Vol. 137, No. 13 — June 18, 2003

Registration
SOR/2003-203 5 June, 2003

EXCISE ACT, 2001

Regulations Respecting the Possession of Tobacco Products That Are Not Stamped

P.C. 2003-857 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 Respecting the Possession of Tobacco Products That Are Not Stamped.

REGULATIONS RESPECTING THE POSSESSION OF TOBACCO PRODUCTS THAT ARE NOT STAMPED

AUTHORIZED POSSESSION

1. For the purposes of paragraph 32(2)(d) of the Excise Act, 2001, a person may possess tobacco products that are not stamped if

• (a) the person is authorized by an officer under section 19 of the Customs Act to transport tobacco products that have been reported under section 12 of that Act and is acting in accordance with that authorization; or
  (b) the person has in their possession documentation that provides evidence that the person is transporting the tobacco products on behalf of
  • (i) a tobacco licensee,
    (ii) an excise warehouse licensee,
    (iii) a special excise warehouse licensee,
    (iv) a duty free shop licensee,
    (v) any person, if the tobacco products are designated as ships' stores under the Ships' Stores Regulations, or
    (vi) an accredited representative.

COMING INTO FORCE

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

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

The new Excise Act, 2001 received Royal Assent on June 13, 2002, thereby replacing the legislative provisions and definitions contained in the existing Excise Act regarding the production and distribution of alcohol and tobacco products. New regulations have been written to support the new Act.

The Regulations Respecting the Possession of Tobacco Products That Are Not Stamped spell out the classes of persons who may transport unstamped tobacco products. These are tobacco products that are not excise duty paid and do not bear duty paid stamps on their packages, cartons, or shipping containers.

A person who transports unstamped tobacco products must fall within one of two categories:

• (1) they must be authorized by Customs to transport imported tobacco products that have been reported to Customs, or
  (2) they must have in their possession documentation to indicate that they may transport unstamped tobacco products on behalf of one of the persons listed in paragraph (1)(b) of these Regulations.

The persons for whom unstamped tobacco products may be transported must themselves be eligible to possess unstamped, non-duty paid tobacco products, as provided under the exceptions set out in subsection 32(2) of the Excise Act, 2001.

These Regulations make in clear that a prescribed transporter must be a customs bonded carrier, if they are transporting unstamped tobacco products that have been imported. For unstamped Canadian tobacco products shipped from within Canada, the carrier must meet the requirements of paragraph (1)(b) of these Regulations, which call for the carrier to be authorized by one of the prescribed persons in order to transport such products.

Currently, carriers of unstamped, non-duty paid tobacco are required to make a formal application to a regional manager of excise duty in order to become an excise bonded carrier, and also obtain security in the form of a bond from an insurance company or other qualifying financial institution. Under the proposal liability for excise duty will remain with the persons listed in paragraph (1)(b) of these Regulations and there will no longer be a requirement for transportation companies to obtain security. This will result in reduced costs for transportation companies and easier access to this type of market.

Alternatives

There is no reasonable alternative to the making of these Regulations. In order to allow the transportation of unstamped tobacco products, the persons who may be so authorized must be prescribed persons pursuant to the provisions of paragraph 32(2)(d) of the Excise Act, 2001. As well, these Regulations are needed to prescribe the circumstances under which the unstamped products may be transported.

Benefits and Costs

These provisions will reduce costs and provide greater efficiency for transportation companies, tobacco licensees, and others who handle unstamped tobacco products, as well as for the Canada Customs and Revenue Agency (CCRA). There will be no need for transportation companies to obtain bonds or other forms of security in order to be authorized to transport unstamped tobacco products on behalf of one of the persons listed in paragraph (1)(b) of the Regulations, and nor will they have to apply to the CCRA for permission to become an excise bonded carrier. This will reduce costs for the transportation companies themselves and also the CCRA, which will no longer have to keep the files for such bonds. Moreover, a tobacco licensee, an excise warehouse licensee, a duty free shop, ships' stores supplier, or accredited representative will not first have to ensure they are dealing with an excise bonded carrier in order to authorize a particular transportation company to transport from their premises any unstamped tobacco products.

Consultation

The CCRA and the Department of Finance carried out extensive consultations with the affected industries prior to the release of draft regulations in December 2001. As well, a Notice distributed in April 2002 to all current and potential licence and registration holders drew their attention to the draft regulations and asked for submissions by June 30, 2002. Following publication and distribution of the Notice, the CCRA received no comments with respect to these Regulations.

These Regulations were pre-published in the Canada Gazette, Part I, on March 22, 2003. No comments were received in response to that pre-publication.

Compliance and Enforcement

The CCRA and the RCMP are responsible for ensuring that transporters of unstamped tobacco products that are imported are duly authorized by a customs officer to do so. Also, the CCRA and the RCMP are responsible for ensuring that no one other than the persons listed in paragraph (1)(b) of the regulations is engaged in shipping or receiving unstamped tobacco products through a transportation company.

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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