Short Title

1 This Order may be cited as the Motor Vehicles Tariff Order, 1988.

Interpretation

• 2 (1) In this Order,

  automobile

  automobile means a four-wheeled passenger motor vehicle having a seating capacity for not more than 10 persons, but does not include an ambulance or hearse; (automobile)

  base year

  base year means the 12 month period beginning on August 1, 1963 and ending on July 31, 1964; (année de base)

  bus

  bus means a passenger motor vehicle having a seating capacity for more than 10 persons or a chassis therefor, but does not include any of the following vehicles or chassis therefor, namely an electric trackless trolley bus, amphibious vehicle, tracked or half-tracked vehicle or motor vehicle designed primarily for off-highway use; (autobus)

  Canadian value added

  Canadian value added means

  • (a) in relation to a class of vehicles produced in Canada in any 12 month period ending on July 31, the aggregate of the following costs to the manufacturer of producing all vehicles of that class that are produced in Canada by the manufacturer in that period and the following depreciation and capital cost allowances for that period, namely

    • (i) the cost of parts produced in Canada, and the cost of materials to the extent that they are of Canadian origin, that are incorporated in vehicles in the factory of the manufacturer in Canada, but not including parts produced in Canada, or materials to the extent that they are of Canadian origin, that have been exported from Canada and subsequently imported into Canada as parts or materials,

    • (ii) transportation costs, including insurance charges, incurred in transporting parts and materials in Canada to the factory of the manufacturer in Canada for incorporation in the vehicles, to the extent that such costs are not included under subparagraph (i),

    • (iii) notwithstanding subparagraph (i), the cost of the iron, steel and aluminum content of parts produced outside Canada for incorporation in the vehicles, if the iron, steel or aluminum was poured in Canada, to the extent that such cost does not exceed the amount the manufacturer was allowed in respect of such materials for vehicles of that class for the base year under the Tariff Item 438c Regulations or Tariff Item 438d and 438e Regulations,

    • (iv) such part of the following costs as is reasonably attributable to the production of the vehicles, namely

      • (A) wages paid for direct production labour in Canada,

      • (B) wages paid for indirect production and non-production labour in Canada,

      • (C) the cost of materials used in the production operation but not incorporated in the final product,

      • (D) the cost of heating, lighting, power and water,

      • (E) workmen’s compensation, unemployment insurance and group insurance premiums, pension contributions and similar expenses incurred in respect of labour referred to in clauses (A) and (B),

      • (F) taxes on land and buildings in Canada,

      • (G) fire and other insurance premiums relative to production inventories and the production plant and equipment, paid to a company authorized by the federal or provincial laws  to carry on business in Canada or a province,

      • (H) rent for factory premises paid to the beneficial owner in Canada,

      • (I) the cost of maintenance and repair work executed in Canada on buildings, machinery and equipment used for production purposes,

      • (J) the cost of tools, dies, jigs, fixtures and other similar equipment of a non-permanent nature that have been manufactured in Canada,

      • (K) the cost of engineering services, experimental work and product development work executed in Canada, and

      • (L) miscellaneous factory expenses,

    • (v) administrative and general expenses incurred in Canada that are reasonably attributable to the production of the vehicles,

    • (vi) depreciation as referred to in subsection (3), in respect of production machinery and permanent plant equipment and the installation costs of such machinery and equipment, to the extent that such depreciation is reasonably attributable to the production of the vehicles, and

    • (vii) a capital cost allowance not exceeding five per cent of the total capital expenditure of the manufacturer for land and buildings in Canada owned by the manufacturer and used by the manufacturer in the production of vehicles or parts, not including any capital expenditure of a person designated in accordance with section 3, to the extent that such allowance is reasonably attributable to the production of the vehicles,

  • (b) in relation to parts, the aggregate of those costs of producing the parts and those depreciation and capital cost allowances that would be included in the calculation of Canadian value added if the parts were vehicles; (valeur canadienne ajoutée)

  customs duties

  customs duties means the customs duties levied on imported goods under the Customs Tariff; (droits de douane)

  duty paid value

  duty paid value means the aggregate of

  • (a) the value for duty, in respect of imported goods, determined in accordance with sections 45 to 56 of the Customs Act, and

  • (b) any customs duties, surtax, countervailing duties or antidumping duties levied, in respect of imported goods, under the Customs Tariff and the Special Import Measures Act; (valeur à l’acquitté)

  manufacturer

  manufacturer means a manufacturer of a class of vehicles who

  • (a) produced vehicles of that class in Canada in each of the four consecutive quarters of the base year, and

  • (b) produced vehicles of a class in Canada in the 12-month period ending on July 31 in which the importation is made where

    • (i) the ratio of the net sales value of the vehicles produced to the net sales value of all vehicles of that class sold for consumption in Canada by the manufacturer in that period is equal to or higher than the ratio of the net sales value of all vehicles of that class produced in Canada by the manufacturer in the base year to the net sales value of all vehicles of that class sold for consumption in Canada by the manufacturer in the base year, and is not in any case lower than 75 to 100, and

    • (ii) the Canadian value added is equal to or greater than the Canadian value added in respect of all vehicles of that class produced in Canada by the manufacturer in the base year; (fabricant)

  net sales value

  net sales value means in respect of any vehicle, the selling price received by the manufacturer for the vehicle, including cost of transporting the vehicle in Canada but not including any other costs of transportation or delivery charges, minus

  • (a) federal sales and excise taxes paid in respect of the vehicle and any parts thereof, and

  • (b) rebates, commissions, discounts and other allowances granted by the manufacturer in respect of the vehicle subsequent to the sale of the vehicle; (valeur marchande nette)

  parts

  parts means, in relation to vehicles, parts and accessories and parts thereof, but does not include parts or accessories or parts thereof for repair or replacement purposes; (parties)

  recipient

  recipient means a Canadian manufacturer listed in Part One of Annex 1002.1 to Chapter Ten of the Free Trade Agreement, as that Part is modified from time to time; (bénéficiaire)

  specified commercial vehicle

  specified commercial vehicle means a truck, ambulance or hearse, or a chassis therefor, but does not include any of the following vehicles or chassis therefor, namely a bus, electric trackless trolley bus, fire truck, amphibious vehicle, tracked or half-tracked vehicle, golf or invalid cart, straddle carrier or motor vehicle designed primarily for off-highway use, or any machine or other article to be mounted on or attached to a truck, ambulance or hearse or a chassis therefor for purposes other than the loading or unloading such a vehicle; (véhicule commercial spécifié)

  subsidiary wholly-owned corporation

  subsidiary wholly-owned corporation and subsidiary controlled corporation have the meanings assigned to those expressions in subsection 248(1) of the Income Tax Act; (corporation filiale possédée en proprieté exclusive) and (corporation filiale contrôlée)

  vehicle

  vehicle means a vehicle of any of the following classes, namely an automobile, a bus, or a specified commercial vehicle, that is complete or substantially complete. (véhicule)

• (2) For the purposes of subparagraph (a)(i) of the definition Canadian value added in subsection (1),

  • (a) the cost of parts and materials acquired by a manufacturer from the manufacturer’s parent corporation or from any subsidiary wholly-owned corporation or subsidiary controlled corporation of the manufacturer or of the parent corporation is the Canadian value added in respect of the parts and the cost to that corporation of the materials to the extent that they are of Canadian origin;

  • (b) the cost of parts and materials acquired by a manufacturer from a supplier other than a corporation referred to in paragraph (a) is the selling price of the parts and materials to the manufacturer less the duty paid value of imported goods used in the production thereof and foreign charges applicable thereto;

  • (c) iron, steel and aluminum poured in Canada, the whole or a portion of the value of which is produced outside Canada, shall be deemed to be of Canadian origin; and

  • (d) parts produced in Canada and materials to the extent that they are of Canadian origin include parts and materials acquired by a manufacturer from a supplier in Canada on condition that the manufacturer has obtained from the supplier a certificate stating

    • (i) in the case of parts and materials acquired by the manufacturer from a corporation described in paragraph (a), the Canadian value added in respect of the parts and the cost to that corporation of the materials to the extent that they are of Canadian origin, and

    • (ii) in the case of parts and materials acquired by the manufacturer from a supplier other than a corporation described in paragraph (a), the cost thereof as calculated in accordance with paragraph (b).

• (3) For the purpose of subparagraph (a)(vi) of the definition Canadian value added in subsection (1), the amount of depreciation on production machinery and permanent plant equipment in respect of each of the ten 12-month periods ending on July 31 that follow the date of acquisition of the machinery and equipment is calculated in the case of machinery and equipment acquired after July 31, 1964, at 10% of

  • (a) the capital cost to the manufacturer of any such machinery and equipment that was manufactured in Canada, and

  • (b) the part of the capital cost to the manufacturer of any such machinery and equipment that was manufactured outside Canada that is attributable to the cost of installing that machinery and equipment

  minus

  • (c) the part of the costs referred to in paragraphs (a) and (b) that was incurred in respect of machinery and equipment disposed of before the beginning of the period.

• (4) For the purposes of the definition manufacturer in subsection (1), in computing the net sales value of all vehicles of any class  that were sold for consumption in Canada by a manufacturer in any 12-month period ending on July 31 in a year subsequent to 1965, there shall be deducted an amount equal to the net sales value of all vehicles of that class sold by the manufacturer in that period that were imported into Canada or taken out of warehouse for consumption on or after January 18, 1965 and for which customs duties have not been removed.

Notices

3 Where a manufacturer of a class of vehicles has, by notice to the Minister in writing accompanied by the consent in writing of any other person, designated that other person as a person associated with the manufacturer in the production of vehicles of that class in Canada in the base year and in any subsequent 12-month period ending on July 31 specified in the notice and that notice has been communicated to the Minister on or before the thirtieth day after the commencement of the period, the person shall, with respect to that class of vehicles, be deemed for the purposes of this Order in that period not to be a separate person but to be one and the same person as the manufacturer.

Removal of Customs Duties

4 Subject to sections 5 to 7, customs duties are removed on the goods of a code set out in column I of an item of Schedule I and described in column II of that item where the goods are imported into Canada on or after January 18, 1965 from any country entitled to the benefit of the Most-Favoured Nation Tariff.

Conditions

5 The removal of customs duties is subject to the following conditions:

• (a) every manufacturer who intends to import vehicles during any 12-month period ending on July 31 shall, before making the first importation of a vehicle during the period, send to the Minister a declaration in the form set out in Schedule II in respect of each class of vehicle that the manufacturer intends to import; and

• (b) every manufacturer who imports vehicles in respect of which customs duties are removed shall submit to the Minister and the Minister of Regional Industrial Expansion such reports as may reasonably be required by those Ministers respecting the production and sale of vehicles by the manufacturer.

Limitations

6 No customs duties are removed in the case of a manufacturer who did not qualify prior to January 1, 1988 as a manufacturer of a class of vehicles under the Motor Vehicles Tariff Order, 1965 as that Order read on December 31, 1987.

7 No customs duties are removed in the case of a recipient where

• (a) effective control of the conduct and operation of the recipient’s business or substantial ownership of its assets is acquired, directly or indirectly, by a person who manufactures vehicles and is not a recipient; and

• (b) after acquisition of effective control or substantial ownership of assets of the recipient’s business, the fundamental nature, scope or size of the business is significantly altered from the business as it had been carried on by the recipient immediately prior to the acquisition.