2 July 2003 GST/HST Interpretation 46364 - Re-importation of Goods Previously Accounted for, Exported and Returned

Dear XXXXX:

Thank you for your letter XXXXX to Béatrice Mulinda concerning the application of the Goods and Services Tax (GST) to the temporary re-importation of a piece of machinery (the "Subject Machinery") previously imported and subject to Division III tax.

Our understanding of the facts is as follows:

Your non-resident client, who is not registered for GST/HST purposes, temporarily imported the Subject Machinery into Canada last year to perform certain commercial services for a Canadian resident. At the time of this importation, tax under Division III of the Excise Tax Act (ETA) was applied on the fair market value of the Subject Machinery.

Afterwards, the Subject Machinery was exported from Canada where it has been used in the ordinary course of your client's business.

Since the time of the Subject Machinery's departure from Canada, it

(i) has not been advanced in value or improved in condition by any process of manufacture or other means;

(ii) has not been combined with any other article abroad;

(iii) has not been supplied outside Canada by way of sale;

(iv) has not been supplied outside Canada by way of lease, licence or similar arrangement;

(v) has not been supplied in Canada in circumstances to which Part V of Schedule VI applies; and

(vi) has not been supplied in Canada to a recipient who claimed, or was entitled to claim, a rebate for tax paid on those goods under subsection 252(1) of the ETA

The non-resident wishes to enter Canada, on a temporary basis, again in the near future, and with the same Subject Machinery, to perform substantially identical services under conditions in which Customs Tariff Item 9814.00.00 applies.

Interpretation Requested

Will your client be required to pay Division III tax on the Subject Machinery on the re-importation?

Interpretation Given

Section 213 of the ETA allows goods to be imported without Division III tax payable if they are goods included in Schedule VII to the ETA.

Section 1 of Schedule VII to the ETA lists goods that may be imported into Canada free of GST when classified by customs under certain headings or subheadings of chapter 98 of Schedule 1 to the Customs Tariff. No longer included in this section are heading Nos. 98.13 and 98.14, which are relevant to the treatment of goods originating in Canada, and goods once accounted for, exported, and returned without having been advanced in value.

Section 8 of Schedule VII to the ETA provides for the non-taxable importation of prescribed goods imported in prescribed circumstances and under prescribed terms and conditions. The goods that are prescribed, together with their terms and conditions, are listed in the Non-Taxable Imported Goods (GST) Regulations made pursuant to section 8 of the schedule.

The Department of Finance's Press Release dated December 18, 1990, indicated that the legislation will be amended to codify current Customs practice with respect to the application of sales tax to Canadian goods and goods once accounted for, exported, and returned. According to the Finance Press Release, goods classified under heading Nos. 98.13 or 98.14 of Schedule 1 to the Customs Tariff will not be relieved from GST if prior to re-importation, they were supplied:

(a) outside Canada by way of sale;

(b) outside Canada by way of lease, licence, or similar arrangement;

(c) in Canada in circumstances to which Part V of Schedule VI (zero-rated exports) applies; or

(d) in Canada to a recipient who claimed, or was entitled to claim, a rebate for tax paid on the goods under subsection 252(1).

As indicated in Customs Notice N-118, the circumstances in which goods classified under heading Nos. 98.13 and 98.14 of Schedule 1 to the Customs Tariff may be imported free of GST will be prescribed by the Non-Taxable Imported Goods (GST) Regulations.

As further indicated in the Notice, goods temporarily imported and then exported, which have been subject to full GST at the time of importation, are considered to be tax paid for purposes of any subsequent importation.

Based on the above, your client will not be required to pay Division III tax on the re-importation of the Subject Machinery. This is regardless of whether your client is a registrant at the time of the re-importation.

I would also like to confirm that the re-importation of a particular good by a registrant that satisfies the previously indicated conditions will qualify for non-taxable status regardless of whether the registrant is entitled to, and has claimed, an input tax credit for full Division III tax paid on the previous importation of the good.

The foregoing comments represent our general views with respect to the proposed amendments to the Excise Tax Act as they relate to the subject matter of your letter. Any change to the wording of these proposed amendments or any future 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.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8220.

Yours truly,

Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate