1 May 2000 GST/HST Ruling 3032 - Application of the GST/HST to Processing Services for Goods Diverted to Canadian Assembly Plants

Dear XXXXX

Thank you for your letter of August 12, 1999 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

XXXXX a Canadian registrant, XXXXX are shipped to the U.S., some of the goods do remain in Canada.

XXXXX which allows the company to import the parts on a non-taxable basis. The company files a monthly Diversion Report with Customs and remits GST and any duties owing on the diverted goods.

The company collects GST on the value of the processing services for goods which are diverted to Canadian assembly plants.

Invoices for services rendered are issued for each truckload of goods leaving XXXXX Canadian plant for a particular destination. These shipments are made up entirely of goods that were sourced from Canadian customers or, alternatively, goods that were sourced from U.S. customers so that there is no co-mingling of Canadian and U.S. goods. A separate invoice for services performed on those parts sourced and exported to the U.S. exists.

Ruling Requested

That XXXXX not be required to collect GST on processing services that it performs on goods that are imported from the U.S. for its U.S. customers and then exported back to the U.S.

Ruling Given

Based on the facts set out above, we rule that the services performed by XXXXX and invoiced to XXXXX U.S. customers on those goods which are imported from the U.S. and then exported back to the U.S. may be zero-rated under section 4 of Part V of Schedule VI of the Excise Tax Act (Act).

Explanation

The fact that XXXXX cannot stipulate which goods will remain in Canada at the time of importation does not mean that zero-rating will not be available for those services, which are separately invoiced, that relate to goods which are exported back to the U.S. For those shipments that remain in Canada, GST or HST should be charged at a rate of 7 or 15% respectively on XXXXX services as zero-rating under section 4 of Part V of Schedule VI of the Act is not available.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8812.

Yours truly,

David Liston
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate