3 October 2003 GST/HST Interpretation 46098 - GST Relief under the Exporters Of Processing Services (EOPS) Program

Dear XXXXX:

Thank you for your letter XXXXX (with attachments) addressed to XXXXX our XXXXX Tax Services Office, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the importation of XXXXX. Your letter has been forwarded to us for our reply.

Your letter states that you import XXXXX for production of XXXXX. The company exports most of this material in finished product form. A small percentage is not exported but rather forwarded to the clients for the Canadian market. It is our understanding that your customers are non-residents of Canada.

Interpretation Requested

Whether the importation of the XXXXX would qualify for tax-free importation pursuant to section 8.1 of Schedule VII to the Excise Tax Act (the Act).

Interpretation Given

A registrant who has been issued an EOPS certificate pursuant to subsection 213.2(1) of the Act may import goods without payment of GST pursuant to section 8.1 of Schedule VII to the Act if all the conditions in that section are met. Some of the conditions are that the imported goods must be:

•   Processed, distributed or stored in Canada and subsequently exported without being consumed or used in Canada except to the extent reasonably necessary or incidental to the transportation of the goods,

•   Incorporated or transformed into, attached to, or combined or assembled with, other goods that are processed in Canada and subsequently exported without being consumed or used in Canada except to the extent reasonably necessary or incidental to the transportation of those other goods, or

•   Directly consumed or expended in the processing in Canada of other goods that are exported without being consumed or used in Canada except to the extent reasonably necessary or incidental to the transportation of those other goods.

It is our understanding that for a particular shipment of XXXXX, your company may not know at the time of importation whether the finished products are to be exported or whether they will be sold and consumed or used in Canada. Or, the company may know at the time of importation that a certain percentage of the finished products will remain in Canada, but because of the similarity of the imported ingredients, it would not be possible to identify which ingredients will be transformed into finished products to be exported and which will be transformed into finished products that will remain in Canada.

In such situations, as the company cannot confirm at the time of importation that the imported XXXXX will be transformed into finished products that will subsequently be exported without being consumed or used in Canada, the importation does not qualify under section 8.1 of Schedule VII to the Act. Therefore, the company should not use its EOPS certificate, even if it has one, when the imported goods are accounted for through Customs.

If there are situations where the company knows at the time of importation that the particular shipment contains XXXXX that will be transformed into finished products that will subsequently be exported without being consumed or used in Canada, and the other conditions in section 8.1 of Schedule VII are met, then the company would be entitled to use the EOPS certificate, if it has one, when the imported goods are accounted for through Customs.

It is stated in your request that your company imports XXXXX to your Facility located at XXXXX. Please note that each separate entity is required to apply for its own EOPS certificate. For example, XXXXX, as a separate entity, would not be entitled to import goods on a tax-free basis by using an EOPS certificate that was issued to XXXXX and vice versa.

If the company that is importing these XXXXX does not already have an EOPS certificate and would like to verify if it qualifies for participation in the EOPS program, please contact your local Tax Services Office.

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) 954-4291.

Yours truly,

Béatrice Mulinda
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate