Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise Duties and Taxes Division
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 204828
Dear: [Client]
Subject: EXCISE INTERPRETATION
Stamping and marking of tobacco products delivered to duty-free shops
Thank you for your [correspondence] of [mm/dd/yyyy] and subsequent telephone conversation with Oumeima Awada on [mm/dd/yyyy] concerning the stamping and marking of tobacco products delivered to duty free shops.
All legislative references are to the Excise Act, 2001 (Act) and its regulations, unless otherwise specified.
We understand […][ACo] holds a tobacco licence issued under paragraph 14(1)(d) authorizing them to manufacture tobacco products, and an excise warehouse licence issued under section 19 authorizing them to possess and store at their specified premises unstamped manufactured tobacco or cigars on which excise duty has not been paid.
You would like information concerning the stamping and marking requirements of tobacco products under two scenarios: tobacco products manufactured in Canada for delivery to a duty free shop and tobacco products manufactured outside of Canada and imported for delivery to a duty free shop. You would also like to know the date the stamp replaced tear tape and whether there are any remaining requirements to use tear tape under the Act.
The following is restricted to duty free shops licensed under the Customs Act – it does not apply to foreign duty free shops.
Section 2 of the Excise Act, 2001 defines manufactured tobacco to mean every article, other than a cigar or packaged raw leaf tobacco, that is manufactured in whole or in part from raw leaf tobacco by any process.
For purposes of this letter, imported manufactured tobacco means manufactured tobacco manufactured outside of Canada and imported.
Imported manufactured tobacco
Imported manufactured tobacco for delivery to a duty free shop that also has a valid duty free shop licence issued under the Act may be imported without an excise stamp and without the payment of excise duty at the time of importation. A special duty is imposed on the unstamped imported manufactured tobacco and is payable at the time of delivery to the duty free shop by the duty free shop licensee.
Subparagraph 32(3)(d)(ii) permits an excise warehouse licensee to sell unstamped imported manufactured tobacco to a duty free shop; consequently, [ACo] can import unstamped manufactured tobacco for entry into their excise warehouse and subsequently sell it to a duty free shop that also has a valid duty free shop licence issued under the Act. Special duty would be payable by the duty free shop licensee at the time of delivery to the duty free shop.
Containers of imported manufactured tobacco for delivery to a duty free shop must display the Stamping and Marking of Tobacco and Cannabis Products Regulations’ Schedule 8 markings: DUTY NOT PAID CANADA.
Packages and cases of imported manufactured tobacco for delivery to a duty free shop are also required to display the applicable prescribed information imposed under sections 3.1, 3.3 and 3.4 of the Stamping and Marking of Tobacco and Cannabis Products Regulations.
If the duty free shop is not licensed under the Excise Act, 2001, it can only receive imported manufactured tobacco that is duty paid and stamped. The duty is payable by the importer or owner of the imported manufactured tobacco and is collected under the Customs Act.
Additional information on the marking requirements for tobacco products is available in Excise Duty Notice EDN30, Tobacco Marking Requirements under the Amended Stamping and Marking of Tobacco Products Regulations.
Manufactured tobacco manufactured in Canada
Manufactured tobacco manufactured in Canada for delivery to duty free shops must be stamped and duty-paid. There is no provision that exempts the payment of duty or the stamping requirements on sales to duty free shops for manufactured tobacco manufactured in Canada.
Cigars
Cigars destined for sale in duty free shops, whether manufactured in Canada or imported, are not required to be stamped and are not subject to excise duty. The special duty imposed under section 53 on imported manufactured tobacco delivered to a duty free shop does not apply to cigars.
As an excise warehouse licensee, [ACo] can sell unstamped cigars to a duty free shop. An excise warehouse licensee is allowed to remove cigars manufactured in Canada (paragraph 50(7)(f)) and imported (paragraph 51(2)(d)) from their excise warehouse for delivery to a duty free shop for sale or offer for sale in accordance with the Customs Act. Subparagraph 32(3)(d)(ii) allows an excise warehouse licensee to sell unstamped cigars to a duty free shop.
Containers of cigars manufactured in Canada or imported and intended for delivery to duty free shops must display the Stamping and Marking of Tobacco and Cannabis Products Regulations’ Schedule 8 markings: DUTY NOT PAID CANADA.
Packages and cases of imported manufactured tobacco for delivery to a duty free shop are also required to display the applicable prescribed information imposed under sections 3.1, 3.3 and 3.4 of the Stamping and Marking of Tobacco and Cannabis Products Regulations.
Tear-tape
The excise stamp has been mandatory on all new tobacco products destined for the Canadian duty-paid market since April 1, 2011. Tobacco products in the marketplace were allowed to have the former tear-tapes or paper stamps for a limited transition period following that date, until inventories of older products were depleted.
As of July 1, 2012, the transition period ended, and cigarettes, tobacco sticks, and fine-cut tobacco products for sale in the Canadian duty-paid market had to carry the federal excise stamp to be legal. To accommodate the longer shelf life of cigars, the former tear-tapes or paper stamps could continue to appear for a limited period of time.
The excise stamp indicates duty has been paid; consequently, the Act no longer contains any requirements for the application of tear tape to manufactured or imported tobacco products.
However, we understand some manufacturers or importers continue to use tear-tape in their manufacturing activities or on imported tobacco products for packaging purposes.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (343) 549-4904
Yours truly,
Chris White
Excise Duty Operations – Tobacco Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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