Vol. 137, No. 13 — June 18, 2003

Registration
SOR/2003-205 5 June, 2003

EXCISE ACT, 2001

Regulations Respecting the Possession of Non-duty-paid Packaged Alcohol

P.C. 2003-859 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 Non-duty-paid Packaged Alcohol.

REGULATIONS RESPECTING THE POSSESSION OF NON-DUTY-PAID PACKAGED ALCOHOL

NON-DUTY-PAID PACKAGED ALCOHOL

1. For the purposes of subparagraphs 88(2)(a)(iv), (c)(ii) and (d)(ii) of the Excise Act, 2001, a person may possess non-duty-paid packaged alcohol if

• (a) the person is authorized by an officer under section 19 of the Customs Act to transport non-duty-paid packaged alcohol that has 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 alcohol on behalf of
  • (i) an excise warehouse licensee,
    (ii) a licensed user,
    (iii) a registered user,
    (iv) a duty-free shop licensee,
    (v) any person, if the alcohol is designated as ships' stores under the Ships' Stores Regulations, or
    (vi) an accredited representative.

NON-DUTY-PAID, MARKED SPECIAL CONTAINER OF ALCOHOL

2. For the purposes of paragraph 88(3)(b) of the Excise Act, 2001, a person may possess a non-duty-paid marked special container of alcohol if the person

• (a) is authorized by an officer under section 19 of the Customs Act to transport a non-duty-paid marked special container of alcohol reported under section 12 of that Act and is acting in accordance with that authorization; or
  (b) has in their possession documentation that provides evidence that the person is transporting the special container on behalf of
  • (i) an excise warehouse licensee, or
    (ii) a registered user.

COMING INTO FORCE

3. 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 (the "Act") received Royal Assent on June 13, 2002, thereby replacing the legislative provisions of the existing Excise Act, regarding the production and distribution of alcohol and tobacco products. The Act authorizes the Governor in Council to make identified related regulations in support of the new legislation.

Accordingly, the Regulations Respecting the Possession of Non-duty-paid Packaged Alcohol have been written to designate the classes of persons who may transport packaged alcohol on which the excise duty has not been paid.

Packaged alcohol is defined in the Act to mean packaged in a container of a capacity of not more than 100 litres or in a marked special container for delivery to a registered user or a bottle-your-own premises.

A person who transports non-duty-paid packaged alcohol must fall within one of two categories:

• (a) be authorized by Customs to transport imported packaged alcohol that has been reported to Customs; or
  (b) have in their possession documentation to indicate that the person may transport the non-duty-paid alcohol on behalf of one of the persons listed under paragraph 1(b) of these Regulations, if the alcohol is packaged in a container not more than 100 litres and 2(b), if the alcohol is in a marked special container.

The persons for whom non-duty-paid packaged alcohol or non-duty-paid marked special containers may be transported must themselves be eligible to possess the non-duty-paid packaged alcohol, as provided under the exceptions set out under subsections 88(2) and 88(3) respectively of the Act.

Currently, carriers of non-duty-paid packaged alcohol are required to make an application to become an excise bonded carrier and obtain security from an insurance company, bank, or other qualifying financial institution but under the proposal responsibility for the alcohol will remain with the persons listed in paragraphs 1(b) and 2(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.

The requirement to possess acceptable documentation to indicate that the person may transport non-duty-paid alcohol will not be onerous and will be in keeping with the types of transportation documents currently in use.

Alternatives

There is no reasonable alternative to the making of these Regulations. In order to allow the transportation of non-duty-paid packaged alcohol and non-duty-paid alcohol contained in marked special containers, the persons must be prescribed persons under prescribed circumstances pursuant to section 88 of the Act.

Benefits and Costs

There will be no costs incurred by the CCRA and there will be administrative savings and benefits from no longer having to administer the application and security process for transporters. Furthermore, the removal of the requirement for security will also result in reduced costs for transportation companies and easier access to this type of market.

These Regulations will provide the framework for implementing the objectives of the Act, that is, to establish a flexible and modern taxation structure that focuses on controlling possession and disposition of non-duty-paid product rather than regulating premises and equipment and should allow producers greater flexibility with their production and distribution processes.

Consultation

The CCRA and the Department of Finance carried out extensive consultations with the affected industries. Draft regulations were released in December 2001 and a Notice distributed in April 2002 to all current and potential licence and registration holders drawing their attention to the draft regulations and asking for submissions by June 30, 2002. Personal presentations and meetings were held with industry groups expressing interest and their comments and suggestions were actively sought and taken into consideration. There were no requests for meetings or written submissions received from producers or transporters 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 is responsible for enforcing the provisions of the Act and these Regulations. The Royal Canadian Mounted Police will carry out direct enforcement of these provisions on a day-to-day basis.

Under section 218 of the Act, every person who contravenes the exceptions for possession of non-duty-paid packaged alcohol under section 88 of the Act can be found guilty of an offence and subject to a fine of between $22.132 and $33.198 multiplied by the number of litres of absolute ethyl alcohol in the spirits to which the offence relates, or to imprisonment.

Contact

• Mr. Mark Hartigan
  Manager, Excise Act, 2001 — Implementation
  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) 954-5894
  FAX: (613) 954-2226

Footnote a

S.C. 2002, c. 22

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