Memorandum D8-3-8
Locator Code: 202B

In Brief

Ottawa, September 24, 1998

SUBJECT

REPAIR ABROAD OF CANADIAN CIVIL
AIRCRAFT, CANADIAN AIRCRAFT
ENGINES AND FLIGHT
SIMULATORS
REMISSION ORDER

This Memorandum has been revised to reflect the elimination of Schedule II "Agreement on Trade in Civil Aircraft Provisions" from the Customs Tariffas of January 1, 1998, and the conversion of the codes in Schedule II to tariff items in Chapter 99 of the schedule to the new Customs Tariff.

Memorandum D8-3-8
Locator Code: 202B

Ottawa, September 24, 1998

SUBJECT

 REPAIR ABROAD OF CANADIAN CIVIL
AIRCRAFT, CANADIAN AIRCRAFT
ENGINES AND FLIGHT
SIMULATORS
REMISSION ORDER

This Memorandum outlines and explains the conditions under which a remission may be granted under the Repair Abroad of Canadian Civil Aircraft, Canadian Aircraft Engines and Flight Simulators Remission Order.

TABLE OF CONTENTS

• Legislation
• Remission Order
• Guidelines and General Information
• Aircraft Emergency Repairs
• Invoicing of Repairs
• Customs Procedures to Be Followed at Exportation
• Corrections and Re-Determinations
• Failure to Comply
• Audit, Examination, or Verification
• Interest and Penalties
• Additional Information

Legislation

Remission Order

ORDER RESPECTING THE REMISSION OF
THE TAX IMPOSED UNDER DIVISION III
OF PART IX OF THE EXCISE TAX ACTON
CANADIAN CIVIL AIRCRAFT, CANADIAN
AIRCRAFT ENGINES, CANADIAN FLIGHT
SIMULATORS AND PARTS
THEREOF, REPAIRED ABROAD

Short Title

1. This Order may be cited as theRepair Abroad of Canadian Civil Aircraft, Canadian Aircraft Engines and Flight Simulators Remission Order.

Interpretation

2. In this Order,

"Canadian aircraft engine" means an aircraft engine

"Canadian civil aircraft" means a civil aircraft

"Canadian flight simulator" means a flight simulator system

"goods" means Canadian aircraft engines, Canadian civil aircraft, Canadian flight simulators and parts thereof; (marchandises)

"part" means a part that can be classified in tariff item No. 9967.00. 00 of the Customs Tariffand

"repair" includes maintenance, rebuilding, modification and conversion; (réparation)

"value of the repair" means, in respect of goods, the cost shown on a repair bill for a repair less the cost of direct labor and employee benefits when those costs are shown separately on the repair bill and are acceptable to the Minister of National Revenue. (valeur de réparations)

3. Remission is hereby granted of the tax payable under Division III of Part IX of the Excise Tax Acton goods returned to Canada after having been exported therefrom for the purpose of repair in an amount equal to the difference between the tax paid or payable on the duty paid value of the goods and the tax paid or payable on the value of the repair where

GUIDELINES AND GENERAL INFORMATION

1. This Order remits the GST on all Canadian manufactured or previously accounted for civil (i.e., non-military) aircraft, aircraft engines, and flight simulators, as well as parts of all the foregoing, when returned to Canada after having been repaired abroad. Applicable taxes, however, must be paid on the value of the parts used in performing the repairs.

2. In order to be accorded a remission under this Order, a part exported for repair must be classifiable under tariff item No. 9967.00.00 of the Customs Tariff. Both complete parts and components of complete parts may qualify under this Order.

3. For the purposes of this Order, a repair of Canadian civil aircraft, aircraft engines, flight simulators, or parts thereof shall include:

4. A remission under this Order may be granted whether or not the repairs could have been made in Canada.

5. To qualify for relief under this Remission Order, it must be substantiated that civil aircraft, aircraft engines, flight simulators, and parts thereof temporarily exported for repairs originated from Canada and are not new importations. Proof of origin for Canadian goods returning to Canada is required by customs at the time of release of the goods.

6. Where possible, the Department has attempted to align its documentation requirements for proof of export, destruction, or origin with existing commercial documents. The commercial documents must describe the goods in sufficient detail to enable the Trade Administration Services officers to verify that the goods returning to Canada are of Canadian origin. This may take the form of a work order or contract from the Canadian owner with a commercial invoice for the repairs.  Acceptable proof of export is fully described in Memorandum D20-1-4, Proof of Export, Canadian Ownership, and Destruction of Commercial Goods. A Certificate of Destruction / Export(Form E15) may also be used. Detailed instructions on the use and completion of the form may be found in Memorandum D20-1-4. However, it should be noted that failure to present conclusive proof may result in the denial of relief of duties and/or taxes.

7. All goods presented for identification at an inland customs office must be forwarded "in bond" to the customs point of exit; otherwise, the goods must be identified at the customs point of exit. The regulations relating to bonding requirements may be found in Memorandum D3-1-1, Regulations Respecting the Importation, Transportation and Exportation of Goods.

8. Articles should be presented to customs for examination prior to packing and crating if this packing and crating would render the articles impossible to identify at the time of export.

9. At the time of re-importation of the repaired articles, the original of Form E15 or export document should be filed with the customs copy of the import account document, and a copy of the form should be attached to the departmental copy of the accounting document.

Aircraft Emergency Repairs

10. Subsection 101(2) of the Customs Tariff(as outlined in Memorandum D8-2-1, Canadian Goods Abroad) provides relief of the GST (or the FST on pre-1991 importations) otherwise payable on aircraft repaired outside of Canada and on the value of the repairs made to the aircraft, provided:

Invoicing of Repairs

11. A Canada Customs Invoice, FormCI1, is to be completed where applicable. The full value of the goods at the time of return to Canada is to be shown in the selling price column of the invoice. A statement of the value of the repair is to be shown in the body of the invoice. The cost of the material used, labor, factory overhead, plus a normal profit markup are to be taken into consideration when calculating such value, whether a charge is made for the service or if it is performed free under warranty or similar arrangement.

12. All customs documents relating to goods for which remission is being claimed in accordance with this Order are to bear the number of the Order in Council, in the "Special Authority" field, in the following format: 82-1994.

Customs Procedures to Be Followed at Exportation

13. Customs will examine the goods to ensure that they are, in fact, the goods described on the relevant export documents. Discrepancies between the goods described on the form and those examined must be clearly indicated by the customs officer.

14. If Form E15 is used as proof of export, instructions on its completion and the customs procedures can be found in Appendix B to Memorandum D20-1-4. The customs officer will check the appropriate boxes on Form E15 and sign and date stamp the appropriate fields upon completion of the examination.

Corrections and Re-Determinations

15. In accordance with subsection 32.2(2) of the Customs Act, the importer is obligated to make a correction to declarations of tariff classification, value for duty, and origin within 90 days after the importer has reason to believe that the original declaration is incorrect.  For example, if the importer/exporter realizes that the goods export/imported were not classifiable under tariff item No. 9967.00.00, the goods are no longer in compliance with a tariff item condition and the importer/exporter is obligated to adjust the accounting declaration for the goods.

16. To correct a declaration, Form B2,Canada Customs  -Adjustment Request, should be submitted to the appropriate regional customs office and any customs duties and taxes owing paid. A correction shall be treated for the purposes of the Customs Actas if it were a re-determination under paragraph 59(1)(a) of the Customs Act.

17. The obligation to make a correction in respect of imported goods ends four years after the goods are accounted for under subsection 32(1), (3), or (5) of the Customs Act.

18. For more information on the filing of corrections, refer to Memorandum D11-6-6, Self-Adjustments to Declarations of Origin, Tariff Classification, Value for Duty, and Diversion of Goods.

Failure to Comply

19. If the goods no longer qualify under tariff item No. 9967.00.00, they will also fail to comply with the terms of the Repair Abroad of Canadian Civil Aircraft, Canadian Aircraft Engines and Flight Simulators Remission Order. Under subsection 118(1) of the Customs Tariff,within 90 days after the date of failure to comply, the importer must report the failure to comply to a customs officer and pay an amount equal to the amount of duties, in this case the GST/HST, that were relieved.When filing Form B2, the importer must insure that the "Special Authority" field is left blank.

20. Importers can submit one Form B2 under a dual authority, in this case under subsections 32.2(2) of the Customs Actand 118(1) of the Customs Tariff.

Audit, Examination, or Verification

21. If as a result of an audit, examination, or verification by the Department, goods are found to have been declared incorrectly, the customs duties payable on the goods will be subject to a re-determination or further re-determination under paragraph 59(1)(a) or (b) of the Customs Act,whichever is applicable.

22. Under subsection 118(1) of the Customs Tariff, where the importer has failed to comply with the terms of the Remission Order, an amount equal to the duties relieved will be owing.  In this case, the GST/HST normally assessed against these goods will be owing.

Interest and Penalties

23. In accordance with subsection 33.4(1) of the Customs Act, the importer is liable to pay interest against any outstanding customs duty amount owed to the Department, from the day following the original date of accounting until the amount is paid in full. The interest will be calculated at the specified rate beginning on the first day after the date the importer became liable to pay the customs duties. For example, where it is determined that the goods were imported incorrectly under tariff item No. 9967.00.00 for the reason mentioned in paragraph 15, the importer is obligated to pay interest on the customs duty amount owing from the day following the original date of accounting until the amount owing is paid.

24. Under subsection 123(2) of the Customs Tariff, interest at the specified rate is also owing against any duties owed the Department for the period beginning on the day that the goods were no longer in compliance with the terms of a Remission Order and ending on the day the amount is paid in full. However, under subsection 123(4), no interest will be incurred if the importer pays the amount owing within 90 days of the date of failure to comply. Continuing the example in paragraph 22, if the GST/HST and any excise taxes owing on the goods are paid within 90 days, no interest will be charged on that portion of the amount owing.  If the GST/HST and any other excise taxes are not paid until after 90 days, interest will be charged as of the date of failure to comply.

25. As per subsection 109.11(2) of the Customs Act,every person who fails to comply with section 32.2 of the Customs Actor subsection 118(1) of the Customs Tariff, is liable to pay a penalty of 5% of the duties owing plus an amount equal to 1% of the duties owing multiplied by the number of complete months, not exceeding 12 months, until the amount is paid in full.  Continuing the example in paragraph 19, if the importer submits Form B2 to adjust the accounting declaration for the goods, to pay the customs duty and interest owing, and to pay an amount equivalent to the GST/HST and any other excise taxes relieved, within 90 days of the original date of accounting, no penalty will be applied. If the importer does not submit Form B2 until after 90 days from the original date of accounting, the importer may be subject to a penalty of 5% of the duties owing plus 1% of the duties owing multiplied by three months.

26. Furthermore, where the importer again fails within three years of the original infraction under subsection 109.11(2) to comply with section 32.2 of  the Customs Act, as per subsection 109.11(3) of the Customs Act, the penalty owing will be 10% of the duties owing plus an amount equal to 2% of the duties owing multiplied by the number of complete months, not exceeding 20 months, until the amount is paid in full.

Additional Information

27. More information on interest and penalty provisions may be found in Memorandum D11-6-5, Interest and Penalty Provisions: Determinations/ Re-Determinations, Appraisals/Re-Appraisals, and Duty Relief.

REFERENCES

ISSUING OFFICE -

Customs and Trade Administration Branch
Trade Incentives Program
Remissions Policy Unit

LEGISLATIVE REFERENCES -

Financial Administration Act, section 17
Order in Council P.C. 1982-1994, June 30, 1982, as amended by SI/88-17, as amended by SI/91-12

HEADQUARTERS FILE -

6565-5-2

SUPERSEDED MEMORANDA "D" -

D8-3-8, March 26, 1993

OTHER REFERENCES -

D3-1-1, D6-2-3, D8-2-1, D11-6-5, D20-1-4

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.