Canada Gazette, Part I, Volume 153, Number 10: Regulations Amending the Duty Free Shop Regulations

March 9, 2019

Statutory authority
Customs Act

Sponsoring agency
Canada Border Services Agency


(This statement is not part of the Regulations.)


Between 2007 and 2010, the Canada Border Services Agency (CBSA) reviewed the Duty Free Shop Regulations (the Regulations) to identify ways to lessen the Agency’s oversight of the duty free shop (DFS) industry and reduce administrative burden. The CBSA announced five changes in 2014 through a Customs Notice, footnote 1 which became effective immediately.footnote 2 Consequential amendments to the Regulations are now required to give full legal effect to the changes announced in the Customs Notice.


Under the Duty Free Shop Program (DFS Program), the Minister of Public Safety and Emergency Preparedness, through CBSA delegates, licenses DFS operators that sell goods to travellers leaving Canada, primarily to ensure that duty-free goods are properly accounted for and exported as required by law. The CBSA currently oversees 55 licensed DFS operators at 33 land border locations and 22 international airport locations. The DFS Program was originally created to generate jobs, support local economies and promote Canadian products.

The DFS Program is governed by a legislative and regulatory frameworkfootnote 3 and supporting policy-based guidelines.footnote 4 The Regulations, first introduced in 1986 and last modified in 2005, prescribe the licensing and operational requirements of the DFS Program. Supporting documents, such as the CBSA’s various D-Memoranda, provide the DFS industry with further details on how to interpret and comply with the regulatory requirements.

An internal CBSA review of the DFS Program in 2007 revealed that the Regulations, being over 25 years old, would benefit from an update. Although the original regulatory objectives were achieved, footnote 5 the industry had evolved considerably since 1986; it was considered more mature and highly compliant with its governing regime. Therefore, it was determined that there was no longer a public policy benefit in regulating so many aspects of this sector.

The program review also determined that the oversight of this retail sector currently required by the Regulations did not align with the CBSA’s safety and security mandate. As a result of the program review, several regulatory changes were recommended to streamline the inventory control and reporting processes, such as eliminating the acknowledgement and reporting of domestic and imported duty paid goods, and the reporting of monthly sales to the CBSA. The program review also suggested aligning the licence renewal process for both land border and airport DFS locations.

In 2010, legislative amendments were proposed to deregulate the industry as much as possible to increase its autonomy, with the CBSA continuing to oversee the DFS Program to ensure that duty-free goods continue to be properly accounted for and exported. The CBSA conducted extensive consultations with all implicated internal and external stakeholders; however, deregulation was not favourably received, mostly due to concerns with business competitiveness.

In large part due to the global economic downturn following the 2008 financial crisis, DFS sales saw a significant decrease. Consequently, DFS licensees were concerned that the proposed legislative changes would be detrimental to their industry and might result in the closure of some businesses. For example, removing the DFS licensing requirements would have allowed for multiple DFS shops operating at one location (generally, only one licence is issued per site, unless an adequate range of goods or services is not available in the existing shop).

The Frontier Duty Free Association (FDFA) also expressed concern that eliminating the requirements for land border operators would make it easier for foreign investors and larger businesses to enter the sector, and jeopardize the business investments made by the existing small to medium-sized Canadian DFSs. footnote 6 Taken as a whole, these proposed changes were considered detrimental to the sector.

In light of significant stakeholder opposition, and because there was no significant net benefit to be gained by Canada by deregulating certain aspects of the industry, the status quo was largely maintained, with a few exceptions. In 2012, select regulatory changes were introduced to reduce the administrative burden for the industry and the CBSA. The DFS industry expressed support for the modified approach, as it allows operators to continue operating under a legal and regulatory framework that takes their ability to make longer-term investment decisions (in response to market challenges) into consideration.

Five changes to the Regulations were announced in Customs Notice 14-031, entitled “Proposed Amendments to the Duty Free Shop Regulations,” published on December 11, 2014. These changes have been enforced since their publication in the Customs Notice, and would now be formally adopted in the Regulations. footnote 7

The changes implemented through the Customs Notice have saved DFS operators a total of $1.78 million (in 2018 Canadian dollars). Additionally, these changes are expected to result in continuing savings of $474,900 annually for the DFS industry. The Government of Canada has realized savings of $155,900 since the publication of the Customs Notice and estimates ongoing savings of $41,600 annually.

An additional amendment, regarding the repeal of the summary of monthly sales and the annual report requirements, is also proposed. This amendment was not published in the 2014 Customs Notice. The Regulations require DFS operators to submit a Duty Free Shop Summary of Monthly Sales (Form B117) each month.

The CBSA receives and records the sales figures for each DFS, and then, although there is no regulatory requirement to do so, the Agency consolidates and disseminates aggregate-level data to select DFS operators, various associations and external stakeholders. These sale figures were originally used to calculate DFS licence fees for land border locations. These fees are no longer issued, footnote 8 as the requirement to submit Form B117 was identified by the CBSA for elimination to reduce the administration burden on both the DFS operators and the CBSA.

Similarly, the Regulations also require DFS operators to submit a Duty Free Annual Report (Form B127)The CBSA used this annual report to ensure that land border DFS operators met their responsibilities related to Canadian product content and small and medium-size business sourcing, as required by CBSA policy.footnote 9 In 2008, as a result of the DFS Program review and the Business Simplification Initiative,footnote 10 in which the CBSA sought ways to improve the efficiency of its commercial processes and programs, the CBSA advised Finance Canada that the requirement for land border DFSs to have 20% Canadian content in its products would be removed. By 2009, this was no longer a policy requirement. Since this requirement was eliminated, there is no longer an operational need to receive Form B127 from DFS operators. There is no longer any reference to Form B127 in CBSA policy documents, and the form itself was removed from the CBSA website in 2008.

Administrative Monetary Penalty System

The CBSA uses the Administrative Monetary Penalty System (AMPS) footnote 11 to issue monetary penalties to commercial clients for violating CBSA’s trade and border legislation. The purpose of AMPS is to provide the CBSA with a means to deter non-compliance by its clients and create a level playing field for all businesses. Non- compliance with CBSA requirements may result in being assessed a monetary penalty under AMPS.

Examples of non-compliance that most often result in AMPS penalties include the following:

The possible penalties are listed in the schedules of the Designated Provisions (Customs) Regulations. Part 5 of the Designated Provisions (Customs) Regulations lists all the penalties to be issued under the Duty Free Shop Regulations. As a result of the changes to the DFS Regulations, consequential amendments are required to the Designated Provisions (Customs) Regulations.


The objective of the proposed amendments is to formally include the modifications announced in the Customs Notice 14-031 in the Regulations and to repeal the summary of monthly sales and the annual report requirements.

The repeal of the reporting requirements regarding monthly sale and annual report would streamline the CBSA’s DFS Program by reducing costs and the administrative burden on both the DFS industry and the CBSA.


In accordance with paragraph 167.1(b) of the Customs Act, together with Customs Notice 14-031, the CBSA has been administering the DFS Program in accordance with the first five proposed amendments described below. These proposed amendments would apply retroactively to the date of the Customs Notice: December 11, 2014. The repeal of section 17 was not part of the Customs Notice, and would take effect on the date of the coming into force of the proposed amendments.

1. Repeal the requirement for applicants to have sufficient financial resources (paragraphs 3(6)(c) and (d) of the Regulations)

The requirement that an individual or business applicant demonstrate that it has sufficient financial resources to pay for a lease (on an on-going basis) or purchase the location where the duty free shop would operate, and that it will be able to collect any applicable duties and taxes, would be repealed. Given that the DFS industry is now well-established, these two requirements were no longer considered necessary, and would be repealed.

Furthermore, imported goods within a DFS are held in-bond, duty and tax free. A DFS licensee is liable for the duties and taxes unless the licensee can prove that the goods have been sold for export, are still in the DFS, have been destroyed, or have been lawfully removed. DFS licensees must post financial security (i.e. bond) against their inventory in order to operate. In the event of an inventory shortage (breakage, theft, etc.), the DFS operator must pay the duties and taxes on the goods. The bond protects the Crown’s interests should the DFS operator fail to meet these obligations.

Eliminating the requirement for applicants to have sufficient financial resources would create a minor reduction in the administrative burden currently experienced by existing DFS businesses (that currently have to apply to renew their licence every five years) and for future entrants to the DFS industry. These businesses would no longer be required to compile and provide this information to the CBSA (e.g. a statement of net worth and supporting financial documents/statements). In addition, this proposed change would result in minor cost savings for the CBSA, as it would no longer need to allocate resources to evaluate the applicant’s financial resources.

This information had been collected as part of the application process for a new DFS in order to demonstrate the applicant’s ability to sustain a successful business and to ensure the collection of any applicable duties and taxes. Meeting this requirement came at a cost to both the CBSA and the proposed licensee. Furthermore, the risk that a licensee may fail to pay applicable duties and taxes as a result of inventory shortages is already being mitigated through the financial security posted by the DFS licensee against its inventory.

2. Extend the validity period of a DFS licence (subsection 6(2) of the Regulations)

Under the Regulations, the validity period of a DFS licence is currently specified as 5 years. The validity period would be lengthened to 10 years. In practice, this has reduced the work associated with the licence renewal process for the CBSA and the applicant, and has allowed for business planning over a longer period.

By extending the validity period of a DFS licence from 5 years to 10 years, the workload associated with the licence renewal process for the CBSA and the applicants has been reduced by half. Licensees only have to complete the renewal form and gather the supporting information once in 10 years (instead of 5 years). The CBSA would only review this information package footnote 12 submitted by the licensee, as well as the CBSA compliance records, and issue a DFS licence once every 10 years (instead of 5 years).

When a licence is renewed, the DFS licensee is asked to provide a completed renewal application form, information on all the owners, a copy of the lease, a copy of the bond, and a copy of the provincial liquor authorization. The CBSA reviews all documents and information to ensure they continue to meet CBSA program requirements. The CBSA reviews and considers any compliance issues over the previous licence term as part of the licence renewal process.

The 10-year validity period was selected by considering the terms used by the land and air sectors of the industry. The land border sector recommended 20-year licences and the airport DFS sector recommended that the term of the licence align with the lease term. There is a small risk with not having DFS operators renew their licences every 5 years, as the licensee may fail to meet the regulatory requirements during the period of the licence, and this non-compliance would go undetected by the CBSA. footnote 13

This change has reduced the regulatory burden and creates efficiencies by reducing the frequency of licence renewal. Furthermore, the longer validity period would provide industry with greater certainty, in that a longer-term licence allows businesses to adjust business planning accordingly, such as making investment or human resources decisions over a longer term. Risk assessments and compliance and verification monitoring activities by the CBSA would continue on a regular basis, and the CBSA would maintain the authority to suspend or cancel a licence, as required.

3. Repeal the requirement to provide or make available public washroom facilities and public telephones that are accessible to disabled persons (paragraphs 13(1)(a) and (b) of the Regulations)

The Regulations currently require that every DFS licensee provide or make available public washroom facilities and public telephones easily accessible to disabled persons (e.g. it could be an access to an airport washroom, a washroom in a plaza located at the land border, or a washroom within the DFS).

These requirements can also be found in existing federal, provincial and municipal building codes; footnote 14 they are therefore duplicative and would be repealed. In practice, this change has reduced the CBSA’s workload by eliminating its responsibility for monitoring compliance. Likewise, the operator’s obligation to report the location of public washrooms and telephones would also be eliminated (when applying for a DFS licence, applicants must prove that they meet all the DFS requirements and provide building plans indicating the location of the bathrooms and telephones).

Although the CBSA approves the plans and verifies the actual site prior to the DFS opening, and regularly conducts audit checks, there would no longer be a need to confirm the existence and location of washrooms and telephones.

4. Repeal the requirement to store and mark goods received in a DFS in the manner specified (subsection 14(a) of the Regulations)

Imported goods that are received into a DFS are usually duty and tax free (as opposed to imported duty paid goods, and domestic goods on which duties are not owed). The Regulations require that licensees ensure the goods they receive are stored, marked (e.g. so that they can be readily identified and checked against the licensee’s records of inventory or relevant customs accounting documents), and are readily distinguishable from imported goods.

Technology has made this requirement obsolete, as the goods received by DFSs can now be electronically logged into new point-of-sale and inventory systems that ensure DFS operators can accurately verify inventory counts in each of the above areas without physically segregating the goods. Therefore, these requirements would be repealed. This change would reduce the regulatory burden on the industry to physically separate the goods, and allow DFSs to store domestic goods and imported goods together, both in their DFS warehouse and in the DFS itself. The DFS licensees could move and store these goods together and gain work and space efficiencies without increasing the risk of revenue loss on the part of the Crown.

5. Repeal the requirement to immediately notify the CBSA of the receipt of goods (paragraph 16(1)(b) of the Regulations)

The Regulations require a DFS licensee to provide the CBSA with an arrival notification for each receipt of new goods. This notification must be done “immediately” upon arrival of the goods.

The proposed amendment would repeal the requirement to notify the CBSA “immediately” of the arrival of the goods. However, the time frame to account for the goods remains five business days from the arrival of the goods at the DFS, as per CBSA policy. The arrival notification requirement itself, although no longer required immediately, can still be fulfilled through the submission of Form B116, Canada Border Services Agency Duty Free Shop Accounting Document. Only when the CBSA has approved Form B116 can the goods be removed from the warehouse and placed for sale in the DFS.

The fact that the arrival notification requirement is no longer immediate and can be done at the same time as the accounting of the goods allows for DFS operators to combine multiple shipments on one arrival notification. This creates efficiencies for both the DFS operator and the CBSA. The proposed amendment also provides the DFS licensee with the option of notifying the CBSA of the arrival of the goods directly through the submission of the required accounting document (i.e. the B116 form), potentially eliminating a separate arrival notification. The CBSA would retain the same level of oversight and control over the goods in the warehouse, as the same information would still be provided.

6. Repeal the requirement to submit a summary of monthly sales and an annual report (section 17 of the Regulations)

Under section 17 of the Regulations, DFS operators are required to provide data on their monthly and annual sales to the CBSA. The proposed amendments would repeal this section and eliminate these two requirements. There is no operational value in collecting or analyzing this data for the CBSA.

Eliminating the requirement to submit a summary of monthly sales and an annual report would also reduce any potential risk of breaching the Privacy Act through the potential unauthorized collection of personal information.

7. Amendments to the Designated Provisions (Customs) Regulations

In Part 5 (Duty Free Shop Regulations) of Schedule 1 to the Designated Provisions (Customs) Regulations, items No. 1, 7, 9 and 10 (as follows) will be repealed.

Item Designated Provision Short-form Description
1 14(a) Failing to ensure that goods received in a duty free shop are stored and marked in prescribed manner
7 16(1)(b) Failing to immediately notify chief officer of customs of the receipt of goods
9 17(a) Failing to provide to chief officer of customs a summary of monthly sales and remittance of fees in prescribed form within the specified period
10 17(b) Failing to provide to chief officer of customs an annual report in prescribed form within the specified period

“One-for-One” Rule

The proposed amendments would result in a reduction of administrative burden for DFS operators. Through consultations with the industry in 2015, it was determined that the 24 small businesses have senior management spend a half an hour a month to complete the monthly sales report (Form B117). The 30 medium/large businesses have an accountant spend one hour to complete the Form B117 each month. Repealing paragraph 17(a) would save DFS operators a total present value (TPV) of $186,000 over 10 years ($26,000 annualized) in administrative costs.

To complete the annual reporting (Form B127), all stakeholders have indicated they use an accountant with the 24 small businesses requiring 4 hours annually and the medium/large business requiring 7 hours annually. The repeal of paragraph 17(b) would result in a reduction of TPV administrative burden imposed on DFS operators over 10 years by $102,000 ($14,000 annualized).

In total, the proposed amendments (only those not implemented through the Customs Notice) would reduce the present value of the administrative burden imposed on DFS operators over 10 years by $288,000 ($40,000 annualized) in 2018 constant Canadian dollars.

For the purposes of the “One-for-One” Rule, values need to be discounted using a discount rate of 7% back to a base year of 2012 and be measured using 2012 constant dollars. Using these measures, the decrease in annualized administrative costs would be $27,261 for the industry and $505 per business.

Accordingly, the “One-for-One” Rule applies to this proposal, as it would result in an “OUT” in the amount of $27,261.

Small business lens

The proposed amendments (i.e. only those not implemented through the Customs Notice) would result in a decrease of compliance and administrative burden on businesses, including small businesses. Therefore, the small business lens does not apply. However, this proposal is relieving in nature, and would reduce the costs over 10 years to small businesses operating duty free shops by a TPV of $94,300 (using a 7% discount rate and 2012 constant Canadian dollars). On average, this will reduce the cost per small business by a TPV of $3,900 over the 10-year period ($559 per small business, annualized).


The following external stakeholders were consulted on the proposed amendments: the Association of Canadian Airport Duty Free Operators (ACADFO), the Frontier Duty Free Association, all individual DFS licensees, the Canadian Airports Council and the Bridge and Tunnel Operators Association (BTOA).

In 2012, widespread external communications were issued to inform affected stakeholders of the revised implementation approach. A letter was sent to all DFS operators, informing them that, as a result of consultations, the CBSA would put forward a recommendation for five minor regulatory changes to the DFS Program instead of the proposed deregulation of the industry, to be implemented through a Customs Notice. This was favourably received by the DFS industry.

In November 2016, more than two years after enacting these regulatory changes through the Customs Notice, the CBSA contacted the FDFA and the ACADFO, as well as all DFS licensees not represented by an association, to seek their comments and feedback. As no feedback was received, the CBSA finalized and closed the consultation process for this regulatory change.

Consultations on the repeal of the requirement to submit a summary of monthly sales have been undertaken for more than 15 years. When it was first proposed in 2002, the FDFA opposed this modification and recommended that the CBSA continue collecting and disseminating the statistics, as the information served as a valuable means of tracking industry performance and compliance.

As a result, the requirement remained unchanged in the Regulations, although these statistics were no longer being collected for their original purpose. Following further internal consultation, the CBSA advised the FDFA through a written letter, in March 2016, that the collection of the sales data would be discontinued. The FDFA provided a response letter in May 2016, outlining their concerns. The CBSA thoroughly assessed the potential operational use of the DFS monthly sales statistics and concluded that the program compliance benefit is better obtained through regular audits and the CBSA’s authority to review books and records under subsection 40(1) of the Customs Act.

Under this subsection, every person who imports goods for any commercial use shall keep records in respect of those goods, make them available to an officer upon request, and answer truthfully to any questions in respect of the records. Although the benefits of this data cited by the FDFA to their industry sector, trade suppliers, provincial liquor boards and other government departments may exist, the onus is on these stakeholders to collect the data required for the administration of their program.

The CBSA confirmed that the monthly sales reports were not required for the administration of the DFS Program and advised the FDFA in writing on June 8, 2017, that the requirement to provide these sales statistics would be removed. However, the industry would continue to be provided with the amalgamated reports until the Regulations were amended. Between 2014 and 2017, this issue was also discussed with the FDFA at various meetings and conferences.

There was no consultation done regarding the removal of the requirement to provide the annual report. The yearly statistics were obtained from the revised monthly report (Form B117, revised in 2006) and operators were advised they no longer had to submit this form as of April 2007. The reference to the Form B127 was removed from policy, and the form itself was removed from the CBSA website in 2008, as part of the Business Simplification Initiative. The CBSA has not been providing any report nor disseminating any data regarding this form since then. No DFS operators, nor the FDFA, have contested the repeal.


The proposed amendments are relieving in nature and result in the removal of existing regulatory requirements that would achieve cost savings for the DFS industry while preserving those elements that ensure program compliance. The proposed amendments also help to ensure that the regulatory framework that the CBSA administers for oversight of the DFS industry reflects the current operational environment and program needs.

The proposed amendments would have benefits in the form of reductions in the administrative burden imposed on DFS operators over 10 years by a TPV of $287,000 ($41,000 annualized) resulting in an estimated annualized savings of $916 per medium/large operator and $559 per small operator. The proposed amendments would not introduce any new requirements on the DFS industry; therefore, no new costs would be imposed as a result of these amendments.


Marie-Josée Charette
Acting Manager
Programs Branch
Canada Border Services Agency
Telephone: 613‑941‑3495
Email: Marie-José


Notice is given that the Governor in Council, pursuant to section 30footnote a, paragraphs 164(1)(i)footnote b and (j), and 167.1(b)footnote c of the Customs Actfootnote d, proposes to make the annexed Regulations Amending the Duty Free Shop Regulations.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Marie-Josée Charette, Acting Manager, Programs Branch, Canada Border Services Agency (email: Marie-José

Ottawa, February 28, 2019

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Amending the Duty Free Shop Regulations


1 Paragraphs 3(6)(c) and (d) of the Duty Free Shop Regulationsfootnote 15 are repealed.

2 Subsection 6(2) of the Regulations is replaced by the following:

(2) No licence shall be valid for more than 10 years.

3 Paragraphs 13(1)(a) and (b) of the Regulations are repealed.

4 Subsection 14(a) of the Regulations is repealed.

5 Paragraph 16(1)(b) of the Regulations is repealed.

6 Section 17 of the Regulations is repealed.

Consequential Amendment to the Designated Provisions (Customs) Regulations

7 Item 1 of Part 5 of Schedule 1 to the Designated Provisions (Customs) Regulationsfootnote 16 is repealed.

8 Item 7 of Part 5 of Schedule 1 to the Regulations is repealed.

9 Items 9 and 10 of Part 5 of Schedule 1 to the Regulations are repealed.

Coming into Force

10 (1) Subject to subsection (2), these Regulations come into force on the day on which they are registered.

(2) Sections 1 to 5 and sections 7 and 8 are deemed to have come into force on December 11, 2014.