Language selection

Government of Canada / Gouvernement du Canada

Search

Sign in

Sign in

EDM5-1-1 Denatured alcohol and specially denatured alcohol

Excise Duty Memorandum

April 2005

This memorandum provides an overview of the rules in the Excise Act, 2001 relating to denatured alcohol and specially denatured alcohol, and of the obligations and entitlements of specially denatured alcohol registrants.

Except as otherwise noted, all statutory references in this memorandum are to the provisions of the Excise Act, 2001. The information in this memorandum does not replace the law found in the Act and its regulations. If this information does not completely address your situation, refer to the Act or regulations or contact your regional excise office for additional information. The offices are listed at Contact information – Excise and Specialty Tax Directorate.

On this page

General

1. Denatured alcohol and specially denatured alcohol are produced by mixing spirits with denaturants in order to render them non-potable, generally for use in various industrial applications. The Act imposes controls over the manufacturing of denatured alcohol, and even tighter controls over the possession, supply, importation and disposal of specially denatured alcohol.

Meaning of denature (s 2)

2. To denature means to denature spirits into denatured alcohol or specially denatured alcohol using prescribed denaturants in the prescribed manner.

Meaning of denatured alcohol (s 2)

3. Denatured alcohol means any prescribed grade of denatured alcohol made from spirits in accordance with the prescribed specification for that grade.

Meaning of specially denatured alcohol (s 2)

4. Specially denatured alcohol means any prescribed grade of specially denatured alcohol made from spirits in accordance with the prescribed specification for that grade.

Meaning of spirits s 2

5. Spirits means any material or substance containing more than 0.5% absolute ethyl alcohol by volume, excluding wine, beer, vinegar, denatured alcohol, specially denatured alcohol, fusel oil or other refuse produced as a result of the distillation process or an approved formulation. Any product containing or manufactured from beer, vinegar, denatured alcohol, specially denatured alcohol, fusel oil or other refuse produced as a result of the distillation process or an approved formulation that cannot be consumed as a beverage is also excluded from the definition of spirits.

Denatured Alcohol and Specially Denatured Alcohol Regulations

6. The prescribed denaturants are listed in the Denatured and Specially Denatured Alcohol Regulations. Examples of prescribed denaturants for purposes of denatured and specially denatured alcohol include methyl alcohol, toluene, ethyl acetate, solvent naphtha, isopropyl alcohol, acetone, formaldehyde solution, chloroform, iodine and pine tar.

Manufacturing of denatured alcohol and specially denatured alcohol

Prohibition – Denaturing of spirits (s 94)

7. The Act imposes a prohibition on the denaturing of spirits. However, a spirits licensee is the only person authorized to manufacture denatured alcohol and specially denatured alcohol. A spirits licensee who denatures spirits must ensure that the spirits are denatured in accordance with the prescribed specifications of the Regulations.

Regulations (s 3)

8. A spirits licensee who denatures spirits shall ensure that the spirits and the denaturants are thoroughly mixed, and the denaturant used is one set out in column 1 of the table of the Regulations that possesses the characteristics set out in column 2.

Required proportions

9. Schedule 1 of the Regulations lists 14 denatured alcohol grades and Schedule 2 lists 25 specially denatured alcohol grades. The quantities of denaturants set out in the Regulations are the quantities required to denature 100 litres of spirits. Where quantities other than 100 litres of spirits are denatured, the quantity of the denaturant used must be in the same proportion as in the Regulations.

Example of denaturing

10. Where a spirits licensee wishes to denature 100 litres of spirits into SDA grade SDAG-1 (Item I of Schedule 2 to the Regulations), the Regulations require it to be denatured using 5 litres of methyl alcohol (methanol). If the licensee wishes to denature 500 litres of spirits into SDA grade SDAG-1, then the volume of denaturants used is multiplied by 5 (that is, 25 litres of methyl alcohol [methanol] would be added).

11. The spirits licensee is required to maintain adequate records to confirm the use of the product, the grade and the quantity of specially denatured alcohol produced.

Denaturants submitted for analysis

12. An excise duty officer may occasionally request that a spirits licensee provide to the Science and Engineering Directorate of the Canada Border Services Agency (CBSA) a sample of denaturants, denatured alcohol or specially denatured alcohol.

Relief of excise duty

Duty relieved – Denatured and specially denatured alcohol (s 132)

13. When a spirits licensee denatures bulk spirits into denatured alcohol or specially denatured alcohol in accordance with the Regulations, the excise duty imposed on the spirits under the Act or levied under section 21.1 of the Customs Tariff is relieved.

Requirement for an SDA registration

SDA registration (ss 18(1) and s 96)

14. The Act provides for the issuance of a specially denatured alcohol (SDA) registration that authorizes a person to possess and use specially denatured alcohol. A person possessing an SDA registration is called an SDA registrant. No person other than an SDA registrant is permitted to use specially denatured alcohol.

15. An SDA registrant must use specially denatured alcohol in accordance with the provisions of their registration. This registration allows an SDA registrant to purchase, receive grades of specially denatured alcohol from a spirits licensee, import, export, and dispose of specially denatured alcohol in a manner approved by the Canada Revenue Agency (CRA). These activities are further explained in the following paragraphs.

Restrictions imposed on registration (ss 18(2))

16. The CRA may impose restrictions on the use of particular grades of specially denatured alcohol.

SDA uses

17. The Act does not specify the uses to which specially denatured alcohol may be put. Specially denatured alcohol is used as a solvent, as a raw material in the manufacture of other products, as a fuel or fuel additive, in laboratories, and in numerous other ways. Use of specially denatured alcohol does not include its packaging or re-packaging for purposes of resale, but it may be used to produce a product other than spirits, specially denatured alcohol or denatured alcohol.

18. Information relating to the requirements and procedures for obtaining an SDA registration is provided in Memorandum EDM2-4-1, Obtaining a Registration.

Possession of denatured alcohol and specially denatured alcohol

Possession of DA

19. Denatured alcohol is not suitable for human consumption, and the spirits cannot be easily recovered. Accordingly, the Act does not impose any restrictions on who may possess it, nor is registration required to possess or use denatured alcohol.

Possession of SDA

20. As spirits can be more easily recovered from specially denatured alcohol, the Act imposes several restrictions on the possession, use, and supply of specially denatured alcohol.

Prohibition – Possession of SDA (s 97)

21. Specially denatured alcohol may only be possessed by:

Supply of denatured alcohol and specially denatured alcohol

Prohibition – Supply for or use as beverage (s 95)

22. Denatured alcohol or specially denatured alcohol may not be sold, provided for use in, or used in or as a beverage.

Sale of SDA (s 99, para 103(a) and (b))

23. The sale of specially denatured alcohol is prohibited, except by:

Exporting SDA (s 102)

24. Specially denatured alcohol may only be exported by a spirits licensee or by the SDA registrant who imported it.

Transporting denatured alcohol and specially denatured alcohol

Transporting DA

25. Any person may transport denatured alcohol.

Transporting SDA (s 97)

26. Spirits licensees, SDA registrants and alcohol registrants are the only persons authorized to transport specially denatured alcohol under the Act.

Importing denatured alcohol, specially denatured alcohol and alcohol denatured other than in accordance with the Act

Importing DA

27. Any person may import denatured alcohol without restriction.

Importing SDA (s 100)

28. Only spirits licensees and SDA registrants are permitted to import specially denatured alcohol. Where any other person attempts to import specially denatured alcohol, the shipment will be denied entry at the time of importation.

Importing alcohol containing denaturants but that is not denatured alcohol

29. A person may import alcohol that has denaturants added but is not denatured within the meaning of the Act. The imported product would, however, be considered spirits and subject to the relevant provisions and restrictions of the Act unless it is excluded from the definition of spirits (for example, an approved formulation). Such a product has a tariff classification number separate from those used for denatured alcohol or specially denatured alcohol.

Importing bulk and packaged spirits (ss 75(1), s 150)

30. If the imported product is bulk spirits, then it may only be imported by a spirits licensee or a licensed user, and the excise duty would be deferred. If the imported product is non-duty-paid packaged spirits, it may be imported by an excise warehouse licensee or licensed user, and the excise duty would be deferred. Otherwise, the importer must pay the excise duty at the time of importation of the non-duty-paid packaged spirits.

Importation of Intoxicating Liquors Act applies (s 59.1)

31. Whether the imported product is bulk or packaged spirits, the provisions of the Importation of Intoxicating Liquors Act also apply.

Other alcohol-based products

32. To determine whether a product is excluded from the definition of spirits, denatured alcohol or specially denatured alcohol and the resulting implications, a person should contact their regional excise office.

Sampling of DA and SDA (ss 68(1))

33. Persons who import denatured alcohol or specially denatured alcohol may be required to make the goods available for sampling before they are released from customs control. Denatured alcohol or specially denatured alcohol may only be reported at certain Canadian customs locations that are designated for sampling. Shipments of denatured alcohol or specially denatured alcohol arriving at other locations will be directed to the closest customs office designated for sampling.

Sampling fee (ss 68(4))

34. The CBSA is authorized under the Act to charge importers a fee for sampling and testing of shipments of denatured alcohol or specially denatured alcohol.

Science and Engineering Directorate

35. Samples taken at designated customs offices will be sent to Science and Engineering Directorate of the CBSA for testing to verify that the denatured alcohol or specially denatured alcohol is denatured in accordance with the Regulations.

Spirits mistakenly acquired or imported as denatured alcohol or specially denatured alcohol

Spirits mistakenly possessed as DA or SDA (ss 101(2))

36. If a person other than a spirits licensee, licensed user or alcohol registrant possesses a product that was believed to be denatured alcohol or specially denatured alcohol in accordance with the Regulations, and then subsequently learns that the product is spirits and not denatured alcohol or specially denatured alcohol as originally believed, the person must immediately:

  1. return it to the spirits licensee who produced or supplied it; or
  2. dispose of, or destroy it, in a manner specified by the CRA.

Spirits mistakenly imported as DA or SDA (ss 101(1))

37. If a person other than a spirits licensee or a licensed user imports a product that was reported under the Customs Act as being denatured alcohol or specially denatured alcohol, and then subsequently learns that the product is spirits and not denatured alcohol or specially denatured alcohol as originally believed, the person must immediately:

  1. export it for return to the person from whom it was acquired; or
  2. dispose of, or destroy it, in a manner specified by the CRA.

If product used (ss 101(3))

38. If a person is unable to return, dispose of, or destroy, spirits that were mistakenly acquired or imported as denatured alcohol or specially denatured alcohol as required, because they used some of the spirits in the production of another product before learning that the product was not denatured alcohol or specially denatured alcohol, the person must:

  1. dispose of or destroy the other product in a manner specified by the CRA; and
  2. pay a penalty equal to the duty imposed under the Act or the Customs Tariff on the amount used.

Exceptions (ss 101(4))

39. The requirement to dispose of, or destroy, the products or to pay a penalty as discussed above does not apply if:

  1. the other product is not spirits in the opinion of the CRA;
  2. the CRA deems the other product to have been produced using denatured alcohol or specially denatured alcohol; and
  3. the person complies with any conditions imposed by the CRA.

Contacting the CRA

40. Any person who possesses or imports what they believed to be denatured alcohol or specially denatured alcohol and later learns that the product has not been denatured should contact their regional excise office to discuss the situation to ensure that any proposed method of return, disposal or destruction is approved by the CRA.

41. For the list of regional excise offices, go to Contact information – Excise and Specialty Tax Directorate.

Returns and disposals of denatured alcohol and specially denatured alcohol

Restrictions on disposal (s103)

42. An SDA registrant may not dispose of specially denatured alcohol other than to:

  1. return it to the spirits licensee who supplied it;
  2. export it if it was imported by the SDA registrant; or
  3. destroy it in a manner specified by the CRA.

Destruction and disposal of SDA

43. If an SDA registrant has specially denatured alcohol that they would like to return or destroy, they should contact their regional excise office to ensure that it is returned or destroyed in an approved manner and that adequate documentation is maintained.

Keeping records

Keeping records (ss 206(1))

44. Every person who possesses an SDA registration under the Act is required to maintain all records that are necessary to determine whether they are in compliance with the Act.

45. Additional information on the requirement to maintain records is available in Memorandum EDM9-1-1, General requirements for records.

Offences and penalties

Failure to comply

46. If an SDA registrant fails to comply with the restrictions of their SDA registration, they may be subject to a penalty or guilty of an offence under the Act.

47. Additional information on offences and penalties is available in Memorandum EDM1-6-1, Administrative penalties under the Excise Act, 2001.

Further information

For all technical publications related to excise duties, go to Excise duties technical information.

For information on how to make a general or technical enquiry on excise duties, go to Contact information – Excise and Specialty Tax Directorate.

For information on how to request a ruling or interpretation related to excise duties, go to Requesting an excise and specialty tax ruling or interpretation. 

Page details

2005-04-25