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MEMORANDUM D4-3-1
Ottawa, November 12, 1996
In Brief
SUBJECT
DUTY FREE SHOP - REGULATIONS
1. The revised Memorandum D4-3-1 reflects the changes to the Regulations governing duty free shops. The proposed amendments have been prepared in order to remove unnecessary or obsolete provisions, to add and to clarify requirements.
2. The following outlines these regulatory changes:
(a) change definition of "Department";
(b) subsection 3(5) - remove restrictions on the limitations to the type of airport where duty free shop licences may be issued;
(c) subsection 3(6) - make minor wording changes;
(d) paragraph 3(6)(b) - repealed;
(e) subsection 3(7) - delete obsolete grandfather provisions of the Regulations;
(f) sections 8, 9, and 10 - require the Minister to provide information to licensees concerning suspension of their duty free shop licence and the opportunity to submit their objections;
(g) paragraphs 13(1)(e) and (f) - remove restrictions to duty free shop operators with regard to the controls or currency exchange rates for sales;
(h) subsection 13(3) remove restrictions that require approval of alterations of a duty free shop;
(i) paragraphs 17(a) and (b) - provision of information every licensee should provide to the chief officer of customs (Forms B 117, Duty Free Shop Summary of Monthly Sales and Remittance of Fees, and B 127, Duty Free Shop Annual Report);
(j) section 19 - impose tobacco sales restriction for persons under the age of 18;
(k) subsection 18(3) - eliminate unnecessary controls;
(l) subsections 17(1) and (2) - remove the record keeping provisions. (These are incorporated in the new Imported Goods Records Regulations.)
3. Any questions concerning Memorandum D4-3-1 should be directed to:
Duty Free Shop Program
Licensing and Revenue Accounting Division
Revenue Canada
15th floor
Sir Richard Scott Building
191 Laurier Ave. West
Ottawa ON K1A 0L5
Telephone: (613) 954-7217
Facsimile: (613) 957-9717
MEMORANDUM D4-3-1
Ottawa, November 12, 1996
SUBJECT
DUTY FREE SHOP - REGULATIONS
This Memorandum outlines the regulations governing the operation of the duty free shops pursuant to sections 24, 30, 37, 166, and paragraphs 164(1) (i) and (j) of the Customs Act.
Regulations
REGULATIONS RESPECTING
DUTY FREE SHOPS
Short Title
1. These Regulations may be cited as the Duty Free Shop Regulations.
Interpretation
2. In these Regulations,
“Act” means the Customs Act; ( Loi )
“applicant” means a person who applies for a licence; ( demandeur )
“border crossing point” means a place on the international border between Canada and the United States at which there is a customs office; ( poste frontalier )
“chief officer of customs”, with respect to a duty free shop or proposed duty free shop, means the manager of the customs office or customs offices that serve the area in which the duty free shop is located or is proposed to be located; ( agent en chef des douanes )
“Department” means the Department of National Revenue; ( ministère )
“excisable goods” means goods that are subject to the Excise Act; ( marchandises assujetties à l'accise )
“intoxicating liquor” has the same meaning as in the Importation of Intoxicating Liquors Act; ( boissons alcoolisées )
“licence” means a licence to operate a place as a duty free shop; ( agrément )
“licensee” means a person to whom a licence has been issued; ( exploitant )
“permanent resident” has the same meaning as in the Immigration Act, 1976. ( résident permanent )
PART I
LICENSING OF
DUTY FREE SHOPS
Issuance of Licence
3. (1) Subject to subsection (6), the Minister may, where he deems it necessary or desirable to do so, issue a licence to any qualified person who makes application therefor in accordance with subsection (2) and who gives such security as may be required under section 4 and pays any fee required to be paid under section 5.
(2) Any person who wishes to apply for a licence shall submit a completed application therefor in the prescribed form to the Deputy Minister.
(3) A corporation is qualified to operate a duty free shop at a border crossing point if
(a) the corporation is incorporated in Canada; and
(b) all the shares of the corporation are beneficially owned by Canadian citizens or permanent residents who
(i) are of good character,
(ii) maintain their principal residence in Canada, and
(iii) resided in Canada for at least 183 days of the year preceding the year in which the corporation makes the application for the licence.
(4) A person other than a corporation is qualified to operate a duty free shop at a border crossing point if the person
(a) is a Canadian citizen or a permanent resident;
(b) is of good character;
(c) maintains his principal residence in Canada; and
(d) resided in Canada for at least 183 days of the year preceding the year in which the person makes the application for the licence.
(5) A person is qualified to operate a duty free shop at an airport if the person has been granted a lease or other right to occupy the place proposed to be operated as a duty free shop.
(6) The Minister shall not issue a licence to an applicant unless
(a) the applicant meets the qualifications referred to in subsection (3), (4) or (5), as the case may be;
(b) REPEALED
(c) the applicant has sufficient financial resources to enable him to lease or purchase the place proposed to be operated as a duty free shop;
(d) the applicant has sufficient financial resources to enable him to provide the facilities, equipment and personnel required under these Regulations;
(e) an adequate range of goods is not available in, or adequate service is not provided by, any duty free shop already located in the area in which the proposed duty free shop is to be located;
(f) the establishment of a duty free shop will not impede the flow of traffic in the area in which the proposed duty free shop is to be located; and
(g) the Department is able to provide customs services with respect to the proposed duty free shop.
(7) REPEALED
Security
4. (1) An applicant shall, before a licence is issued to him, give security in an amount that is determined by the Minister, but in no case shall the amount of security be less than $10,000.
(2) The Minister may at any time require a licensee to increase the amount of security given under subsection (1) to an amount sufficient to ensure the payment of any duties payable in respect of the goods in the duty free shop.
(3) The security given under subsection (1) shall be deposited with the chief officer of customs and shall be in the form of
(a) cash;
(b) a certified cheque;
(c) a transferable bond issued by the Government of Canada; or
(d) a bond issued by
(i) a company that is registered and holds a certificate of registry to carry on the fidelity or surety class of insurance business and that is approved by the President of the Treasury Board as a company whose bonds may be accepted by the Government of Canada,
(ii) a member of the Canadian Payments Association referred to in section 4 of the Canadian Payments Association Act ,
(iii) a corporation that accepts deposits insured by the Canada Deposit Insurance Corporation or the Régie de l'assurance-dépôts du Québec to the maximum permitted by the statutes under which these institutions were established,
(iv) a credit union as defined in paragraph 137 (6) (b) of the Income Tax Act , or
(v) a corporation that accepts deposits from the public, if repayment of the deposits is guaranteed by her majesty in right of a province.
Licence Fees
5. (1) Every licensee shall pay to the chief officer of customs a fee for his licence, determined in the manner described in subsection (2) or (5), as the case may be.
(2) Subject to subsection (4), a licensee of a duty free shop at an airport shall pay, for the period beginning on the day on which the licence is issued and ending on March 31 in the same fiscal year and for each fiscal year of operation thereafter, a fee determined on the basis of the amount of security deposited under section 4 in accordance with the following table:
|
Amount of Security Deposited |
Amount of Fee Per Fiscal Year |
| $10,000 | $ 100 |
| $10,001 to $50,000 | $ 800 |
| $50,001 to $200,000 | $ 1,500 |
| $200,001 to $500,000 | $ 3,000 |
| more than $500,000 | $ 5,000 |
(3) The fee payable under subsection (2) for the period beginning on the day on which the licence is issued and ending on March 31 in the same fiscal year shall be paid on or before the issuance of the licence and the fee for each fiscal year of operation thereafter shall be paid on or before April 1 of that fiscal year of operation.
(4) Where the licence is issued in respect of a duty free shop in an airport for a period of less than twelve months in a fiscal year, the fee payable under subsection (2) for that fiscal year shall be in an amount that is the same proportion of the applicable fee as the number of months for which the licence is issued is of the fiscal year.
(5) A licensee of a duty free shop at a border crossing point shall pay a fee in an amount that is equal to the aggregate of
(a) one per cent of the first $500,000 of the annual gross revenue from sales,
(b) two per cent of the next $500,000 of the annual gross revenue from sales, and
(c) three per cent of the annual gross revenue from sales that exceeds $1,000,000,
calculated monthly and payable in monthly instalments on the fifteenth day of the month following the month in which the sales were made.
(6) For the purposes of this section, “fiscal year” means the period beginning on April 1 of a year and ending on March 31 of the year next following.
Term of Licence
6. (1) Subject to subsection (2), a licence is valid for a period beginning on the date indicated on the licence as being the date on which the licence becomes effective and ending on the date indicated on the licence as being the date on which the licence expires.
(2) No licence shall be valid for more than five years.
Amendment of Licence
7. (1) The Minister may amend a licence only for the following purposes:
(a) Subject to subsection (2),
(i) to change a restriction specified in the licence as to the classes of goods that may be received in the duty free shop, or to specify such a restriction;
(ii) to change the circumstances specified in the licence in which goods may be received in the duty free shop, or to specify such circumstances; or
(b) to change the name of the licensee, where the name of the licensee is changed.
(2) The Minister may amend a licence for the purposes set out in subparagraph (1) (a) (i) or (ii) only where he has given 90 days notice of the proposed amendment.
Cancellation or Suspension of Licences
8. The Minister may cancel a licence where the licensee
(a) no longer owns or leases the place that is licensed as a duty free shop;
(b) requests the Minister in writing to cancel the licence; or
(c) is bankrupt.
9. (1) Subject to section 10, the Minister may suspend or cancel a licence where the licensee
(a) is the subject of a receivership in respect of his debts;
(b) fails to comply with any Act of Parliament or regulation made pursuant thereto, that prohibits, controls or regulates the importation or exportation of goods, or that relates to customs and excise;
(c) REPEALED
(d) has, in the course of his operation of the duty free shop, acted dishonestly in his business dealings with customers, suppliers, customs brokers, carriers, Her Majesty or servants of Her Majesty; or
(e) has failed to carry out, within a reasonable time and in a reasonable manner, any proposal made in the application for the licence.
(2) Subject to section 10, the Minister may suspend or cancel a licence where
(a) the volume of goods sold in the duty free shop is no longer sufficient to warrant the continued operation of the duty free shop;
(b) there is no longer a need for a duty free shop in the area in which the duty free shop is located; or
(c) the Department is no longer able to provide customs services with respect to the duty free shop.
(3) Subject to section 10, the Minister may cancel a licence where the licensee
(a) has made a misrepresentation in the application for the licence; or
(b) no longer qualifies under these Regulations for a licence.
10. (1) The Minister shall, immediately after suspending a licence, give to the licensee a notice confirming the suspension and providing all relevant information concerning the grounds on which the Minister has suspended the licence.
(2) The licensee may, within 30 days after the date on which the licence is suspended, make representations to the Minister regarding why the licence should be reinstated.
(3) The Minister shall, before cancelling a licence under section 9, give the licensee 90 days notice of the proposed cancellation and provide the licensee with all relevant information concerning the grounds on which the Minister proposes to cancel the licence.
(4) The licensee may, within 90 days after the day on which the notice referred to in subsection (3) is given, make representations to the Minister regarding why the licence should not be cancelled.
Reinstatement and Renewal of Licences
11. The Minister may reinstate a suspended licence where the Minister is satisfied that the cause for the suspension no longer exists.
12. The Minister may renew a licence on the expiration of its term on condition that
(a) in the case of a duty free shop at a border crossing point, the licensee submits an application therefor in the prescribed form to the Deputy Minister at least six months before the date on which the licence is to expire;
(b) in the case of a duty free shop at an airport, the licensee has been granted a new lease, an extension of the existing lease or a new right to occupy the place operated as a duty free shop; and
(c) no grounds exist for the Minister to suspend or cancel the licence.
PART II
OPERATION OF
DUTY FREE SHOPS
Facilities, Services and Standards
13. (1) Every licensee shall, at the duty free shop in respect of which his licence was issued,
(a) provide or make available public washroom facilities that are easily accessible to disabled persons;
(b) provide or make available public telephones that are easily accessible to disabled persons, if the telephone company providing service to the duty free shop agrees to provide such telephone service;
(c) provide service in English and French if the duty free shop is located in an area in which customs services are provided in English and French; and
(d) display notices in English and French indicating
(i) that the goods sold in the duty free shop are for immediate exportation only and must be reported under the Act if they are returned to Canada,
(ii) the circumstances in which goods imported into the United States by individuals are exempt from duties, and
(iii) the circumstances in which goods imported into Canada by individuals are exempt from duties;
(e) REPEALED
(f) REPEALED
(2) Where a duty free shop forms only part of a building, the licensee shall keep the duty free shop separate from the remainder of the building by a partition or other suitable structure.
(3) REPEALED
14. Every licensee shall ensure that
(a) the goods received in the duty free shop are stored and marked in such a manner that
(i) those goods may be readily identified and checked against the licensee's records of inventory and, in the case of imported goods, against the relevant customs accounting documents, and
(ii) domestic goods may be readily distinguished from imported goods;
(b) the goods received in the duty free shop are held in an area designated by the chief officer of customs until, in the case of imported goods, those goods have been accounted for under the Act or, in the case of domestic goods, those goods have been approved by an officer for entry into the licensee's inventory;
(c) the duty free shop may be locked and sealed by an officer where the chief officer of customs requests that the duty free shop be locked and sealed, for the purpose of enabling an officer to check the goods therein against the licensee's records of inventory;
(d) the duty free shop may be locked and sealed by an officer in the event that the licensee's licence expires or is cancelled or suspended and may be kept locked and sealed until
(i) in the case of goods therein other than excisable goods or wine, the duties and taxes payable on the goods have been paid or the goods have been disposed of in accordance with the laws relating to customs and excise, and
(ii) in the case of goods therein that are excisable goods or wine, the goods have been disposed of in accordance with the laws relating to customs and excise or, in the case of intoxicating liquor, in accordance with the laws relating to intoxicating liquor of the province in which the duty free shop is located; and
(e) the duty free shop is kept suitable for the safekeeping of the goods stored therein.
15. (1) No intoxicating liquor shall be sold in a duty free shop in a province unless the licensee has obtained written approval to sell intoxicating liquor from the board, commission or agency that is authorized by the laws of the province to sell or to authorize the sale of intoxicating liquor in that province.
(2) No intoxicating liquor shall be transferred from a duty free shop in a province to another duty free shop or to a bonded warehouse in the province unless the licensee has obtained written approval for the transfer from the board, commission or agency described in subsection (1).
Receipt of Goods
16. (1) Every licensee shall, on the arrival of goods at the duty free shop in respect of which his licence was issued,
(a) acknowledge the receipt of the goods by
(i) endorsing the bill of lading, waybill or other similar transportation document presented to him by the carrier, or
(ii) endorsing the document by which the licensee accounts for inventory; and
(b) immediately notify the chief officer of customs of the receipt of the goods.
(2) Before any goods are taken into a duty free shop, the licensee shall present to the chief officer of customs any documents required to be presented to him under the Act or any regulations made pursuant thereto.
Provision of Information
17. Every licensee shall provide to the chief officer of customs
(a) a summary of monthly sales and remittance of fees, in the prescribed form, no later than 15 days after the last day of the month in which the sales described on the form were made; and
(b) an annual report, in the prescribed form, not later than 60 days after the end of the fiscal year of the duty free shop for which the report is made.
Transfer of Ownership of Goods
18. (1) Subject to subsections (2) to (4), the ownership of goods in a duty free shop may be transferred only by sale to persons who are about to leave Canada.
(2) The ownership of goods in a duty free shop may be transferred to the person who sold them to the licensee, on condition that the goods are dealt with in accordance with the laws relating to customs and excise.
(3) The ownership of goods in a duty free shop may be transferred to a person having a licence in respect of another duty free shop, on condition that the goods are dealt with in accordance with any law relating to customs and excise, and, in the case of intoxicating liquor, in accordance with section 15.
(4) Where a licensee's licence is about to expire or be cancelled and a new licensee is to be licensed to operate a duty free shop on the same premises as the premises of the licencee, the ownership of the goods in the duty free shop may be transferred to the proposed new licensee.
19. No licensee shall sell, give or in any manner convey any tobacco product to a person under the age of eighteen years.
REGULATIONS RESPECTING
THE KEEPING OF RECORDS
BY PERSONS WHO IMPORT
COMMERCIAL GOODS OR CAUSE
SUCH GOODS TO BE IMPORTED
AND BY PERSONS WHO ARE ISSUED
A LICENCE UNDER SECTION 24 OF THE
CUSTOMS ACT OR SUBSECTION 81(1)
OF THE CUSTOMS TARIFF OR
A CERTIFICATE UNDER
SUBSECTION 80.1(1)
OF THE CUSTOMS TARIFF
Short Title
1. These Regulations may be cited as the Imported Goods Records Regulations.
Interpretation
1.1 In these Regulations,
“Act” means the Customs Act; ( Loi )
“commercial goods” means goods imported into Canada for sale or for any industrial, occupational, commercial, institutional or other like use. ( marchandises commerciales )
General
2. Every person who is required by subsection 40(1) of the Act to keep records in respect of commercial goods shall keep, for the period of six years following the importation of the commercial goods, all records that relate to
(a) the origin, marking, purchase, importation, costs and value of the commercial goods;
(b) payment for the commercial goods;
(c) the disposal of the commercial goods in Canada; and
(d) any application for an advance ruling made under subsection 43.1(1) of the Act in respect of the commercial goods.
3. In addition to the records referred to in section 2, a person who imports or causes to be imported commercial goods that have been released free of duty or at a reduced rate of duty because of their intended use or because they were intended to be used by a specific person shall keep, for the same period of time referred to in that section,
(a) a certificate or other record signed by the user of the commercial goods that shows the user's name, address and occupation and indicates the actual use made of the commercial goods; or
(b) in the case where the commercial goods have been diverted to a use other than that on the basis of which they were released free of duty or at a reduced rate of duty or have been sold or otherwise disposed of to a person not entitled to have the commercial goods so released, records that contain information sufficient to confirm that the full applicable duties have been paid.
3.1 Every person who is required by subsection 40(3) of the Act to keep records in respect of commercial goods shall
(a) where the person has been issued a licence under section 24 of the Act for the operation of a place as a sufferance warehouse, keep all records that contain information concerning the receipt of commercial goods into it, and the removal of those commercial goods from it, for the period of six years after the receipt of the commercial goods into it;
(b) where the person has been issued a licence under section 24 of the Act for the operation of a place as a duty free shop, keep all records that relate to commercial goods received into it, for the period of six years after the sale or disposal of those commercial goods, including all records that contain information concerning
(i) the accounting for the commercial goods,
(ii) the sale or disposal of the commercial goods from the duty free shop,
(iii) the actual selling price of the commercial goods in the duty free shop and the manufacturer's suggested retail price,
(iv) the amount that the person paid for the commercial goods,
(v) the control of inventory in the duty free shop,
(vi) the composition of the inventory in the duty free shop,
(vii) the remittance of fees to the Department of National Revenue, or
(viii) the size of the display area allocated in the duty free shop to the commercial goods;
(c) here the person has been issued a licence under subsection 81(1) of the Customs Tariff for the operation of a bonded warehouse, keep all records that relate to commercial goods received into it and commercial goods removed from it, for the period of six years after their removal, including all records that contain information
(i) describing the commercial goods when they are received into or exported from the bonded warehouse,
(ii) accounting for the commercial goods when they are removed from the bonded warehouse,
(iii) concerning inventory and the transactions that occur while the commercial goods are in the bonded warehouse,
(iv) concerning the transfer of ownership in respect of the commercial goods,
(v) concerning the transfer of the commercial goods to another bonded warehouse, to a sufferance warehouse or to a duty free shop, or
(vi) concerning the unpacking, packing, manipulation or alteration of the commercial goods, or any combining of those commercial goods with other goods; and
(d) where the person has been issued a certificate under subsection 80.1(1) of the Customs Tariff , keep all records that relate to commercial goods in respect of which relief from the payment of duties has been granted under section 80 of that Act, for the period of six years after the relief is granted, including all records that contain information concerning
(i) the importation of the commercial goods,
(ii) the processing in Canada of the commercial goods,
(iii) the amount of relief granted on the commercial goods,
(iv) the sale or transfer, between persons to whom certificates have been issued, of the commercial goods,
(v) the payment, under subsection 103(1) of the Customs Tariff , of an amount equal to the amount of the duties on any of the commercial goods that have been transferred, sold or disposed of, or
(vi) the inventory in Canada of the commercial goods.
4. The records referred to in sections 2 to 3.1 shall be kept in such a manner as to enable an officer to perform detailed audits of the records and to obtain or verify the information on which a determination of the amount of the duties paid, payable, deferred or relieved was made.
5. The records referred to in sections 2 to 3.1 may be copied by means of any photographic, microphotographic or image processing process that is in accordance with National Standard of Canada CAN/CGSB-72.11-93, Microfilm and Electronic Imaging as Documentary Evidence , published by the Canadian General Standards Board in November 1993, as amended from time to time, and kept in that format for the period prescribed in those sections.
6. The records referred to in sections 2 to 3.1 may be kept on machine-sensible data media if the media can be related back to the supporting source documents and are supported by a system capable of producing accessible and readable copy.
Enforcement
7. Where a person has not kept records in accordance with these Regulations, preferential tariff treatment under NAFTA may be denied or withdrawn in respect of the commercial goods that are the subject of those records.
8. Where any person who is required to produce records in accordance with subsection 43(1) of the Act fails to do so, preferential tariff treatment under NAFTA may be denied or withdrawn in respect of the commercial goods that are the subject of those records.
REFERENCES
ISSUING OFFICE -
Transportation Division
LEGISLATIVE REFERENCES -
Customs Act
HEADQUARTERS FILE -
7755-2
SUPERSEDED MEMORANDA “D” -
D4-3-1, November 10, 1986
OTHER REFERENCES -
D4-1-2, D17-1-21
| Last updated: 1996-11-18 |
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