Vol. 137, No. 13 — June 18, 2003

Registration
SOR/2003-202 5 June, 2003

EXCISE ACT, 2001

Regulations Relieving Special Duty on Certain Tobacco Products

P.C. 2003-856 5 June, 2003

Her Excellency the Governor General in Council, on the recommendation of the Minister of National Revenue, pursuant to paragraph 304(1)(o) of the Excise Act, 2001 (see footnote a) , hereby makes the annexed Regulations Relieving Special Duty on Certain Tobacco Products.

REGULATIONS RELIEVING SPECIAL DUTY ON CERTAIN TOBACCO PRODUCTS

DEFINITION

1. In these Regulations, "Act" means the Excise Act, 2001.

RELIEF

2. For the purposes of paragraph 58(1)(a) of the Act, a tobacco product of a brand set out in Schedule 1 is a prescribed tobacco product.

3. For the purposes of paragraph 58(2)(a) of the Act, a cigarette exported under a brand set out in Schedule 2 is a prescribed cigarette.

COMING INTO FORCE

4. These Regulations take effect on July 1, 2003.

SCHEDULE 1
(Section 2)

TOBACCO PRODUCTS

Item	Brand
1.	American Choice Full Flavour 100's
2.	American Choice Full Flavour King Size
3.	American Choice Light 100's
4.	American Choice Light King Size
5.	American Choice Menthol 100's
6.	American Choice Menthol King Size
7.	American Choice Ultra Light 100's
8.	American Choice Ultra Light King Size
9.	American Choice Menthol Light 100's
10.	American Choice Menthol Light King Size
11.	American Choice Non Filter King Size
12.	Bronza Silver
13.	Bronza Gold
14.	Camron Bay Full Flavour 100's
15.	Camron Bay Full Flavour King Size
16.	Camron Bay Light 100's
17.	Camron Bay Light King Size
18.	Camron Bay Menthol 100's
19.	Camron Bay Menthol King Size
20.	Camron Bay Ultra Light 100's
21.	Camron Bay Ultra Light King Size
22.	Camron Bay Menthol Light 100's
23.	Camron Bay Menthol Light King Size
24.	Camron Bay Non Filter King Size
25.	Canadian Gold
26.	Canadian Natural Fine Cut Tobacco
27.	Capitol Full Flavour
28.	Capitol Lights
29.	Catalina Full Flavour 100's
30.	Catalina Full Flavour King Size
31.	Catalina Light 100's
32.	Catalina Light King Size
33.	Catalina Menthol 100's
34.	Catalina Ultra Light 100's
35.	CIGS Full Flavour 100's
36.	CIGS Full Flavour King Size
37.	CIGS Light 100's
38.	CIGS Light King Size
39.	CIGS Menthol 100's
40.	CIGS Menthol King Size
41.	CIGS Menthol Light 100's
42.	CIGS Menthol Light King Size
43.	CIGS Ultra Light 100's
44.	CIGS Ultra Light King Size
45.	Doral
46.	Gold Coast
47.	GPC
48.	GPC Approved
49.	GPC Full Flavour
50.	GPC Lights
51.	GPC Ultra Lights
52.	Imperial Special Blend
53.	Kent
54.	Lucky Strike
55.	Mercer
56.	Mild Seven
57.	Monte Carlo
58.	Montreal Blend
59.	MVP Full Flavour 100's
60.	MVP Full Flavour King Size
61.	MVP Light 100's
62.	MVP Light King Size
63.	MVP Menthol 100's
64.	MVP Menthol King Size
65.	MVP Ultra Light 100's
66.	MVP Ultra Light King Size
67.	MVP Menthol Light 100's
68.	MVP Menthol Light King Size
69.	MVP Non Filter King Size
70.	Native Sun Full Flavour 100's
71.	Native Sun Full Flavour King Size
72.	Native Sun Light 100's
73.	Native Sun Light King Size
74.	Native Sun Menthol 100's
75.	Native Sun Menthol King Size
76.	Native Sun Ultra Light 100's
77.	Native Sun Ultra Light King Size
78.	Native Sun Menthol Light 100's
79.	Native Sun Menthol Light King Size
80.	Native Sun Non Filter King Size
81.	Opal Full Flavour 120's
82.	Optiva Full Flavour 100's
83.	Optiva Full Flavour King Size
84.	Optiva Lights 100's
85.	Optiva Lights King Size
86.	Optiva Menthol 100's
87.	Optiva Menthol King Size
88.	Optiva Ultra Lights 100's
89.	Optiva Ultra Lights King Size
90.	Optiva Menthol Lights 100's
91.	Optiva Menthol Lights King Size
92.	Optiva Non Filter King Size
93.	Raïs Menthol
94.	Regular
95.	Scenic 101
96.	Senator Full Flavour 100's
97.	Senator Full Flavour King Size
98.	Senator Light 100's
99.	Senator Light King Size
100.	Senator Menthol 100's
101.	Senator Menthol King Size
102.	Senator Ultra Light 100's
103.	Senator Ultra Light King Size
104.	Senator Menthol Light 100's
105.	Senator Menthol Light King Size
106.	Senator Non Filter King Size
107.	Seneca Full Flavour 100's
108.	Seneca Lights 100's
109.	Seneca Menthol Full Flavour 100's
110.	Seneca Menthol Lights 100's
111.	Seneca Ultra Lights 100's
112.	Seneca Full Flavour
113.	Seneca Lights
114.	Seneca Menthol Full Flavour
115.	Seneca Menthol Lights
116.	Seneca Ultra Lights
117.	Tassili
118.	Versace Full Flavour 100's
119.	Versace Full Flavour King Size
120.	Versace Lights 100's
121.	Versace Lights King Size
122.	Versace Menthol 100's
123.	Versace Menthol King Size
124.	Versace Ultra Lights 100's
125.	Versace Ultra Lights King Size
126.	Versace Menthol Lights 100's
127.	Versace Menthol Lights King Size
128.	Versace Non Filter King Size
129.	Versace Deluxe Ultra Lights 100's
130.	Versace Deluxe Ultra Lights King Size
131.	Viceroy
132.	Wave
133.	Westport Full Flavour 100's
134.	Westport Full Flavour King Size
135.	Westport Lights 100's
136.	Westport Lights King Size
137.	Westport Menthol 100's
138.	Westport Menthol King Size
139.	Westport Ultra Lights 100's
140.	Westport Ultra Lights King Size
141.	Westport Menthol Lights 100's
142.	Westport Menthol Lights King Size
143.	Westport Non Filter King Size
144.	Yankee Blend Fine Cut Tobacco

SCHEDULE 2
(Section 3)

CIGARETTES

Item	Brand
1.	Canadian Gold
2.	Zig Zag

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

The Regulations Relieving Special Duty on Certain Tobacco Products replace the Export Tax Exemption Regulations (Tobacco Products), made under the provisions of the Excise Tax Act (ETA). These new Regulations give effect to the provisions of paragraphs 58(1)(a) and 58(2)(a) of the Excise Act, 2001 (the Act), which allow certain tobacco products and cigarettes to be prescribed for purposes of potentially allowing them full exemption from the application of the special duty provisions of the Act.

The legislative criteria applicable to the relief from special duty for prescribed tobacco products and prescribed cigarettes, as set out under section 58 of the Act, are the same as the current criteria under section 23.3 of the ETA that apply to the exemption from the excise tax on exported Canadian manufactured tobacco. For the exemption to apply, only very minimal amounts of the production of a prescribed tobacco product brand may be sold on the Canadian market during the years preceding the year of first exportation. For the prescribed cigarettes, no cigarettes of that particular type or formulation may ever be sold in Canada before or after the time when they are first exported.

Under section 56 of the Act, special duty is imposed on certain exports of tobacco products destined for sale in foreign "duty paid" markets. The special duty is relieved for Canadian-made prescribed tobacco products and prescribed cigarettes that also meet the detailed criteria set out under the provisions of paragraphs 58(1)(b) and (c) and 58(2)(b) of the Act.

There are two types of products that may be prescribed under paragraphs 58(1)(a) and 58(2)(a) of the Act. A tobacco product may be a cigarette, tobacco stick, or other manufactured tobacco product. A cigarette, however, must meet the definition of "cigarette" in section 2 of the Act.

The prescribed tobacco products and prescribed cigarettes that are named in these Regulations are also named in the Regulations Respecting the Stamping and Marking of Tobacco Products, thereby potentially qualifying them for an exemption from the normal marking provisions, if they otherwise meet the legislative criterion under subsection 38(3) of the Act that they not be commonly sold in Canada.

Most of the tobacco brands listed in the Schedule to these Regulations have been added to the list of prescribed brands in response to requests made by Canadian manufacturers since a draft of the regulations was first published in December 2001.

Following pre-publication in the Canada Gazette, Part I, on March 22, 2003, several of the names on the prescribed tobacco brand list have been removed based on the advice of the companies concerned, namely: the two Bossman brand extensions; the brands known as "Canadian", "Canadian Extra Light", and "Canadian Light"; as well as "Gauloises Blondes" and "Gitanes". Also, the brand extensions known as "CIGS Extra Light 100's" and "CIGS Extra Light King Size" have been removed and some minor corrections have been made to the styles of certain brand name extensions.

Alternatives

There is no reasonable alternative to the making of these Regulations. In order for the exemptions from the current excise tax on tobacco exports to continue as special duty relief under this Act, these tobacco products must be prescribed.

Benefits and Costs

These Regulations will enable those companies that have been making or wish to make prescribed tobacco products or prescribed cigarettes to continue with their business plans and supply the needs of foreign customers. There will be no new costs assumed by Canadian tobacco manufacturers or by the Canada Customs and Revenue Agency (CCRA).

Consultation

The CCRA and the Department of Finance carried out extensive consultations with Canadian tobacco manufacturers, as well as other interested parties, after the regulations were released for general distribution in December 2001. Tobacco manufacturers provided some verbal comments to indicate their support for the continuation of the prescribed tobacco product and prescribed cigarette provisions, and in some cases made requests for additions to the lists of prescribed tobacco brands.

Following pre-publication of these Regulations on March 22, 2003, some manufacturers advised the CCRA of certain deletions and corrections that should be made, as noted in the "Description" section.

Also following pre-publication of these Regulations, the Canadian Cancer Society indicated its concerns with the continuation of the prescribed brands provisions through these Regulations, as well as the appearance of some of the names on these lists. In response to the Canadian Cancer Society's concerns, the CCRA did revisit some of the brands and recommended that several of them be removed from the lists, as noted above.

Compliance and Enforcement

The CCRA is responsible for enforcing these Regulations at the manufacturer/exporter level, while the Royal Canadian Mounted Police is responsible for direct enforcement of these provisions if any of the prescribed tobacco products that are actually made for the export markets should appear in the Canadian market in more than minimal quantities. For the prescribed cigarettes, the formulations would have to be analysed by the CCRA's Laboratory and Scientific Services Directorate to compare the formulations for the foreign markets with those made for the Canadian market.

Any prescribed tobacco product or prescribed cigarette that does not also meet the criteria set out in the legislation would be ineligible for the special duty relief. CCRA auditors will be responsible for ensuring that the criteria are met, and for assessing the special duty on those exported prescribed tobacco products and prescribed cigarettes that fail to meet those provisions.

Contact

• Mr. Steve Mosher
  Senior Legislative Officer
  Excise Duties and Taxes Division
  Excise and GST/HST Rulings Directorate
  Policy and Legislation Branch
  Place de Ville, 20th Floor
  320 Queen Street
  Ottawa, Ontario
  K1A 0L5
  Telephone: (613) 941-1497
  FAX: (613) 954-2226

Footnote a

S.C. 2002, c. 22

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