Proposed GST/HST Amendments Relating To Drop Shipments

The drop shipment rules found in section 179 of the Excise Tax Act (the Act) essentially allow an unregistered non-resident person to acquire goods in Canada, or commercial services in respect of goods, on a tax-free basis, provided the goods are ultimately exported or are retained in Canada by a registrant. The Department of Finance has also stated that the drop shipment rules are intended to apply only where a registrant agrees to accept a potential liability for tax in respect of a subsequent transfer or non-commercial use of the goods.  In addition, the Department of Finance has stated that the rules are intended to help "ensure that GST¹ applies to goods located in Canada that are supplied by an unregistered non-resident person for final consumption in Canada in the same way as tax would apply to the goods if they were acquired by an unregistered non-resident person outside of Canada and imported for final consumption in Canada" ².