14 July 1994 GST/HST Interpretation 11995-1 - Application of the Goods and Services Tax (GST) to Import Charges Such as Tailgating, Wharfage and MEA

Dear XXXXX

I refer to your facsimile transmission dated November 8, 1993, addressed to Tony D'Abramo regarding the application of the Goods and Services Tax (GST) to import charges such as tailgating, wharfage and MEA. Please excuse the delay in my reply.

I wish to confirm that section 10 of Part VII of Schedule VI of the Excise Tax Act zero-rates a supply of a particular freight transportation service from a place in Canada to another place in Canada that is part of a continuous freight movement from an origin outside Canada to a destination in Canada, where the supplier of the service maintains documentary evidence satisfactory to the Minister that the service is part of a continuous freight movement from an origin outside Canada to a destination in Canada.

The Excise Tax Act defines "continuous freight movement" to mean the transportation of tangible personal property by one or more carriers to a destination specified by the shipper of the property, where all freight transportation services supplied by the carriers are supplied as a consequence of instructions given by the shipper of the property.

The following examples illustrate how the GST would apply to a domestic portion of a freight transportation service that is part of a continuous freight movement from an origin outside Canada to a destination in Canada.

1. Cargo arrives from Europe by ship and the ocean bill of lading shows the destination as the Montreal docks. The consignee's place of business is located in Cornwall. This particular freight movement ends at the Montreal docks because that is the destination specified by the shipper of the property. The charges for the domestic movement from the Montreal dock to Cornwall, the location of the consignee's premises,would be taxable.

2. Cargo arrives from Europe by ship and the ocean bill of lading shows the destination as Cornwall, the location of the consignee's premises. In accordance with the Excise Tax Act this particular freight movement would end at Cornwall.

The charges for the domestic movement, from the Montreal dock to Cornwall would be zero-rated because the consignor's documentation specified the destination to be Cornwall.

Whether a freight movement ends at dockside or not is a matter of fact. Schedule VI, Part VII, section 10 zero-rates a freight transportation service that is part of a continuous freight movement. Therefore the freight transportation service provided must meet the criteria of a continuous freight movement outlined under the Excise Tax Act in order to qualify for zero-rating.

The information provided to you by XXXXX appears to be correct as quoted in the above mentioned facsimile.

For your information the Excise Tax Act defines freight transportation services to include any incidental property or service when supplied to the recipient of the freight transportation service by the person who supplies the freight transportation service. When ancillary services are supplied as part of an import and/or export freight movement, they too, will be zero-rated. Examples of ancillary charges which may be incurred are tailgating and wharfage.

For example, an ocean carrier transports tangible personal property from a place outside Canada to the Port of XXXXX. The ocean carrier invoices the shipper for the services relating to the ocean transportation and discharging the cargo. Subsection 8 of Part VII of Schedule VI of the Excise Tax Act zero-rates these charges. In addition, tailgating and top wharfage are supplied at port side by a terminal operator and invoiced to the ocean carrier. The carrier re-invoices the shipper for the tailgating and top wharfage. Since stevedoring and terminal operations (tailgating and top wharfage) are considered freight transportation services and are supplied in conjunction with an import movement of cargo these charges would also be zero-rated.

I trust this information will be of assistance to you. If you require further information or assistance, please do not hesitate to contact Pamela Lafrance at (613) 954-4206.

Yours truly,

J.A. Venne
Director
Tax Policy - Special Sectors
Policy and Legislation
Excise/GST