March 23, 2020
Obtaining Market Authorization to Manufacture Hand Sanitizers

Canadian brewers,

You have most likely heard about the shortage of hand sanitizer (or disinfectant in general) and many in the beverage alcohol sector are stepping up.

The Natural and Non-prescription Health Products Directorate of Health Canada oversees the authorization of hand sanitizers and disinfectants.

Considering the unprecedented demand and urgent need for disinfectants and hand sanitizers during the COVID-19 pandemic, Health Canada is acting through interim measures to increase supplies.

Typically, all products and sites require authorization from Health Canada, but flexibilities are being introduced in order to meet a public health need. Health Canada is trying to expedite applications.

Those wishing to manufacture and obtain Health Canada approval can visit the site below and review both Word documents:
* Hard-surface disinfectants for use against coronavirus (COVID-19)
* Health Canada Disinfectant Sanitizing Form
* Information from Natural and Non-prescription Health Products Directorate

Federal Excise Tax
In terms of federal excise tax being exempt on these products, the following general information has been provided by Susan Tolonini at Canada Revenue Agency with respect to the application of federal excise duty to spirits used in the production of hand sanitizers.

The CRA administers the Excise Act, 2001 which governs the federal taxation of several commodities, including spirits, and regulates activities involving the manufacture, possession and distribution of these products. For example, persons who produce and package spirits, persons who use non-duty-paid spirits in the manufacture of non-beverage spirit-based products such as cosmetics or hand sanitizers, and persons who operate warehouses to store non-duty-paid alcohol must possess an excise duty licence. A registration is required to possess, transport or use non-duty paid spirits.

Depending on the circumstances, a spirits licence, users licence and/or a specially denatured alcohol registration issued under the Act may be required by a person in order to legally produce hand sanitizer using non-duty paid alcohol in Canada. There are several ways hand sanitizer can be produced by licensees or registrants without triggering an excise duty liability. For example, a distiller (spirits licensee) that is also a user licensee can produce hand sanitizer in accordance with an approved formulation without the payment of excise duty on the final product. There are also provisions that would allow a specially denatured alcohol registrant to possess and use specially denatured alcohol to produce hand sanitizer without the payment of duty. A distiller (spirits licensee) is authorized under the Act to denature alcohol according to specified criteria. Although it could be cost-prohibitive, there is also the option to use duty-paid alcohol to produce hand sanitizer.

The requirements under the Act will vary depending on the facts of each case and the proposed activities to be undertaken. As a result, it is difficult to provide specific guidance without a specific set of facts.

If you require additional information on federal excise duty inquiries that relate to the use of spirits in hand sanitizer, please reach out:

Susan Tonolini
A/Manager - Excise Duty Operations – Alcohol
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency
Susan.Tonolini@cra-arc.gc.ca
613-670-7357

Thank you,