5 February 2013 Ruling Case No. 141852

Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis. CRA stated:

If the recipient [i.e., Company B] does not know at the time of purchase whether the continuous transmission commodity, including a portion thereof, purchased from a particular supplier will be exported, then the recipient cannot and should not provide a written declaration stating that the commodity is intended to be exported in the circumstances described in paragraphs 1(b) to (d) of Part V of Schedule VI.

Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis.

In finding that s. 232(2) did not apply to the supply of crude made by Company A to Company B, CRA stated:

The reduction in consideration must relate to the original supply and may be made for any reason but must not depend on any action undertaken by the recipient or any supply made by the recipient. Furthermore, a reduction in consideration is not considered to have occurred if the goods are sold back to the original supplier. To be considered a reduction of consideration, it must be evident that the goods are being returned to the supplier rather than being sold to the supplier.

Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis.

In finding that the rule in s. 153(3) did not apply, CRA stated:

…the crude oil supplied by [Company B] does not serve as consideration for the supplies of crude oil by [Company A] to [Company B]….[T] here is a difference between property supplied as consideration for other property, and property which is supplied for which a credit is given for use against future supplies.