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Federal budget eliminates duty on mobile offshore drilling units

February 14, 2014

The Federal Budget introduced Tuesday afternoon will eliminate customs duties payable on certain offshore oil and gas drilling equipment.

Presently, mobile offshore drilling units (MODUs) used in oil and gas exploration and development can be temporarily imported into Canada on a duty-free basis under the Mobile Offshore Drilling Units Remission Order. This Remission Order was extended in 2009 for another five years and is now set to expire in May 2014.

Budget 2014 proposes to eliminate the 20-per-cent Most-Favoured-Nation rate of duty on imported MODUs. This tariff elimination will be given effect by amendments to the Customs Tariff and will be effective in respect of goods imported into Canada on or after May 5, 2014.

The following is an excerpt from budget documents:

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NOTICE OF WAYS AND MEANS MOTION TO AMEND THE CUSTOMS TARIFF

That it is expedient to amend the Customs Tariff as follows:

1. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.20.11 with a Most-Favoured-Nation Tariff rate of customs duty and, where necessary, the applicable preferential tariff rates of customs duty of "Free", for "Drilling platforms (including jack-ups and semi-submersibles) used in drilling activity for exploration, delineation or development of offshore projects" currently classified in tariff item No. 8905.20.10 which is being revoked.

2. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.20.19 to maintain current rates of customs duty on "Drilling platforms" currently classified in tariff item No. 8905.20.10 except for "Drilling platforms (including jack-ups and semi-submersibles) used in drilling activity for exploration, delineation or development of offshore projects".

3. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.90.11 with a Most-Favoured-Nation Tariff rate of customs duty and, where necessary, the applicable preferential tariff rates of customs duty of "Free", for "Drill-ships used in drilling activity for exploration, delineation or development of offshore projects" currently classified in tariff item No. 8905.90.10 which is being revoked.

4. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.90.19 to maintain current rates of customs duty on "drill-ships, drilling barges and floating drilling rigs" currently classified in tariff item No. 8905.90.10 except for "Drill-ships used in drilling activity for exploration, delineation or development of offshore projects".

5. Any enactment founded on sections 1 to 4 be deemed to have come into force on May 5, 2014.

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