MEMORANDUM D4-3-8

Ottawa, May 31, 2002

DUTY FREE SHOP - OFF-SITE STORAGE

This Memorandum sets out the policy and procedures by which duty free shop licensees may store a portion of their inventory in an approved off-site storage facility.

For the regulations governing the guidelines and general information contained in this Memorandum, refer to Memorandum D4-3-1, Duty Free Shop - Regulations.

1. In certain instances, duty free shop licensees may be permitted to include an off-site storage facility as part of their operation. In order to do so, the licensees must follow the approval process outlined below. They must also conform to the requirements for establishing this facility, they must ensure that the facility is secure and they must control the movement of inventory in and out of the off-site storage facility, in conformity with the provisions outlined below. If they wish to store liquor in their off-site storage facility, licensees must satisfy all requirements of their provincial liquor commission, including minimum security standards to ensure the physical security of the goods. All provisions of any Act of Parliament or regulations made pursuant thereto that prohibit, control, or regulate the importation or exportation of goods, or that relate to customs and excise, as well as policies and procedures that apply to the duty free shop will also apply to the off-site storage facility.

Approval Process

2. A licensee contemplating the establishment of an off-site storage facility in addition to an existing duty free shop operation is to submit Form L58, Duty Free Shop Licence Amendment Form, together with detailed plans or drawings of the proposed facility to the local chief officer of customs. These documents will be reviewed and forwarded, along with local and regional comments, to the Manager, Duty Free Shop Program, for final approval and sign-off. Completion instructions for Form L58 are provided in Memorandum D4-3-2, Duty Free Shop - Licensing.

3. Approval of the appropriate provincial liquor authority must be included with the submission in order for customs to consider approving the storage of alcoholic beverages in the off-site storage facility.

4. Failure by the licensee to meet all of the policy and procedural requirements for approval and operation of the off-site storage facility may result in suspension or cancellation of off-site storage privileges by customs.

Site Requirements

5. Only one off-site storage facility is permitted for each duty free shop licence.

6. The off-site storage facility must be located within the same local customs district as the duty free shop. In addition, it must be within a reasonable distance of the duty free shop for which it will hold inventory, as determined by local customs.

7. The off-site storage facility must be physically located so as to be easily serviceable by customs.

Facility Standards

8. Where the off-site storage facility is located within an existing building also used for other purposes, the duty free shop licensee is responsible for ensuring that the area or areas designated as part of the duty free operation are physically secure. This area is to be clearly marked and separated from the remainder of the warehouse area by means of a partition or other physical means satisfactory to the local chief officer of customs.

Operational Requirements

9. Restrictions that apply to goods that duty free shop licensees are permitted to stock in their duty free shop inventory will also apply to goods held in the off-site storage facility. Refer to the restrictions in Memorandum D4-3-4, Duty Free Shop - Report and Control of Inventory.

10. Duty free shop licensees must ensure that the security bond posted for their operation includes any inventory held in the off-site storage facility.

Report and Control of Inventory

11. Goods may be received by the licensee for initial release by customs into the duty free shop inventory at the off-site storage facility or the duty free shop. Requirements for reporting the initial receipt of goods at an off-site storage facility for inclusion in the duty free shop inventory are identical to those that the duty free shop licensee or authorized agent must meet when goods are initially received at the duty free shop itself. Refer to Memorandum D4-3-4, and Memorandum D4-3-5, Duty Free Shop - Documentation Requirements.

12. Goods transferred between the off-site storage facility and the duty free shop may only be transferred on Form B116 (TRANSFER), Canada Customs Duty Free Shop Accounting Document (see the Appendix). Approval for this movement must be obtained in advance from local customs, and Form B116 (TRANSFER) must be presented to local customs before movement of the goods.

13. Liability for duty free shop goods while they are in movement will remain with the licensee, just as it does when the goods are in the off-site storage facility or the duty free shop. The goods will be considered secured under the duty free shop security bond posted for the total inventory (see paragraph 10). Any loss of inventory will be subject to action against the duty free shop security bond unless immediately accounted for by the licensee.

14. Coding instructions for Form B116 (TRANSFER) are found in Memorandum D4-3-5. When using Form B116 as a transfer document for the purposes of moving inventory between the duty free shop and the off-site storage facility, the licensee should indicate on the form the nature of the movement, for example "from off-site storage facility to duty free shop." This information may be entered at the bottom of the section called "Description" of the form. Please refer to the Appendix for a sample of Form B116 (TRANSFER).

15. Where an automated system is in operation for inventory control records at a duty free shop and the system is capable of identifying whether the goods are physically located at the duty free shop or the off-site storage facility, the licensee may attach detailed transfer data generated by the system to Form B116, provided the local chief officer of customs agrees to such an arrangement.

APPENDIX

Sample Form B116

REFERENCES

ISSUING OFFICE -

Import Process Division
Operational Policy and Coordination Directorate

HEADQUARTERS FILE -

7740-0

LEGISLATIVE REFERENCES -

Customs Act

OTHER REFERENCES -

D4-3-1, D4-3-2, D4-3-4, and D4-3-5

SUPERSEDED MEMORANDA "D" -

N/A

Services provided by the Canada Customs and Revenue Agency are available in both official languages.

This Memorandum is issued under the authority of the Commissioner of Customs and Revenue.