27 January 2005 Excise Interpretation 56701 - Restricted Preparations

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX,

Thank you for your letter XXXXX in which you were seeking clarification on the treatment of former Excise Act "restricted preparations" under the new Excise Act, 2001.

Under the Excise Act, a bonded manufacturer was allowed to use non-duty-paid spirits to manufacture authorized goods under an approved formula card.

A bonded manufacturer producing goods as per an approved formula card that was also a "restricted preparation" was subject to additional requirements. These included maintaining a record showing the quantities of restricted preparations sold and the name and address of the person to whom each quantity was sold.

Furthermore, the bonded manufacturer had to submit a request for the quantity of spirits needed to manufacture a given quantity of the product for the ensuing 12-month period.

Under the Excise Act, 2001, a licensed user is authorized to use non-duty-paid alcohol to manufacture similar goods under an approved formulation.

As a result of the coming into force of the Excise Act, 2001, all formula cards, including restricted preparations, became obsolete as of July 1, 2003 and were deemed to be an application for formulation approval under the new Act.

The Laboratory and Scientific Service Directorate (LSSD) is reviewing all previously approved formula cards to evaluate if they meet the new requirements. The LSSD may request new samples or other information where necessary.

Approval will then be granted or denied by the appropriate regional Excise Duty office. A licensed user may continue manufacturing products according to their approved formula cards until they receive such notification from the regional Excise Duty office. At that time, the licensed user must stop manufacturing the product using the directions of the old formula card and if approved, begin production under the newly approved formulation.

XXXXX must also stop manufacturing according to an old formula card once the new formulation is approved under the Excise Act, 2001 XXXXX.

As for the concept of a "restricted preparation", I would like to point out that it has not been carried forward under the Excise Act, 2001. However, the Excise Act, 2001 will introduce a new concept called "restricted formulation".

A restricted formulation is "an approved formulation on which the Minister has imposed the condition or restriction under section 143 that the formulation can only be used by a licensed user or be exported". Such products would consist of formulations that are potable and cannot be approved without condition such as certain flavourings.

XXXXX. If the products are potable, it is possible that XXXXX will not be approved without condition. If approved as a restricted formulation, you have to ensure that the recipient possesses a user's licence or that the product is exported.

Alternatively, you may:

•   add ingredients to render the formulation non-potable such as a thickening agent, sodium chloride, glycerol, glycerine, propylene glycol, triacetin, acetic acid, etc.; or

•   use duty-paid alcohol.

Should you choose the second alternative, you must report the duty on the appropriate line (line 4 to 8) on page 1 of the form B263 Excise Duty Return - Licensed User and make payment of the duty applicable to the volume taken for use in production of the unapproved formulations.

I hope that the information provided above helps to clarify your concerns. Should you have questions or require additional information, please do not hesitate to contact me at 957-4138.

Yours truly,

Nathalie Robitaille
Excise Duty Operations - Alcohol
Excise and GST/HST Rulings Directorate
Policy and Planning Branch
Revenue Canada Agency

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