Canada Gazette

In the past, there has been some confusion on the part of duty free shop owners as to whether any or all of the shares of a corporation licensed to operate a border crossing duty free shop could be owned by a "second-level" corporation. These amendments will clarify the provisions of subsection 3(3) of the Duty Free Shop Regulations so that shares of a corporation, applying to be licensed to operate a duty free shop at a border crossing point, may be owned by another corporation whose shares are owned entirely by individual persons.

The individual shareholders of these "second-level" corporations are themselves obliged to meet the requirements pertaining to Canadian citizenship or residency, and also be persons of "good character." These requirements represent no change from the present rules for the individual shareholders.

In addition, "housekeeping" amendments are being proposed, such as changes to the position titles.

2. Requiring duty free shop prospective licensees to dissolve the "second-level" corporations who owned the shares in the duty free shops at border crossings and to sell or transfer those shares to qualifying individuals; or

3. Amending the Regulations to allow "second-level" corporations to own the shares of corporate duty free shops at border crossings.

It was felt that the third option would be the preferred course of action, since it would cause the least disruption for the duty free shop owners.

These amendments will involve no additional administrative or compliance costs for duty free shop operators or for the Canada Border Services Agency (CBSA). The chief benefit of the amendments is an enhanced flexibility to an operator's permissible corporate structure, while maintaining the policy goals of the Regulations.

These amendments will ensure that the primary objective relating to Canadian ownership of land border duty free shop licences are maintained. The changes themselves will not require any changes to the current licensee share hold structures and will enhance the opportunity of licensees to plan for succession of their operations.

Consultations were carried out with licensees who have not been in compliance with the existing provisions and with representatives of the Frontier Duty Free Association. All of the parties consulted support these changes.

These Regulations were pre-published in the Canada Gazette, Part I, on October 23, 1999. Following the pre-publication of the amendments, the CBSA (in part, formerly known as the Canada Customs and Revenue Agency) received verbal comments from two persons; both indicated their support for the Regulations.

The amendments were not published in the Canada Gazette, Part II, at the time, given that the CBSA was undertaking a comprehensive regulatory review of the Duty Free Shop Program. The review has now been completed, and the amendments are being pre-published to show that the changes remain necessary.

CBSA officials will monitor compliance with these amendments as part of the normal auditing and monitoring activities already used to ensure compliance with the Duty Free Shop Regulations. The CBSA and the corporate duty free shop operators will incur no new compliance costs as a result of these changes.

Mr. Doug Waldie, Director, Export Process Division, Commercial Operational Policy Directorate, Admissibility Branch, Canada Border Services Agency, Sir Richard Scott Building, 15th Floor, 191 Laurier Avenue W, Ottawa, Ontario K1A 0L8, (613) 954-6986 (telephone), (613) 946-0241 (facsimile), Doug. Waldie@cbsa-asfc.gc.ca (electronic mail).

Notice is hereby given that the Governor in Council, pursuant to section 30 (see footnote a) and paragraph 164(1)(i) (see footnote b) of the Customs Act (see footnote c), proposes to make the annexed Regulations Amending the Duty Free Shop Regulations.

Interested persons may make representations with respect to 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 the manager, Legislative Affairs, Canada Border Services Agency, 4th Floor, Room 4023, Killeany Place, 150 Isabella Street, Ottawa, Ontario K1A 0L8.

Persons making representations should identify any of those representations the disclosure of which should be refused under the Access to Information Act, in particular under sections 19 and 20 of that Act, and should indicate the reasons why and the period during which the representations should not be disclosed. They should also identify any representations for which there is consent to disclosure for the purposes of that Act.

1. (1) The portion of subsection 3(3) of the French version of the Duty Free Shop Regulations (see footnote 1) before paragraph (a) is replaced by the following:

(3) Une société constitue une personne qualifiée pour exploiter une boutique hors taxes à un poste frontalier si les conditions ci-après sont réunies :

(2) Subsection 3(3) of the Regulations is amended by striking out the word "and" at the end of paragraph (a) and by replacing paragraph (b) with the following:

(i) a Canadian citizen or permanent resident,

(ii) another corporation that is incorporated in Canada all of whose shares are beneficially owned by a Canadian citizen or permanent resident, or

(iii) both a Canadian citizen or permanent resident and that other corporation; and

(i) is of good character,

(ii) maintain their principal residence in Canada, and

(iii) resided in Canada for at least 183 days of the year before the year in which the corporation makes the application for the licence.

(5) A person is qualified to operate a duty free shop at an airport or at a border crossing point if the person has been granted a lease or other right to occupy the place proposed as the duty free shop.

(a) the applicant meets the qualifications referred to in subsection (3) or (4) and subsection (5) in the case of a duty free shop at a border crossing point, or subsection (5) in the case of a duty free shop at an airport;

(f) the establishment of a duty free shop will not impede the flow of traffic in the vicinity in which the proposed duty free shop is to be located; and

2. Subsection 9(2) of the Regulations is amended by striking out the word "or" at the end of paragraph (b), by adding the word "or" to the end of paragraph (c) and by adding the following after paragraph (c):

(d) the licensee has altered the structure of the duty free shop in a manner that

(i) contravenes a requirement related to the storage or sale of goods set out in the Act or in these Regulations,

(ii) impedes the flow of traffic in the vicinity in which the duty free shop is located, or

(iii) detrimentally affects the immediate export of goods.

(a) in the case of a duty free shop at a border crossing point, the licensee submits an application in the prescribed form to the Commissioner at least 90 days before the date on which the licence is to expire;

4. The portion of section 17 of the Regulations before paragraph (a) is replaced by the following:

17.1 Every licensee that is a corporation shall provide to the Commissioner 90 days written notice in advance of a proposed change in the beneficial ownership of the shares of a corporation referred to in subsection 3(3).

6. These Regulations come into force on the day on which they are registered.