EDN61 Excise Stamping Regime – Transition to New Contract

Overview

Under the Act, no person can sell, offer for sale or have in their possession a tobacco or cannabis product, except low-THC cannabis products and prescription cannabis drugs, unless it bears the appropriate excise stamp. Any person that contravenes this requirement is liable to a fine, imprisonment or both.

The excise stamp indicates that federal excise duty has been paid and that the tobacco product was manufactured, or the cannabis product was produced, legally. The excise stamp has state-of-the-art visible and hidden identifiers and incorporates security features that only federal, provincial and territorial law enforcement agencies can detect. The excise stamp allows law enforcement agencies, retailers and consumers to more easily identify illicit tobacco and cannabis products.

The federal excise stamp is distributed through a secure process administered by the CRA. The excise stamp may contain federal, provincial or territorial features depending on the intended jurisdiction of sale. For more information on the excise stamping regime, go to Excise duty notices under the Excise Act, 2001. For more information on the excise stamp features, see the section “Excise stamp security features” in this notice.

Stamp provider and term of contract

The previous contract to design, manufacture and distribute excise stamps, awarded in 2008 to the joint venture of the Canadian Bank Note Company Limited and SICPA Security Solutions Canada Corporation, expired on September 30, 2019.

Following a bidding process, the CRA awarded the new excise stamp contract to the Canadian Bank Note Company Limited. The new excise stamp contract came into effect on October 1, 2019 and will expire on September 30, 2024. At expiry, the CRA has the option to extend the contract up to 10 additional one-year periods.

Excise stamp types

Since October 1, 2019, the following excise stamp types are available:

• Cannabis
• Cigarettes 20
• Cigarettes 25
• Tobacco 50
• Tobacco 100
• Tobacco 200
• Cigars
• Raw leaf

The following tobacco excise stamp types are no longer available:

• Cigarettes 200
• Tobacco 150
• Tobacco 250
• Tobacco 400

For more information on how to proceed with unused old excise stamps, refer to the last section of this notice entitled “Transition”.

Price for excise stamps

Under the new contract ending September 30, 2024, the price for an excise stamp is $0.0067425 per stamp. All applicable taxes and delivery charges are extra.

Excise stamp security features

Under the Act, no person can sell, offer for sale or have in their possession a tobacco or cannabis product, except low-THC cannabis products and prescription cannabis drugs, unless it bears the appropriate excise stamp. Similarly, no person can produce, possess, sell, or otherwise supply or offer to supply anything that is intended to resemble or pass for an excise stamp. Furthermore, if an excise stamp has not been applied to a cannabis or tobacco product, it can only be in the possession of certain persons. This includes:

• the excise stamp provider;
• the excise stamp user to whom the excise stamp is legally issued, such as a tobacco licensee, a prescribed person who is importing tobacco product and a cannabis licensee;
• the person transporting an excise stamp on behalf of the persons mentioned above; or
• for a cannabis excise stamp, a person that has in their possession cannabis excise stamps only for the purpose of applying adhesive to the excise stamps on behalf of the cannabis licensee to which the excise stamps are issued.

The following is an example of an excise stamp, as well as a description of some of the excise stamp’s unique security features, which are explained below the example.

Visible features

Visible features include the following:

• the dimensions of the excise stamps are exactly 20 × 40 mm;
• the stamp type indicates, in distinctive print, the type of product (cannabis, cigarettes, tobacco, cigars, raw leaf) to which the excise stamp will be affixed;
• the jurisdiction includes the jurisdiction’s name abbreviation (Canada or any province or territory), as well as the jurisdiction’s distinctive colour band and background. The abbreviation, the colour band and background of the excise stamps will be that of the particular intended duty-paid market;
• the unique identifier is an alphanumeric identifier specific to each excise stamp, and starts with 3 capital letters followed by 6 numbers;
• the federal duty-paid status distinctively indicates that federal excise duty has been paid on the cannabis or tobacco product.

Overt security features

The overt security features include the following:

• the intaglio latent image is an engraved image featuring unique tactile and visual effects. On the excise stamp, the letter C is visible on minor movement of the excise stamp at normal viewing angles;
• the colour shift ink is an overt security feature where the ink shifts in colour from green to red when the excise stamp is tilted. The change of colour occurs with a change of viewing angle;
• the anti-copy line work provides a distinctive and unique appearance to the excise stamp. Further, this feature makes it extremely difficult to replicate by photocopy because the quality and clarity of the line work would not carry over to a copied document;
• the excise stamp also includes ultraviolet-visible ink that fluoresces under a commercially available black light.

Delivery options

Under the new contract, the excise stamp provider is providing secured delivery services to excise stamp users by using:

• a subcontractor of Canadian Bank Note Company Limited, as pre-approved in the excise stamp contract, or
• a commercial carrier requested by the excise stamp user, and that is approved by Canadian Bank Note Company Limited.

Also, under the new contract, the excise stamp provider is accountable for the excise stamps until the excise stamp user accepts possession or takes delivery of the excise stamps. This is deemed to occur on the earlier of the time:

• the excise stamp provider delivers the excise stamps to the excise stamp user’s authorized delivery location;
• the excise stamp user takes possession at the excise stamp provider’s distribution facilities through the excise stamp user’s selected delivery service; or
• the excise stamp user contracts with the excise stamp provider for additional services.

The cost of secure delivery is the responsibility of the excise stamp user and must be at cost and not subject to an additional surcharge or profit mark-up by the excise stamp provider.

Verification tools

Since excise stamps contain hidden security features not readily apparent upon unaided visible inspection, the CRA has made handheld devices available to help verify the authenticity of the excise stamps.

A level-1 device is available for lease to excise stamp users. Although excise stamp users are not required to possess or use this verification tool, it allows them to authenticate the excise stamps they are applying on cannabis or tobacco products. This tool helps excise stamp users to comply with the Act and verify that they are not in possession of or applying counterfeit excise stamps. Excise stamp users are able to order level-1 devices through the web-based ordering system. The lease price will include enhancements, upgrades or replacements, as well as any cost to recall the tool (the all-inclusive firm price).

Under the new contract ending September 30, 2024, the price for the lease of one level-1 verification tool is a one-time payment of $500. All applicable taxes and delivery charges are extra.

Similarly, a level-2 device is available for the enforcement community, and can be obtained from the CRA. The level-2 device authenticates the excise stamp and provide additional information that is useful for the enforcement of the Act and any provincial or territorial legislation.

Additional services

Under the new contract, the excise stamp provider may enter into commercial arrangements with the excise stamp user for services such as, but not limited to, filling excise stamp dispensing cartridges, applying an adhesive to excise stamps or putting excise stamps into a roll (reel) format.

It is important to note that when an excise stamp user contracts with the excise stamp provider for additional services related to the excise stamp, the ownership and responsibility for accounting for these excise stamps are transferred to the excise stamp user before the additional services can begin, even though delivery of the excise stamps has not been completed and the excise stamp provider will still have possession of the excise stamps. Any excise stamps that are unaccounted for or are damaged during these additional services will be the responsibility of the excise stamp user.

Test stamps

On May 1, 2019, the web-based ordering system was updated to provide excise stamp users the option to order “test stamps” online. The availability of test stamps allows for the testing and calibration of application equipment without the accountability and controls imposed on excise stamps.

Note that test stamps are not excise stamps; they do not indicate that excise duty was paid and cannot be used in place of excise stamps.

Transition

To facilitate a smooth transition between the two stamp contracts, excise stamp users have maintained their current user identifications and passwords to access the web-based ordering system.

The excise stamp is mandatory on all tobacco and cannabis products, except low-THC cannabis products and prescription cannabis drugs, destined for the Canadian duty-paid market. As the old excise stamp contract has expired and the new one came into effect on October 1, 2019, excise stamp users may still have in their possession an inventory of unused excise stamps obtained under the old excise stamp contract. To minimize the impact on excise stamp users and facilitate reduction of inventories of unused excise stamps, the CRA will allow excise stamp users to continue to apply the old excise stamp to manufactured products until their inventory has been depleted. As a result, legally stamped tobacco and cannabis products found on the Canadian market after October 1, 2019 may carry either the old or new excise stamp.

Similarly, the stamp provider may continue to sell the old excise stamp until their inventory is depleted. However, as of October 1, 2019 the firm price of all excise stamps ordered is fixed at the reduced price of $0.0067425 per stamp as outlined in the new contract.