10 September 2003 GST/HST Interpretation 39822 - GST/HST Place of Supply - CIP (Named Place In Canada) Incoterms 2000

Dear XXXXX:

Thank you for your letter XXXXX (with attachments) sent to our office XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST). Please accept our apologies for the delay in responding to your letter.

Interpretation Requested

You request confirmation that tangible personal property (TPP) supplied by way of sale by a GST/HST registered supplier and shipped "CIP (named place in Canada) Incoterms 2000" will be deemed by paragraph 142(2)(a) of the Excise Tax Act (ETA) to be a supply made outside of Canada for GST/HST purposes provided that the supplier delivers the TPP to the contracted carrier at a location outside of Canada.

Interpretation Given

As you know, under paragraph 142(1)(a) of the ETA, a supply by way of sale of TPP is deemed to be made in Canada (subject to sections 143, 144 and 179) if the TPP is, or is to be, delivered or made available in Canada to the recipient of the supply. Under paragraph 142(2)(a) of the ETA, a supply by way of sale of TPP is deemed to be made outside Canada if the TPP is, or is to be, delivered or made available outside Canada to the recipient of the supply.

For purposes of paragraphs 142(1)(a) and 142(2)(a) of the ETA, the phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the law of the sale of goods, as follows:

•   "Delivered" refers to those situations where delivery of the TPP under the applicable law of the sale of goods is effected by actual delivery.

•   "Made available" refers to those situations where delivery of the TPP under the applicable law of the sale of goods is effected by constructive delivery (i.e., actual physical possession of the TPP is not transferred to the recipient of the supply yet is recognized as having been intended by the parties and as sufficient in law). For example, situations arise where a person sells TPP to another person and agrees to hold the property as bailee for the buyer.

In any given case, the place where the TPP is delivered or made available may be determined by reference to the place where the TPP is considered to have been delivered under the law of the sale of goods applicable in that case.

Generally, the place where the TPP is delivered or made available can be determined by reference to the terms of the contract.

Where a contract of sale specifically uses the Incoterm "CIP (named place in Canada) in accordance with Incoterms 2000 in its intended circumstances, it is CCRA's position that the goods are delivered or made available to the recipient of the supply at the place where they are delivered by the seller to the carrier nominated by him to bring the goods to the named destination or, if there are a number of carriers, to the first carrier. In this case, if the supplier delivers the TPP to the carrier at a location outside Canada for transport to the "Named Place In Canada", the supply of TPP by the registered supplier is deemed to be made outside Canada pursuant to paragraph 142(2)(a) of the Excise Tax Act and is therefore not subject to GST/HST.

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 954-4291.

Yours truly,

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