Telephone: (613) 957-8220
Fax: (613) 990-3602
XXXXX HQR0000710
XXXXX File: 11640-3
XXXXX S. 6.2, Part V of Sch. VI
XXXXX October 9, 1997
Dear Sir:
Thank you for your letter of February 26. 1997, that you sent to XXXXX requesting confirmation of our interpretation of section 6.2 of Part V of Schedule VI to the Excise Tax Act (the Act), as it applies to repairs made in Canada to empty cargo containers used in international transport. I apologize for the lateness of this response.
Interpretation Requested
Whether section 6.2 of Part V of Schedule VI to the Act should be interpreted broadly to include repair services performed on empty cargo containers, whether or not such repairs are performed as a result of an emergency.
Interpretation Given
It is the Department's position that section 6.2 of Part V of Schedule VI to the Act should be interpreted as written, taking into account the facts that may exist in any particular situation.
Section 6.2 is quite straight forward in that it applies only in the case of an emergency repair service in respect of an empty cargo container that belongs to an unregistered non-resident where it is used in transporting property to or from Canada and which is classified under heading 98.01 of Schedule I to the Customs Tariff.
You are correct in stating that the term "emergency" is not defined under the Act. However, in paragraph 85 of the GST Memorandum 300-5, entitled Exports, (copy enclosed) the Department will generally consider an "emergency" to be an unforeseen event or combination of events that calls for immediate action. For example, where a container is ordered out of service by an inspector because it is unfit for use, and where the repairs are undertaken immediately to restore the container's structural integrity and serviceability to a safe condition before it continues in service, such repairs would fall within the ambit of section 6.2 of Part V of Schedule VI to the Act.
As you may be aware, there are a few conventions and regulations that exist concerning cargo containers used in international transport of goods. To name just a few, reference can be made to the Safe Containers Convention Regulations SOR/82-1038, the Dangerous Goods Shipping Regulations SOR/81-951, the IICL-4 Guide (Institute of International Container Lessors) or the IMDG Code (International Maritime Dangerous Goods).
For instance, under the above Safe Container Convention Regulations, at subsection 5(10), it is stated that the owner of every container shall ensure that it is maintained is a safe condition. Section 8 of the same Regulations provides that where there is significant evidence that the condition of a container creates an obvious risk to safety, the owner thereof or his representative in Canada shall withdraw it immediately before it continues in service, or arrange for its further transportation after appropriate means have been taken to protect the structural integrity of the container.
Under the Dangerous Goods Shipping Regulations, pursuant to subsection 8(5), where a package of dangerous goods are to be carried in a mobile unit - a freight container, etc. - the person responsible for packing that unit shall ensure that
• the unit is, immediately before stowed on a ship, clean, dry and apparently fit to receive goods;
• the unit is properly placarded and marked;
• the unit is properly secured in the closed condition; and
• in the case of a temperature controlled unit, it has machinery and power supply that are of a type unable to cause hazard to the goods and in are in proper working order.
The IICL-4 Guide (for inspectors) states, at paragraph 3 of section 1.1, that inspections of containers are made in order to reveal actual conditions that may be considered unsafe or which may reduce the usefulness or life of the container.
Paragraph 12.3 of the IMDG Code provides that freight containers and vehicles should not be offered for the transport of goods of class 1 (explosives) unless the container or the vehicle is structurally serviceable. Structurally serviceable means the freight container or vehicle should not have major defects in its structural components. In addition, deterioration in any component of the freight container or the vehicle, regardless of the material of construction, such as rusted-out metal in sidewalls or disintegrated fibreglass, is unacceptable.
The issue as to whether any maintenance or repair work performed on containers, under the above Regulations or International Conventions qualify as "emergency repairs" is a question of fact.
Conditions under which timely repairs are undertaken to preserve the continuing utility of a container or to maximize its useful life, would not, in themselves, be considered "emergency repairs" under the current policy.
If the repairs, as mentioned earlier, are undertaken where there is significant evidence that the conditions of the container may create an obvious risk to the safety of goods, persons or the environment, such services would likely be classed as emergency repairs.
This being said and because of the existing Regulations and Conventions, it would be very unlikely that that the owner of the container would be able to shift the work to non-Canadian depots or service providers should a freight container be ordered out of service by an inspector, while it is situated in Canada. In other words, the container would be taken out of service in Canada and therefore would not be allowed to be transported until the necessary repairs are undertaken. Thus, the Canadian depots and service providers would not be placed at a competitive disadvantage as the owner or lessor of the container, it appears, would be required to have the repairs undertaken in Canada or in any other country where the container is taken out of service.
In conclusion, the Department is of the view that section 6.2 should be interpreted as intended, with the view of zero-rating repair services that may be characterized as "emergency repairs", as discussed above.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in GST Memoranda Series (1.4), do not bind the Department with respect to a particular situation.
Please contact the undersigned if you require further information.
Yours truly,
Daniel E.B. Chamaillard
Senior Rulings Officer
Border Issues
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch
Encl.
| c.c.: |
R. Nanner
D. Chamaillard |
XXXXX
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