Schedule - Order in Council 1535/2023

Coordinated Vaping Product Taxation Agreement

Between:

The Government of Canada (referred to in this Agreement as “Canada”), as represented by the Minister of Finance of Canada,

And:

The Government of Ontario (referred to in this Agreement as the “Province”), as represented by the Minister of Finance of Ontario,

Together referred to in this Agreement as the “Parties”.

The parties agree as follows:

Part I
Interpretation

1. The following definitions apply in this Agreement.

   “additional duty”, in respect of a coordinated province,

   means the duty in respect of the coordinated province imposed under the Excise Act, 2001 on vaping products in addition to the federal vaping duty.

   “additional duty rate”, at any time in respect of a coordinated province,

   means a rate of duty for, or in relation to, the coordinated province that is applicable, at that time, to determine and calculate the additional duty in respect of the coordinated province.

   “Agreement”

   means this coordinated vaping product taxation agreement, entered into by Canada under Part III.3 of the Federal-Provincial Fiscal Arrangements Act with the Province, under applicable provincial legislation, if any, and all instruments amending or restating it, or any successor agreement to it.

   “business day”

   means a day that is neither a Saturday nor a day defined as a holiday within the preamble to the definition of that word in subsection 35(1) of the Interpretation Act, R.S.C. 1985, c. I-21, as amended from time to time.

   “coordinated vaping duty”

   means the federal vaping duty and the additional duty in respect of each coordinated province.

   “coordinated province”, at any time,

   means a province that has entered into a coordinated vaping product taxation agreement with Canada and that, at that time, is a province in respect of which additional duties are applicable.

   “Customs Act”

   means the Customs Act, R.S.C. 1985, c. 1 (2^nd Supp.), as amended from time to time.

   “Excise Act, 2001”

   means the Excise Act, 2001, S.C. 2002, c. 22, as amended from time to time.

   “federal vaping duty”

   means the duty payable in respect of vaping products under the Excise Act, 2001 that applies in respect of vaping products intended for consumption, use or sale in a province irrespective of whether the province is a coordinated province.

   “Federal-Provincial Fiscal Arrangements Act”

   means the Federal-Provincial Fiscal Arrangements Act, R.S.C. 1985, c. F-8, as amended from time to time.

   “month”

   means a calendar month.

   “province”

   has the same meaning as in subsection 35(1) of the Interpretation Act, R.S.C. 1985, c. I-21, as amended from time to time.

   “Provincial Sales Tax”

   in respect of a province means a retail sales tax that applies to a broad base of property or services, or a similar transaction tax that applies to a broad base of property or services, in respect of the province, including the new harmonized value-added tax system as defined in subsection 277.1(1) of the Excise Tax Act, R.S.C. 1985, c. E-15, as amended from time to time.

2. Unless otherwise specified, words or expressions used in this Agreement have the same meaning as in the Excise Act, 2001. Where a word is defined in this Agreement or that Act, other parts of speech and grammatical forms of the same word have corresponding meanings.

Part II
Implementation

3. Subject to the requisite legislative approvals, the Parties agree:
   1. to work collaboratively and in a timely manner towards the imposition of the additional duty in respect of the Province;
   2. that Canada will make best efforts to introduce, on or before July 1, 2024, the necessary legislative amendments to give effect to the Agreement;
   3. that the additional duty in respect of the Province will be implemented by Canada on July 1, 2024; and
   4. that the systems necessary for the Minister of National Revenue to effectively administer and enforce the additional duty in respect of the Province, and the systems necessary for the collection contemplated by clause 23 at Canadian international borders by the Minister of Public Safety and Emergency Preparedness of Canada, will be in place as of July 1, 2024.

4. Unless otherwise mutually agreed upon between the Parties and subject to the terms and conditions of this Agreement,
   1. the Province will make a public announcement, as early as possible before July 1, 2024, in respect of the Province’s agreement to the implementation by Canada of the additional duty in respect of the Province as of July 1, 2024;
   2. the Province will, following the public announcement referred to in paragraph (a), introduce at the earliest opportunity in the Province’s legislature an instrument (e.g., a bill or motion) in respect of the Province’s agreement to the implementation by Canada of the additional duty in respect of the Province, requesting a timely vote or adoption by the Province’s legislature to occur before April 1, 2024; and
   3. if the Province provides Canada with the proposed text of the public announcement referred to in paragraph (a) or the instrument referred to in paragraph (b), Canada agrees to review that proposed text in a timely manner.

Part III
Additional Duty Rate

5. The Parties agree that the additional duty will be determined as provided for under the Excise Act, 2001.
6. The Parties agree that the federal vaping duty rates will be the following as of July 1, 2024:
   1. for vaping products that are vaping devices that contain vaping substances or that are vaping substances in immediate containers:
      1. if the vaping substance is in liquid form, the total of $1.00 per 2 millilitres of vaping substance or fraction thereof, for the first 10 millilitres of vaping substance in the vaping device or immediate container and $1.00 per 10 millilitres of vaping substance or fraction thereof, for any additional amount of vaping substance in the vaping device or immediate container, or
      2. if the vaping substance is in solid form, the total of $1.00 per 2 grams of vaping substance or fraction thereof, for the first 10 grams of vaping substance in the vaping device or immediate container and $1.00 per 10 grams of vaping substance or fraction thereof, for any additional amount of vaping substance in the vaping device or immediate container; and
   2. for vaping products that are vaping substances not in any vaping device or immediate container:
      1. if the vaping substance is in liquid form, the total of $1.00 per 2 millilitres of vaping substance or fraction thereof, for the first 10 millilitres of vaping substance and $1.00 per 10 millilitres of vaping substance or fraction thereof, for any additional amount of vaping substance, or
      2. if the vaping substance is in solid form, the total of $1.00 per 2 grams of vaping substance or fraction thereof, for the first 10 grams of vaping substance and $1.00 per 10 grams of vaping substance or fraction thereof, for any additional amount of vaping substance.
7. The Parties agree that the additional duty rates in respect of the Province will be the following as of July 1, 2024:
   1. for vaping products that are vaping devices that contain vaping substances or that are vaping substances in immediate containers:
      1. if the vaping substance is in liquid form, the total of $1.00 per 2 millilitres of vaping substance or fraction thereof, for the first 10 millilitres of vaping substance in the vaping device or immediate container and $1.00 per 10 millilitres of vaping substance or fraction thereof, for any additional amount of vaping substance in the vaping device or immediate container, or
      2. if the vaping substance is in solid form, the total of $1.00 per 2 grams of vaping substance or fraction thereof, for the first 10 grams of vaping substance in the vaping device or immediate container and $1.00 per 10 grams of vaping substance or fraction thereof, for any additional amount of vaping substance in the vaping device or immediate container; and
   2. for vaping products that are vaping substances not in any vaping device or immediate container:
      1. if the vaping substance is in liquid form, the total of $1.00 per 2 millilitres of vaping substance or fraction thereof, for the first 10 millilitres of vaping substance and $1.00 per 10 millilitres of vaping substance or fraction thereof, for any additional amount of vaping substance, or
      2. if the vaping substance is in solid form, the total of $1.00 per 2 grams of vaping substance or fraction thereof, for the first 10 grams of vaping substance and $1.00 per 10 grams of vaping substance or fraction thereof, for any additional amount of vaping substance.
8. The additional duty rates in respect of the Province set out in clause 7 shall remain at the same fixed proportion to the corresponding federal vaping duty rates and any change by Canada to a federal vaping duty rate shall result in a proportional change to the corresponding additional duty rate set out in clause 7.

Part IV
Coordinated Duty Base

9. The Province agrees that the duty base for the additional duty in respect of the Province must remain common with the duty base for the federal vaping duty in order to maintain a coordinated duty base between the federal vaping duty and the additional duty in respect of the Province. The Province agrees that Canada is responsible for determining the vaping products that are subject to both federal vaping duty and additional duty in respect of the Province.
10. Canada may propose any duty base change in respect of the federal vaping duty and the Province agrees to be bound by all duty base changes that are implemented in respect of the federal vaping duty.

Part V

Provincial Revenues

11. For each particular month, Canada shall determine the positive or negative amount (referred to as the “Additional Duty Monthly Amount”) determined by the formula

    A + B - C

    where

    1. is the aggregate of all amounts of additional duty in respect of the Province assessed or reassessed under the Excise Act, 2001 during the particular month in respect of any reporting period;
    2. is the aggregate of all amounts of additional duty in respect of the Province accounted for under the Customs Act during the particular month; and
    3. is the aggregate of all amounts of any rebate or remission, or amounts otherwise refunded, as or on account of additional duty in respect of the Province in the particular month.

12. For greater certainty, for the purposes of clauses 11 and 18, an amount reassessed under the Excise Act, 2001 means the positive or negative amount that is the difference between the amount of the reassessment and the amount of the previous assessment or previous reassessment, as the case may be, to which the reassessment relates.
13. For greater certainty, interest and penalties are not included in the determination of Additional Duty Monthly Amounts and any amounts determined under clause 18.
14. If the Additional Duty Monthly Amount for a particular month is greater than zero, that Amount shall be paid by Canada, in accordance with the Federal-Provincial Fiscal Arrangements Act, to the Province on the first business day of the third month following the particular month.
15. If the Additional Duty Monthly Amount for a particular month is less than zero, that Amount becomes due and payable by the Province as a debt due to Canada on the first business day of the third month following the particular month.
16. The Additional Duty Monthly Amount and any amounts determined under clause 18 will not be adjusted to account for the time-value of a payment schedule set out in this Part.
17. For each particular month, Canada shall provide to the Province in a timely fashion a statement of the determination of the Additional Duty Monthly Amount for that particular month.
18. If the Agreement is terminated on a particular day for any reason, on or before the last day of the sixty-third month following the particular day
    1. Canada shall, on the basis of information available on another day that is the last day of the sixtieth month following the particular day, determine the positive or negative amount determined by the formula

       A + B - C

       where

       1. is the aggregate of all amounts of additional duty in respect of the Province assessed or reassessed under the Excise Act, 2001 at any time on or after the particular day but before the other day that were not included in the determination of previous payments made to the Province under this Part,
       2. is the aggregate of all amounts of additional duty in respect of the Province accounted for under the Customs Act at any time on or after the particular day but before the other day that were not included in the determination of previous payments made to the Province under this Part, and
       3. is the aggregate of all amounts of any rebate or remission, or amounts otherwise refunded, as or on account of additional duty in respect of the Province at any time on or after the particular day but before the other day that were not included in the determination of previous payments made to the Province under this Part;
    2. Canada shall provide to the Province a statement of the determination of the amount calculated in accordance with paragraph (a); and
    3. if the amount calculated in accordance with paragraph (a) is positive, that amount shall be paid by Canada, in accordance with the Federal-Provincial Fiscal Arrangements Act, to the Province.
19. If the amount calculated in accordance with paragraph 18(a) is negative, that amount becomes due and payable by the Province as a debt due to Canada on the last day of the sixty-third month following the day on which the Agreement is terminated.

Part VI
Inter-Provincial Sales

20. Subject to the requisite legislative approvals, the relevant federal legislation will specify that
    1. the additional duty in respect of the Province applies to vaping products intended for consumption, use or sale in the Province and does not apply to vaping products intended for consumption, use or sale outside the Province, as determined by the rules under the Excise Act, 2001; and
    2. a person that is outside the Province and that is liable to pay additional duties in respect of the Province is required to pay those additional duties, as determined in accordance with paragraph (a).

Part VII
Imposition of Duty at Canadian International Borders

21. The importation into Canada of vaping products intended for consumption, use or sale in the Province will be subject to the additional duty in respect of the Province in accordance with the rules applicable to the importation of vaping products into Canada under the Excise Act, 2001 and any other special rules under that Act developed for purposes of the additional duty in respect of the Province.

Part VIII
Coordinated Duty Administration

22. The Minister of National Revenue will administer and enforce the coordinated vaping duties payable under the Excise Act, 2001. The Parties acknowledge that Canada will be solely responsible for all costs related to this administration and enforcement, including the collection referred to in clause 23.
23. Despite clause 22, the Parties acknowledge that the collection of the coordinated vaping duties payable under the Excise Act, 2001 in respect of the importation of vaping products is a responsibility of the Minister of Public Safety and Emergency Preparedness of Canada.
24. The administration and enforcement contemplated by clause 22 and the collection contemplated by clause 23 will be at service and compliance levels that are at least as high as those applied to the administration and enforcement of the federal vaping duty.

Part IX
Exchange of Information

25. The Parties agree to co-operate fully in exchanging such information regarding the additional duty in respect of the Province as may be disclosed pursuant to applicable laws and regulations, including section 211 of the Excise Act, 2001.

Part X
Litigation

26. Canada will be responsible for the conduct of litigation in respect of the coordinated vaping duties.

Part XI
Vaping Product Taxation Policy

27. The Parties agree that a Vaping Product Taxation Policy Committee, consisting of representatives from Canada and each coordinated province, will be tasked with overseeing the coordinated vaping duty system. The Committee will review issues related to the legislation governing the coordinated vaping duty, including the common duty base, duty rates and common duty structure. In conducting these duties, the Committee will provide timely advice, as appropriate, to the Minister of Finance of Canada and the Ministers of Finance of the relevant coordinated provinces.
28. The Minister of Finance of Canada and the Ministers of Finance of each coordinated province will each appoint an individual to act, and serve from time to time, as that party’s representative on the Vaping Product Taxation Policy Committee.
29. Canada will chair the meetings of any committee, sub-committee or working group established under this Agreement.
30. Meetings of the Vaping Product Taxation Policy Committee will be held as and when agreed upon by consensus between Canada and the coordinated provinces from time to time.
31. Canada and the coordinated provinces will each communicate, as appropriate, the results of the deliberations of the Vaping Product Taxation Policy Committee to the Deputy Minister of Finance of Canada and of the relevant coordinated provinces.
32. If the Vaping Product Taxation Policy Committee cannot reach consensus in respect of an issue under its review, the issue will be referred to the Deputy Minister of Finance of Canada and of each coordinated province.
33. If an issue referred to the Deputy Ministers described in clause 32 remains unresolved, the issue will be referred to the dispute resolution process set forth in the applicable provisions of Part XII.

Part XII
Dispute Resolution

34. Best efforts will be exercised by officials of Canada and the relevant coordinated provinces to reach consensus in respect of issues arising in respect of matters governed by this Agreement.
35. Subject to clause 36, issues not resolved by officials of Canada and the relevant coordinated provinces will be referred to the Minister of Finance of Canada and the Ministers of Finance of the relevant coordinated provinces.
36. If the issue relates to the administration of the coordinated vaping duties contemplated by clause 22, the issue will be referred to the Minister of National Revenue, the Minister of Finance of the Province and, if applicable, to the appropriate Ministers of the relevant coordinated provinces, with notice of same to the Minister of Finance of Canada. If the issue relates to the collection of the coordinated vaping duties contemplated by clause 23, the issue will be referred to the Minister of Public Safety and Emergency Preparedness of Canada, the Minister of Finance of the Province and, if applicable, to the appropriate Ministers of the relevant coordinated provinces, with notice of same to the Minister of Finance of Canada and the Minister of National Revenue.
37. If an unresolved issue has been referred to the Ministers described in clause 35 or 36, those Ministers may refer the issue to a third party for consideration and advice.

Part XIII
Term, Amendment and Termination

38. The terms and conditions of this Agreement will continue in full force and effect, in accordance with and subject to the provisions of this Part, until the date that is specified by a Party in a written notice that is delivered to the other Party setting out the Party’s desire to terminate this Agreement.
39. Any amendment to this Agreement must be made in writing through mutual agreement of the Parties and subject to any necessary approvals, authorizations or applicable legislative requirements.
40. Any amending document mutually agreed upon between the Parties will form a part of this Agreement and will be effective as of the date specified in that amending document.
41. Either Party may deliver to the other Party a written notice of termination to be effective no sooner than the end of the six-month period that immediately follows the last day of the calendar month in which the written notice of termination is received or any other time period that may be mutually agreed upon between the Parties. The Parties agree that the termination date set out in such a written notice of termination will be the last day of a month.
42. On termination of this Agreement, all rights and obligations of Canada and the Province under this Agreement cease, except for the obligations of Canada and the Province to settle accounts relating to amounts outstanding under this Agreement and any obligations relevant to settling these accounts.

Part XIV
Government Payment of Duties

43. Despite any applicable Crown immunity, Canada and the Province agree to pay the coordinated vaping duties payable under the Excise Act, 2001 by their respective governments or by agents and entities thereof.

Part XV
Province-Specific Measures

44. The Province will take, throughout the term of this Agreement, all actions necessary to ensure that
    1. a tax, charge, fee, margin, mark-up or other revenue-generating instrument specifically related to vaping products and legislated or authorized by the Province or by His Majesty in right of the Province will not be imposed or levied in respect of the production, distribution, consumption, use, sale or bringing into the Province of vaping products; and
    2. if the Province has a Provincial Sales Tax, vaping products are not subject to the Provincial Sales Tax in respect of the Province at a rate that exceeds the general Provincial Sales Tax rate in respect of the Province.
45. Despite clause 44, if the Province imposes a tax specifically related to vaping products, or imposes a Provincial Sales Tax in respect of the Province applicable to vaping products at a rate that exceeds the general Provincial Sales Tax rate in respect of the Province, clause 44 does not apply to such imposition provided that the total of the rate of any such tax specifically related to vaping products and the highest rate of any Provincial Sales Tax in respect of the Province applicable to vaping products does not exceed the highest prevailing general Provincial Sales Tax rate in Canada.

46. The Province will propose legislation that is appropriate or necessary in order to give effect to the provisions of this Agreement, unless, in accordance with applicable laws, the Province gives effect to these provisions through other means.

Part XVI
Audit

47. The Minister of Finance of the Province may designate a person to examine such books and records, excluding any information that is protected by law, as may be relevant in order to permit such person to report in respect of the payments made to the Province under this Agreement.

Part XVII
Miscellaneous

48. If Canada enters into a coordinated vaping product taxation agreement under Part III.3 of the Federal-Provincial Fiscal Arrangements Act with another province, or enters into a successor coordinated vaping product taxation agreement under that Part with another province, on terms that differ from those of the Agreement then in effect between Canada and the Province, the Province will have the option of entering into a successor agreement with Canada regarding vaping product taxation on the same terms as those in the coordinated vaping product taxation agreement with the other province. For the purpose of this clause, a successor coordinated vaping product taxation agreement includes an amended coordinated vaping product taxation agreement.
49. If under the Agreement the Province has received from Canada any amount in excess of the amount to which it is entitled, Canada may recover as a debt due to Canada an amount equal to that excess from any moneys that may become payable to the Province under this Agreement or under any Act of Parliament.
50. If under the Agreement Canada has received from the Province any amount in excess of the amount to which it is entitled, Canada shall pay to the Province an amount equal to that excess as soon as practical following Canada becoming aware of the excess payment by the Province.
51. The Parties agree that any amount of debt due or payment owing to Canada or the Province under this Agreement shall not bear interest.
52. If a Party informs the other Party of a proposed change that may affect the coordinated vaping duties under this Agreement and that is to be announced publicly by that Party in a Budget or in a similar public announcement, the other Party commits to take all actions necessary to embargo the existence of such a proposal, including a negotiation or agreement, unless the Parties mutually agree otherwise in writing or unless otherwise required by law. Notwithstanding the embargo commitment referred to in this clause, Canada may, prior to any public announcement of such a proposal, negotiation or agreement, discuss on a need-to-know basis with other federal government departments or agencies (such as the Department of Justice, the Canada Revenue Agency and the Canada Border Services Agency) the information required for the purposes of evaluating and developing the processes and mechanisms that may be necessary for the proper implementation, administration and enforcement in respect of such a proposal, negotiation or agreement.
53. Any written notice that Canada is required to provide under this Agreement shall be provided by means of a letter from the Minister of Finance of Canada to the Minister of Finance of Ontario. Any written notice that the Province is required to provide under this Agreement shall be provided by means of a letter from the Minister of Finance of Ontario to the Minister of Finance of Canada.
54. This Agreement may be executed in any number of counterparts, each of which will constitute an original and all of which taken together will constitute one and the same instrument. Counterparts may be executed in original, electronic or faxed form and the Parties adopt any signatures received by electronic mail or by a receiving fax machine as the original signatures of the Parties; provided, however, that a Party providing its signature in such manner will promptly forward to the other Party an original of the signed copy of this Agreement.
55. By entering into this Agreement, neither Party is deemed to surrender or abandon any of the powers, rights, privileges or authorities vested in either of them under the Constitution Acts, 1867-1982 (or under any amendments to those acts) or otherwise, or to impair any of such powers, rights, privileges or authorities.
56. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings between the Parties with respect to that subject matter.
57. After execution of this Agreement, each Party will do, or cause to be done, all acts as the other Party may reasonably require from time to time for the purpose of giving effect to this Agreement and each Party will use reasonable efforts, and take all steps as may be reasonably within that Party’s power, to implement to their full extent the provisions of this Agreement.
58. A Party may waive any right under this Agreement, but only in writing. If a waiver of any provision of this Agreement is executed in writing by a Party, that written waiver will not constitute a waiver of any other provision of this Agreement and will not constitute a continuing waiver unless otherwise expressly provided.
59. The waiver by a Party of a breach of a condition or term of this Agreement will not be treated as a waiver of a subsequent breach and therefore will not prevent that Party from enforcing that term or condition in the case of a subsequent breach or insisting upon performance of an obligation under the Agreement.

In witness whereof, this agreement is signed in duplicate,

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Order in Council 1535/2023