MEMORANDUM D4-3-5

Ottawa, February 11, 1991

SUBJECT

DUTY FREE SHOP

DOCUMENTATION REQUIREMENTS

This Memorandum outlines and explains Customs documentation procedures relating to the remittance of duty free shop licence fees and the inward and outward reporting of inventory.

TABLE OF CONTENTS

• Guidelines and General Information
• Description of Forms
• Information Requirements
• Accounting and Record Keeping
• Additional Information
• Appendix A
• Appendix B
• General Information
• Appendix C
• References

Legislation

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

GUIDELINES AND GENERAL INFORMATION

1.This Memorandum is to be used as a guide by Customs personnel and duty free shop licensees and their employees/agents who are involved in preparing and processing Customs documents for duty free shop inventory reporting and licence fee remittals.

2.For information regarding the preparation of other Customs forms which would be used by a duty free shop operator, refer to the following Customs Memoranda:

DESCRIPTION OF FORMS

Summary of Monthly Sales and Remittance of Revenue - Form B 117

3.Form B 117 is a Customs document used to report gross revenue from sales at a duty free shop. In addition to providing statistical information on the type and value of goods sold each month, this form is used for the calculation and remittance of licence fee payments by land border duty free shop operators.

Canada Customs Duty Free Shop Accounting Document - Form B 116

4.Form B 116 is a Customs document used to account for goods destined for sale and export from a duty free shop. This form is completed when reporting goods into or out of inventory. Documentation procedures are set out in this directive according to the specific use of the form, i.e., B 116 (IN), B 116 (OUT) or B 116 (TRANSFER).

INFORMATION REQUIREMENTS

5.Accounting documents and licence fee remittal forms must be properly completed before they can be accepted by Customs for processing. To facilitate the review process, copies of the documents used to prepare the form, i.e., commercial or Customs invoices, cargo control documents, sales receipts or cash tapes, must be attached to forms B 117 or B 116 for verification purposes.

6.All information on the forms must be legible and all fields must be completed in accordance with the instructions contained in the Appendices to this Memorandum.

7.Customs Officers will review the document packages submitted to ensure compliance with departmental requirements. Any Customs form submitted which does not meet the requirements will be returned to the licensee and, where applicable, release of goods into inventory will be withheld. In all such cases, the licensee will be informed of the reasons for rejection.

ACCOUNTING AND RECORD KEEPING

8.Duty free shop licensees are responsible for ensuring that adequate books and records pertaining to the purchase, import, accounting and export by sale or other removal of goods from inventory are maintained. For Customs control purposes, the following list constitutes the minimum records required:

9.The licensee is to ensure that these records are filed in a manner which will facilitate accounting verifications by an officer of Customs and Excise or any other person authorized to do so by the Minister.

10.Separate accounting systems and records must be maintained by the licensee if there are other commercial activities in operation at the duty free shop, i.e., foreign exchange booth, snack-bar, etc.

11.In accordance with the Regulations, all import and accounting records pertaining to the sale and export of goods at a duty free shop are to be retained from the date of receipt of the goods for a period ending six years from the date they were lawfully removed from the shop. This does not relieve the licensee of the liability to retain records and books under any other Act or regulation made thereto.

ADDITIONAL INFORMATION

12.Licensees wanting to privately print Customs forms may do so in accordance with the procedures set out in Memorandum D17-1-11, Private Printing of Customs Forms. Prior approval from the Duty Free Shop Program office is required for printing of the B 116 or B 117 forms and any such requests are to be directed to the attention of:

13.Any questions regarding the completion instructions or format examples of the Customs forms which follow in the Appendices to this Memorandum can be directed to the local Customs office or the Program office as noted in paragraph 12 of this Memorandum.

APPENDIX A

FORM B 117

CODING INSTRUCTIONS AND FORMAT EXAMPLES

1.Form B 117 is the primary source document used to input statistical data into the Licensee Evaluation and Monitoring System (LEMS). This form is also used by land border duty free shop operators to calculate monthly licence fee payments which are based on a variable percentage of annual gross revenue from sales.

2.Form B 117 is to be prepared in triplicate and submitted by the 15th day of the month following the month in which the sales were made. Copies of cash tapes are to be submitted with the form B 117 for verification purposes. After review by Customs for completeness and accuracy, the copies of the form will be distributed as follows:

3.Airport duty free shop licensees will submit forms B 117 monthly for statistical purposes only as licence fees for these sites are based on the amount of security posted and not on sales. (For further information on the payment of airport licence fees refer to Memorandum D4-3-3, Duty Free Shop - Licensee Responsibilities.) All references in this Appendix to "licence fee payments" therefore apply to land border operations only.

Licence Fee Remittal

4.The licence fee is payable in monthly installments with the amount to be remitted calculated as a percentage of the annual gross revenue from sales as at the end of each calendar month. The percentage varies as follows:

5.For the purpose of computing licence fee remittals, "gross revenue from sales" is considered to be the total cash value of the sales transactions as recorded on the sales receipts. For example, if an article with a ticket price of $90 is sold for $81 as a result of a 10 per cent discount being given, the gross revenue is considered to be $81, the actual price paid.

6.At the end of each 12 month period (which commences the first month the shop is opened), the computation of the percentage of gross sales will revert back to the beginning of the scale. At the request of a licensee, this fee payment schedule may be changed to reflect another 12 month period (calendar or business fiscal year) but such a change will only be authorized if it does not result in a revenue loss to the Crown. All such requests are to be made by means of a form L 58 submitted to the Program office in Ottawa.

7.When the year-to-date sales surpass a percentage limit before the end of a calendar month, the higher rate would be applied to the excess amount for that month and each month thereafter until the next limit is reached or it is time to revert to the beginning of the scale again. In reporting the year-to-date sales, it should be noted that this refers to the 12 month licence fee payment schedule and not the calendar fiscal year (unless the period happens to correspond with the fee schedule).

8.The licence fee payments are to be submitted at the same time as the monthly form B 117. A form K 21, Cash Receipt, will be issued by Customs to the licensee as proof of payment. If an error is detected after a form B 117 was submitted (and accepted by Customs), an amended form B 117 is to be submitted for that month, identifying the nature and reason for the amendment. The licensee will be advised by Customs of any monies owing or refundable as a result of such an adjustment.

9.Annually, Excise auditors will verify the total gross revenue from sales against the remittances made during the year. Adjustments, if any, will be made at that time, either by reimbursement by Customs or the issuance of a form K 23, Invoice, for monies owing.

Coding Instructions - Form B 117

10.The various fields on the form B 117 are to be completed as outlined below. For a specimen of the completed form, refer to the format examples.

Field 1 or 2 - Mark the appropriate box to indicate if the form B 117 is an original submission or an amendment for a previous month.

Field 3 - Indicate the full name and mailing address of duty free shop.

Field 4 - Indicate the month/year for which gross revenue from sales is being reported.

Field 5 - Enter the full name, job title and signature of the person who prepared the document.

Field 6 - Identify the Customs office at which the form B 117 is submitted.

Field 7 - Indicate duty free shop licence number.

Field 8 - For Customs use.

Field 9 - For Customs use.

Field 10 - Standard grouping for departments/product lines against which monthly sales must be reported.

Field 11 - Indicate the cash value of all sales transactions to date (including current reporting period) under each department, by origin of goods as well as by totals. Note: Year-to-date refers to the 12 month period which corresponds to the licence fee payment schedule.

Field 12 - Show the gross revenue from sales (cash value) for the current reporting period by the department, origin of goods sold and totals. Note: Sales reported in this field are to be included in the gross sales reported in Field 11.

Field 13 - (To be completed by the land border duty free shop licensees only.) The value reported in the "Gross Sales" column - against one or more of the percentage rates - is to equal the over-all total shown in Field 12. The "Amount Due" is then calculated according to the percentage(s) against which the gross sales were reported. (Refer to format Example A-2 for sample calculation.)

Field 14 - When an amended form B 117 is submitted, the amount of any licence fee adjustment which may be required is to be shown here.

Field 15 - Show the total amount payable as a licence fee for the month reported.

Field 16 - For Customs use.

"Comments" - Licensees are to show cash value (total only) of all discounts given on sales transactions during current reporting period in this section. (Note: Discounts are not to be included in the cash values reported in Field 12.) When an amended form B 117 is submitted, the reason for the amendment would also be shown here. The Customs date stamp is also to be placed in this section to indicate fee payment has been received.

Format Examples - Form B 117

The examples in this section represent typical, not actual transactions and are set out in the following order:

EXAMPLE A-1

[Example A-1 not reproduced here]

This example shows the basic format for completing a form B 117. The report represents the first month of a 12 month fee payment schedule.

EXAMPLE A-2

[Example A-2 not reproduced here]

This example shows the format used in calculating the licence fee payment when gross sales surpass a percentage limit during the reporting period.

EXAMPLE A-3

[Example A-3 not reproduced here]

This example shows the format used when a licence fee adjustment is necessary. In this case, an overpayment for a previous month was identified (reason shown in comments section).

EXAMPLE A-4

[Example A-4 not reproduced here]

This example shows the format used when an amended form B 117 is submitted. The reason for the amendment is shown in the comments section and in this example, no licence fee adjustment is necessary as the gross sales total was not affected.

APPENDIX B

FORM B 116

CODING INSTRUCTIONS

1. Form B 116 is a Customs document used for the reporting of goods in and out of inventory at a duty free shop. The procedures outlined in this Appendix relate specifically to the mechanics of completing this multiple use form. For more information regarding the procedures for the reporting of inventory, refer to Memorandum D4-3-4, Duty Free Shop - Report and Control of Inventory.

2. Guidelines for the completion of form B 116 are set out in the following order - B 116 (IN), B 116 (OUT) and B 116 (TRANSFER). Specific coding instructions and format examples follow at the end of this Appendix.

Receipt of Goods - Form B 116 (IN)

3. Shipments received at a duty free shop will normally be accompanied by one or more of the following documents:

4. These documents are the primary source of information for the licensee or licensee's agent in preparing the form B 116 (IN) to move goods into inventory. Form B 116 (IN) is to be presented to Customs within five days of a shipment's arrival having first been reported to Customs.

5. If the supporting documents are unavailable or inadequate for completing the form, the local Chief Officer of Customs may extend the time period for presentation of the form B 116. The shipment would remain in the holding area of the shop warehouse, however, until such time as the form B 116 (IN) is submitted.

6. Goods being moved into inventory can be identified on the form B 116 (IN) according to specific product lines or by pre-determined product/commodity groups composed of the same or similar goods. It should be noted that when a licensee chooses to use the product/commodity method of reporting inventory, all inventory shortages due to thefts or other unsubstantiated discrepancies will be calculated on the basis of the highest value item within the product grouping, unless proof that the goods were of a lower value can be provided by the licensee. The goods are also to be identified on the form in the unit size in which they will be sold. An example of the reporting methods is as follows:

7. For control purposes, a separate form B 116 must be used to move domestic and imported goods into inventory. Unique reporting codes are also to be assigned to each product line (or product/commodity group) carried in the shop to allow perpetual inventory records on each item to be maintained. The inventory code series is also to differentiate between imported and domestic goods.

8. The reporting method can vary from one duty free shop to another depending upon what the licensee and local Chief Officer of Customs agree upon. The product lines (or product/commodity groups) and their respective inventory codes used at any one shop must, however, be documented and an updated listing provided to Customs prior to any changes being introduced.

9. It is the responsibility of the duty free shop licensee to identify, if possible, goods being moved into inventory which may be subject to drawback claims under Memoranda D7-3-4, Canadian Manufactured Goods and D7-3-5, Goods Imported and Exported Drawback Regulations. When identified at the time of receipt, these goods must be properly described on the form B 116 (IN) and if available, the previous transaction number, office and date, cross-referenced on the form. A separate form B 116 should be presented for goods subject to drawback when their status as such is known.

10. The form B 116 (IN) is to be completed in triplicate and submitted to Customs together with appraisal quality invoices (Canada Customs or commercial) and related cargo control documents, permits, etc. The document package will be reviewed and periodically verified against the shipment itself.

11. If no discrepancies are noted, Customs will assign a transaction number from the appropriate series (Imported or Domestic) and date stamp all copies of the form B 116 (IN). The third copy of the document package will be returned to the licensee and at this time, the goods may be removed from the holding area and the inventory control system adjusted to reflect the new inventory quantities.

Goods Sold and Exported - Form B 116 (OUT)

12. Goods sold and exported from a duty free shop are to be reported out of inventory on a form B 116 (OUT). The frequency with which the form B 116 (OUT) must be submitted is determined by the local Chief Officer of Customs but in no case is it to be less often than monthly.

13. Domestic and imported goods are to be reported out of inventory on separate forms B 116. The reporting method used must also be in accordance with that which was used at the time of initial accounting, i.e., same inventory codes, unit sizes, values, etc.

14. The form B 116 (OUT) is to be completed in triplicate and submitted to Customs together with copies of all related sales receipts. The document package will be reviewed by Customs to verify the type and quantity of goods sold. A numbered and stamped copy of the form B 116 (OUT) will be returned to the licensee and at this time, inventory balances may be adjusted to reflect the quantities sold.

Alternate Disposal Methods - Form B 116 (OUT)

15. A form B 116 (OUT), completed as outlined above, is to be presented to Customs for the purpose of adjusting inventory records whenever goods are removed from inventory for reasons other than that they were sold for export. Additional documentation to be submitted in support of a form B 116 (OUT) would vary as follows:

Transfer of Goods - Form B 116 (TRANSFER)

16. Goods transferred from a bonded warehouse to a duty free shop may be documented by the transferor or warehouse operator on a form B 3 (Ex-warehouse) or a form B 116 (TRANSFER) document. Goods shipped from one duty free shop to another duty free shop may only be transferred on a form B 116 (TRANSFER) document.

17. Upon receipt of a shipment, the transferee at the duty free shop is to verify type and quantity of goods received and sign the transfer documents presented by the carrier. When a form B 3 (Ex-warehouse) document is used to effect the transfer, the licensee will be required to prepare and present a form B 116 (IN), together with the transfer document, to local Customs to move the goods into inventory. However, when a form B 116 (TRANSFER) document has been used, the transfer document may be presented to local Customs without additional paperwork if the form is legible and the licensee is able to insert the applicable inventory codes onto the transfer form.

18. When a licensee intends to return in bond goods to a bonded warehouse or transfer them to another duty free shop, the goods are to be documented on a form B 116 (TRANSFER) and moved in bond under cargo control documents. Upon receiving approval of the transfer by Customs at the originating office, the licensee may ship the goods and adjust the inventory balances to reflect the reduction in quantity of goods. Proof of acceptance of the transfer by the bonded warehouse or receiving duty free shop operator may be required.

19. A form B 116 (TRANSFER) document is also to be used when domestic goods are being returned to a supplier or transferred to another duty free shop within Canada. When proof that the domestic goods are not taxable (or that a drawback was not claimed) can be provided by the licensee, the goods may be transferred by a non-bonded carrier. Carrier documents are always to be submitted with the form B 116 and upon approval of the transfer by Customs, the goods may be shipped and the inventory balances adjusted to reflect the reduction in quantity.

Form B 116 - Coding Instruction, Format Examples

20. The various fields shown on the form B 116 are to be completed as outlined below. Refer to the format examples for specimens of the completed form.

Field 1 - TYPE - By marking the appropriate box(es), this field is used to identify the document type and the basic classification of the goods which are being reported in or out of inventory. The following definitions apply to the terminology used in this section:

"Imported" refers to goods manufactured or produced outside of Canada.

"Domestic" refers to finished goods manufactured or produced in Canada.

"Duty Paid" refers to imported goods on which applicable duties/taxes have been paid.

"Transferred" refers to the movement of goods between a duty free shop and a bonded warehouse in Canada or between two duty free shops located in Canada.

"Ex-Duty Free Shop" refers to the removal of goods from the inventory of a duty free shop.

To indicate the document type (or the specific use of the form), the boxes in this section would be marked off as follows:

A form B 116 (IN): the imported, domestic or duty paid box is to be marked off according to the specific origin and duty status of the goods being reported. If the goods were transferred from a bonded warehouse or from another duty free shop, the "transferred" box would also be marked off.

A form B 116 (OUT): the imported, domestic or duty paid box is to be marked off in accordance with the specific origin and duty status of the goods as at the time they were first moved into inventory. The "Ex-duty free shop" box must also always be marked off to indicate the goods are being removed from inventory.

A form B 116 (TRANSFER): the imported, domestic or duty paid box is to be marked off in accordance with the specific origin and duty status of the goods. The "Transferred" box must also be marked off to indicate that the goods are being removed from inventory and transferred to or from a duty free shop. If the goods are being transferred out of a duty free shop (i.e., to a bonded warehouse or another duty free shop or returned to a supplier in Canada), the "Ex-Duty Free Shop" box would also be marked off.

Field 2 - DUTY FREE SHOP NAME AND ADDRESS - For a form B 116 (IN), indicate the name/address of the duty free shop to which the goods were delivered.

For a form B 116 (OUT), indicate the name and address of the duty free shop from which the goods are being removed from inventory.

For a form B 116 (TRANSFER), the name and address of the warehouse, duty free shop or supplier to which the goods are being transferred are to be indicated here.

Field 3 - VENDOR OR TRANSFEROR NAME - NUMBER - For a form B 116 (IN) or a form B 116 (OUT), the vendor, supplier or transferor's name and address is to be indicated. If there are different vendors for the goods, i.e., in the case of a form B 116 (OUT), indicate "various". For drawback purposes a specific supplier name, however, must always be shown.

For a form B 116 (TRANSFER), indicate the name and address of the supplier, bonded warehouse or duty free shop to which the goods are being moved.

Field 4 - B 116 TRANSACTION NO. - Customs will assign a document transaction number according to the origin of the goods and whether they are being delivered into or removed from inventory.

Field 5 - CARGO CONTROL NO. - For a form B 116 (IN) or form B 116 (TRANSFER), indicate the cargo control document number or, if not available, waybill or bill of lading number.

This field is not applicable to a form B 116 (OUT).

Field 6 - CUSTOMS OFFICE - Indicate the Customs office where the duty free shop is located on the form B 116 (IN) or form B 116 (OUT). For a form B 116 (TRANSFER), indicate the Customs office where the goods are to be transferred.

Field 7 - D.F.S. NO. - For a form B 116 (IN), indicate the licence number assigned to the duty free shop receiving the goods. For a form B 116 (OUT), indicate the licence number of the shop from where the goods are being removed. For a form B 116 (TRANSFER), leave blank unless goods are being transferred to a duty free shop in which case, the licence number of the receiving shop is to be shown.

Field 8 - PAGE NO. - Indicate page number as 1 of 1 or 1 of 2, etc., as applicable.

Field 9 - QUANTITY - Indicate the quantity according to the unit size in which the goods are normally sold in the duty free shop i.e., 12, cartons, cigarettes (200's), 10, litre bottles, brandy, etc.

Field 10 - DESCRIPTION - For all document types, the goods are to be described in sufficient detail to permit physical verification of the shipment with the form B 116, i.e., indicate brand names, identifying marks, per unit value, etc. This space is also to be used to indicate the unique duty free shop inventory reporting codes applicable to the goods listed.

For the form B 116 (IN), the report control number, assigned at the time the goods were first reported as received to Customs, is also to be shown in the description field. If the form B 116 (IN) documents goods subject to drawback, a statement to this effect would also be shown in the description field.

For the form B 116 (OUT), when goods are removed for reasons other than that they were sold and exported, a cross-reference to the transaction number of the supporting document(s) is to be shown in this field, i.e., form B 3 transaction number. Refer to paragraph 15 of this Appendix for the various types of supporting documents which may be used.

For the form B 116 (TRANSFER), when goods are being transferred from a bonded warehouse to a duty free shop, a cross-reference is to be made on the form B 116 to the original warehouse document on which the goods were imported (by indicating the page and line number of the form B 3 on which they were reported). Note: This requirement applies only when a bonded warehouse operator prepares the form B 116 on behalf of the receiving duty free shop operator.

Field 11 - COUNTRY OF ORIGIN - For all document types, indicate the country where the goods were produced or manufactured. Country codes are acceptable.

Field 12 - VALUE (Can. Dollars) - For all document types, indicate the value, in Canadian funds, of the goods as per invoices provided at the time the goods were first reported to Customs. The rate of exchange to be used for imported goods is to be the prevailing rate on the date of direct shipment of the goods to Canada.

Field 13 - C.C. QUANTITY - For the form B 116 (IN) and form B 116 (TRANSFER) indicate the cargo control quantity exactly as it appears on the cargo control document.

This field is not normally applicable to a form B 116 (OUT).

Field 14 through to Field 18 - These fields are used for form B 116 (TRANSFER) documents only and are completed as follows:

Field 14 - Indicate the Customs office from which the goods are being transferred.

Field 15 - Originating Customs office will assign a transaction number from the appropriate import/domestic (OUT) number series.

Field 16 - Indicate previous warehouse, duty free shop accounting document type (if available) and number.

Field 17 - For Customs use (date and signature).

Field 18 - Provide signature of transferor.

Field 19 - DECLARATION - For all document types, mark the appropriate box. This form is to be signed and dated by authorized duty free shop personnel only.

Field 20 - For Customs use (date stamp).

GENERAL INFORMATION

20.Form B 116 (IN) and form B 116 (OUT) are to be completed in three copies and submitted to Customs with applicable supporting documents. The form will be distributed by Customs, after stamping and numbering, as follows:

21.The form B 116 (TRANSFER) document is to be completed in at least six copies and distributed as follows after being approved, stamped and numbered by the Customs office at the place of origin of the shipment:

22.When a B 116 (TRANSFER) document is prepared in accordance with paragraph 19 of this Appendix, only three copies are required. The distribution of the form would in this case be the same as with a form B 116 (IN) or form B 116 (OUT).

23.Where an automated system is in operation for inventory control records at a duty free shop, the licensee may attach detailed entry or removal data generated by the system to the form B 116 provided the local Chief Officer of Customs agrees to such an arrangement.

Format Examples - Form B 116

24.The examples in this section represent typical, not actual transactions and are set out in the following order:

EXAMPLE B-1

[Example B-1 not reproduced here]

This example shows the basic format used for completing a form B 116 to report goods into inventory at a duty free shop. This form B 116 (IN) accounts for a shipment of domestic goods by a licensee who has chosen to use the "product line" method for reporting goods.

EXAMPLE B-2

[Example B-2 not reproduced here]

This example shows a form B 116 prepared for a shipment of goods transferred from a bonded warehouse to a duty free shop. Upon arrival, the licensee can use the original transfer document as the form B 116 (IN) by adding the applicable control ledger number and duty free shop inventory reporting codes for the items listed. In this case, a "product/commodity group" method of reporting was used. After completing Field 19 on the form it can be submitted to Customs for review and numbering.

EXAMPLE B-3

[Example B-3 not reproduced here]

This example shows the format used to account for goods subject to drawback on a form B 116 (IN). The product line method of reporting has been used in this example.

EXAMPLE B-4

[Example B-4 not reproduced here]

This example shows the basic format used for completing a form B 116 to report goods out of inventory. This form B 116 (OUT) example accounts for all domestic goods sold and exported over a specified reporting period (using the product line reporting method).

EXAMPLE B-5

[Example B-5 not reproduced here]

This example shows a format used to report goods out of inventory which were not sold and exported. This form B 116 (OUT) example accounts for duty paid items destroyed while still in inventory (using a product line method for reporting goods).

EXAMPLE B-6

[Example B-6 not reproduced here]

This example shows the basic format used for completing the form B 116 to transfer goods out of inventory. This form B 116 (OUT) accounts for a shipment of imported goods being returned to a bonded warehouse by a licensee who utilized the product line method of reporting.

APPENDIX C

INVENTORY RECORD ADJUSTMENTS

1.An inventory adjustment request may be submitted to Customs when a licensee has reason to believe that discrepancies identified during a physical audit of the duty free shop inventory can be attributed to administrative errors rather than being actual physical shortages and overages.

2.All requests to offset a shortage in physical inventory (vis-à-vis inventory records) with a concurrent overage are to be submitted in writing to the local Chief Officer of Customs for consideration. Factors taken into account when considering approval of such a request include: the physical or documentary evidence produced in support of the claim; similarity of the goods; values and the type of internal controls in place at the shop. Under no circumstances however, will an offset between domestic and imported goods be allowed.

3.Circumstances where an inventory record adjustment might be considered appropriate include the following:

4.When requesting an inventory record adjustment, the unit cost of the items that were found to be short and over in the physical count must be identified. The unit cost of each item would be determined on the basis of the highest value most recently reported on the forms B 116 for goods of that description, brand and size.

5.Where Customs is satisfied that an identified shortage in inventory, or a portion thereof, does not actually exist, the licensee will be advised of the allowable adjustment. An example of such an inventory adjustment is provided at the end of this Appendix.

6.Net shortages voluntarily disclosed by the operator will be assessed appropriate duties and taxes and any overages will be added to inventory. Where Customs and Excise undertakes an audit, a point of finality is reached when the officer arrives at the duty free shop. While inventory adjustments relating to such an audit may be accepted, net discrepancies may be subject to penalty action.

Documentation

7.In all cases where discrepancies in physical inventory have been noted, the duty free shop licensee is responsible for submitting appropriate documentation to reconcile inventory records with audit findings. Specific documentation to be submitted is as follows:

8.All accounting documents are to be cross-referenced by transaction numbers and copies attached to the related audit report. The complete audit documentation package is to be placed on the licensee's operating file at the local Customs office.

9.The final record adjustments and payment of applicable duties are to be finalized within 30 calendar days of the audit in which the discrepancies were identified. Under no circumstances is an inventory record adjustment to be made without prior written approval from Customs.

Inventory Adjustment

Example

Note: A copy of all accounting documents generated as a result of the audits will be attached to the audit report and placed on the licensee's operating file.

REFERENCES

ISSUING OFFICE

Licensing Division

LEGISLATIVE REFERENCES

Customs Act

HEADQUARTERS FILE

7740-0

SUPERSEDED MEMORANDA "D"

D4-3-2, November 10, 1986

D4-3-5, November 10, 1986

D4-3-6, June 1, 1986

D4-3-7, November 10, 1986

D4-3-10, November 10, 1986

D4-3-5, June 1, 1986

OTHER REFERENCES

D4-3-1, D4-3-2, D4-3-3, D4-3-4, D4-3-7, D7-3-4, D7-3-5, D17-1-1, D17-1-10, D20-1-1

SERVICES PROVIDED BY THE DEPARTMENT ARE AVAILABLE IN BOTH OFFICIAL LANGUAGES.

THIS MEMORANDUM IS ISSUED UNDER THE AUTHORITY OF THE DEPUTY MINISTER OF NATIONAL REVENUE.