Tax & Trade Blog
Tobacco Manufacturing Equipment: What's Up?
When you are a boutique Canadian law firm practising in a niche area like Indirect Tax, Customs and International Trade, AND you get multiple inquiries from multiple clients with the same problem, you KNOW something is up!
We have been getting a lot of recent inquiries about machinery being seized or held up at the Canadian border on the basis that it is “tobacco manufacturing equipment”.
Tobacco Manufacturing Equipment
Interestingly enough, “tobacco manufacturing equipment” is a highly regulated item in Canada.
In fact, section 32.1(1) of the Excise Act, 2001(“EA 2001”) prohibits even the possession of “tobacco manufacturing equipment” with the intent to manufacture a tobacco product, and section 32.1(2) outright prohibits the importation of “tobacco manufacturing equipment” no matter the importer’s intended use of it!
(Only limited exceptions exist to these rules – e.g., for holders of tobacco licenses, etc.).
Recent CBSA / RCMP Enforcement Activity
Judging by our inquiries, the Canada Border Services Agency (“CBSA”) has developed a specialized unit involved in “targeting” commercial shipments entering Canada for review where the equipment being imported is viewed as potentially usable in the tobacco industry. Where suspected contravention is found, the matter is referred to the RCMP for seizure action.
Even basic wrapping machines have been targeted – and even though capable of use (and intended for use) in many other non-tobacco related industries!
The problem seems to be an overly broad definition of “manufacturing” found in section 2 of the EA 2001, which captures almost every stage of the production process, up to and including packaging!
The Bottom Line
Persons suspected of contravening these rules can expect to have CBSA refer the matter the RCMP, and the RCMP to seize the alleged offending equipment. While appeal rights are available, they are complicated and professional legal advice is generally advisable.
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