Archived - Explanatory Notes

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These explanatory notes are provided to assist in an understanding of the proposed amendments to the Excise Act, 2001 and the Customs Act. These notes are intended for information purposes only and should not be construed as an official interpretation of the provisions they describe.


Related Documents:


Enhanced Tobacco Stamping Regime

Excise Act, 2001

Clause 1

Interpretation

EA, 2001
2

Section 2 of the Excise Act, 2001 defines terms that apply for the purposes of the Act.

Subclauses 1(1) and (2)

Definitions

EA, 2001
2

"stamped"

"stamped" is currently defined under the Act to mean that prescribed information in a prescribed format has been affixed to, impressed on or otherwise applied to the tobacco product or its container to indicate that duty, other than special duty, has been paid. The definition "stamped" is amended consequential to the addition of the term "excise stamp" in the Act.

"excise stamp"

The Act is amended to add a new definition, "excise stamp".  The new definition is introduced in conjunction with new sections 25.1 to 25.5 of the Act that provide new controls on excise stamps.

"Excise stamp" means a stamp that is issued by the Minister of National Revenue under subsection 25.1(1) of the Act and that has not been cancelled under section 25.5. The definition is relevant for the purposes of introducing an enhanced stamping regime for tobacco products.

Clause 2

Possession

EA, 2001
5

Section 5 provides that, in certain specified situations, possession of an item by one person is deemed to be possession by other persons, where there is knowledge of and consent to the person's possession. Furthermore, in some situations possession is given an extended meaning to include possession by another person or having in a place for one's own use or benefit or the use or benefit of another person.

Subsections 5(1) and (2) are amended to add references to new sections 25.2, which prohibits a person from possessing counterfeit excise stamps, and 25.3, which sets out controls on the possession of excise stamps.

Clause 3

Excise stamps

EA, 2001
25.1 to 25.5

New sections 25.1 to 25.5 establish the new controls being introduced to implement the enhanced stamping regime for tobacco products.

Issuance of excise stamps

EA, 2001
25.1

New section 25.1 sets out the rules related to the issuance of excise stamps.

Subsections 25.1(1) and (2) enable the Minister of National Revenue to issue excise stamps and to limit the quantity of stamps that may be issued to a tobacco licensee or a prescribed person who is importing tobacco products.

Subsection 25.1(3) requires that security be provided in a form satisfactory to the Minister and in an amount to be determined in accordance with the regulations before the issuance of excise stamps. Subsection 25.1(4) provides that the Minister may authorize a producer of excise stamps to supply excise stamps to a person to whom the Minister agreed to issue stamps under subsection 25.1(1).

Subsection 25.1(5) provides that the design and construction of excise stamps shall be subject to the Minister's approval.

Counterfeiting excise stamps

EA, 2001
25.2

New section 25.2 prohibits a person from producing, possessing, selling or otherwise supplying, or offering to supply, anything that is intended to pass for an excise stamp without lawful justification or excuse.

Unlawful possession of excise stamps

EA, 2001
25.3

New section 25.3 establishes prohibitions on who may possess excise stamps.  Subsection 25.3(1) prohibits the possession of excise stamps that have not been affixed to a tobacco product or its container to indicate that duty, other than special duty, has been paid on the product. Subsection 25.3(2) sets out the exceptions to this prohibition, which include the person who lawfully produced the stamps and persons who were issued the stamps by the Minister of National Revenue.

Unlawful supply of excise stamps

EA, 2001
25.4

New section 25.4 prohibits a person from disposing of, selling or otherwise supplying, or offering to supply, excise stamps unless it is done in accordance with the Act.

Cancellation, return and destruction of excise stamps

EA, 2001
25.5

New section 25.5 provides that the Minister of National Revenue may cancel excise stamps that have been issued. The Minister may also direct that the stamps be returned or destroyed in a specified manner.

Clause 4

Keeping records – excise stamps

EA, 2001
206(2.2)

New subsection 206(2.2) requires every person who has been issued excise stamps to keep records that are necessary to determine the receipt, retention, location, use or disposition of the stamps. This amendment is consequential to the new controls on excise stamps imposed under new sections 25.1 to 25.5.

Clause 5

Unlawful production, sale, etc., of tobacco or alcohol

EA, 2001
214

Section 214 provides that it is an offence to contravene various provisions of the Act, including manufacturing a tobacco product without a tobacco licence (section 25) and knowingly purchasing or receiving for sale tobacco products from unlicensed tobacco manufacturers, tobacco products that are not properly packaged and stamped, or fraudulently stamped tobacco products (section 29). A person convicted of any of these offences is liable to a fine or to imprisonment.

The section is amended to add a reference to new sections 25.2 to 25.4, which prohibit a person from producing and possessing counterfeit excise stamps, or possessing and supplying excise stamps otherwise than in accordance with the Act.

Clause 6

Failure to comply

EA, 2001
234

Section 234 currently provides a maximum penalty of $25,000 for certain contraventions of the Act.

Section 234 is amended by dividing the section into two new subsections 234(1) and (2), as well as by adding a reference to new paragraph 25.5(b) to provide a penalty for persons who fail to return or destroy stamps as directed by the Minister of National Revenue.

Clause 7

Penalty in respect of unaccounted excise stamps

EA, 2001
238.1

New section 238.1 establishes a penalty for unaccounted excise stamps.

Under subsection 238.1(1), a person who is issued excise stamps is liable to a penalty if the person cannot account for the stamps as being in their possession.

The penalty would not apply if the person can demonstrate that the stamps were affixed to tobacco products or their containers in the prescribed manner and that duty, other than special duty, has been paid on the products. In the case of stamps that were cancelled, the penalty would not apply if the person can demonstrate that the stamps were returned or destroyed as directed by the Minister of National Revenue.

Subsection 238.1(2) establishes that the amount of the penalty for each excise stamp that cannot be accounted for is equal to the duty that would be imposed on a tobacco product for which the stamp was issued under subsection 25.1(1).

Clause 8

Certain things not to be returned

EA, 2001
264

Section 264 currently provides that alcohol, specially denatured alcohol, a restricted formulation, raw leaf tobacco or tobacco products seized in the course of an inspection under section 260 of the Act may not be returned to any person, unless they were seized in error.

Section 264 is amended to also prevent a seized excise stamp from being returned to any person, except if the seizure was made in error. This amendment is consistent with other controls being introduced on the possession and disposal of excise stamps.

Clause 9

Excise stamps not to be sold

EA, 2001
266(1.1)

Subsection 266(1) specifies that the Minister of National Revenue may sell, destroy or otherwise deal with any item seized in the course of an inspection under section 260.

New subsection 266(1.1) is introduced to prohibit the sale of a seized excise stamp by the Minister. This amendment is consistent with other controls being introduced on the possession and disposal of excise stamps.

Clause 10

Regulations

EA, 2001
304

Section 304 provides authority to the Governor in Council to make regulations to carry out the purposes and provisions of the Act.

Subclause 10(1)

Regulations – Security

EA, 2001
304(1)(c)

Paragraph 304(1)(c) is amended to provide regulation making authority in respect of the types of security that are acceptable prior to the Minister of National Revenue issuing excise stamps, and the manner by which the amount of the security is to be determined. This amendment is consequential to the new requirement under subsection 25.1(3) that a security be posted prior to a person being issued an excise stamp.

Subclause 10(2)

Regulations – Issuance of excise stamps

EA, 2001
304(1)(f.1)

New paragraph 304(1)(f.1) is added to provide regulation making authority in respect of the issuance of excise stamps. This amendment is consistent with the introduction of the new controls on excise stamps provided under new sections 25.1 to 25.5 of the Act.

Customs Act

Clause 11

Interpretation

CA
2(1)

Subsection 2(1) of the Customs Act is amended by adding a new definition, "excise stamp", which is consequential to the addition of the definition of the term in section 2 of the Excise Act, 2001. The definition is necessary because of other amendments to the Customs Act that utilize this term (see clauses 12 to 16).

Clause 12

Excise stamps not to be sold

CA
97.25(3.1)

Subsection 97.25(3) provides that the Minister of National Revenue may direct, after giving 30 days written notice to the debtor, the sale, by public auction or tender or by the Minister of Public Works and Government Services, of any good imported or reported for export by or on behalf of the debtor that has been detained because the debtor has failed to pay an amount as required by the Customs Act.

New subsection 97.25(3.1) prohibits the sale of seized excise stamps. This amendment is consistent with other controls being placed on the sale or disposal of excise stamps under the Customs Act, as well as the sale restrictions on seized excise stamps under section 266 of the Excise Act, 2001 (see clause 9).

Clause 13

No return of certain goods

CA
117(2)

Subsection 117(2) of the Customs Act provides that spirits, wine, specially denatured alcohol, restricted formulations, raw leaf tobacco or tobacco products that were seized under the Act may not be returned, unless they were seized in error.

Subsection 117(2) is amended to also prevent the return of excise stamps, unless the stamps were seized in error. This amendment is consistent with other restrictions on the sale or disposal of seized excise stamps under the Excise Act, 2001 and Customs Act, including the restriction on returns of seized excise stamps under section 264 of the Excise Act, 2001 (see clause 8).

Clause 14

Excise stamps not to be sold

CA
119.1(1.01)

Subsection 119.1(1) of the Customs Act currently provides that the Minister of Public Safety and Emergency Preparedness may authorize an officer to sell, destroy or otherwise deal with seized goods.

New subsection 119.1(1.01) prohibits the sale of seized excise stamps. This amendment is consistent with other controls being placed on the sale or disposal of excise stamps under the Customs Act, as well as the sale restrictions on seized excise stamps under section 266 of the Excise Act, 2001 (see clause 9).

Clause 15

Disposal of things abandoned or forfeit

CA
142(1)

Subsection 142(1) of the Customs Act currently excludes spirits, specially denatured alcohol, a restricted formulation, wine, raw leaf tobacco and tobacco products from the rules under that subsection covering the disposal of goods abandoned or forfeited under the Act.

Subsection 142(1) is amended to also exclude abandoned or forfeited excise stamps from the general rules under that subsection. This amendment is consistent with other changes being made to the Customs Act in respect of excise stamps, in particular new subsection 142.1(1.1) in respect of the disposal of abandoned or forfeited excise stamps (see clause 16).

Clause 16

Dealing with abandoned or forfeited excise stamps

CA
142.1(1.1)

Subsection 142.1(1) of the Customs Act specifies that the Minister of Public Safety and Emergency Preparedness may sell, destroy or otherwise deal with abandoned or forfeited spirits, specially denatured alcohol, a restricted formulation, wine, raw leaf tobacco and tobacco products.

New subsection 142.1(1.1) is introduced to specify that the Minister may destroy or otherwise deal with abandoned or forfeited excise stamps, but not sell these stamps. This amendment is consistent with other controls being placed on the disposal of excise stamps under the Customs Act.

Clause 17

Coming into force

The proposed amendments will take effect on a date or dates to be set by the Governor in Council.