler. The document must show that the same shipment, with a full description to indicate the quantities and descriptions of the cigarette, tobacco stick, or fine cut brands that have been loaded onto a XXXXX transport plane and exported.
However, if the tobacco products are delivered first to a CBW for storage prior to being loaded onto a XXXXX transport plane for export, any reasonable shipping document together with matching invoices that both show the quantities and brands delivered to the CBW and duly signed at time of receipt by the CBW operator, is acceptable. It is recommended that the form B60 not be used for such shipments, unless it clearly indicates the goods are excise duty paid. It may be best to use a "pro forma" invoice for shipments of duty paid tobacco products to CBWs and also to Canadian duty free shops.
Shelagh Heatlie of the Trade Incentives Program, Customs Branch, will address your question on the warehousing situation for tobacco products shipped to XXXXX for subsequent shipment to XXXXX[.]
The foregoing comments represent our general views based on the subject matter and information as presented in your letter. This interpretation is based on the provisions of the current Excise Act and Excise Tax Act. The new Excise Act, 2001 is scheduled to be implemented on July 1, 2003 and could affect the information contained herein.
Should you require further information on this matter, please do not hesitate to contact me, at (613) 954-0111, or Steve Mosher at (613) 941-1497.
Sincerely,
Preston Gallant, CGA
Manager
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
| c.c.: |
Shelagh Heatlie
Trade Incentives Division
Customs Branch
XXXXXBeatrice Mulinda
Government Operations and Border Issues Division
Excise and GST/HST Rulings |
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