For GST purposes, the transportation of corporeal movable property (also called “tangible personal property”) by one or more carriers from a place in Canada to a place outside Canada, or to another place in Canada from which the property is to be exported. After the shipper transfers possession of the property to the carrier and before the property is exported, the property must not be further processed, transformed or altered in Canada, except to the extent reasonably necessary for its transportation.

For example, it may be necessary to freeze goods to ensure they arrive at their destination in usable condition, or to disassemble or pack items at a port to prevent in-transit damage. In each of these instances, the transformation or alteration of the goods is considered necessary for their transportation and, therefore, does not prevent the transportation service supplied in Canada from qualifying as part of a continuous outbound freight movement.

However, where a shipment of iron ore is made in Canada to a steel manufacturer that subsequently exports the steel produced from the ore, the transformation of the iron ore into steel is not necessary for its transportation. Therefore, the transportation service supplied in respect of the iron ore is subject to tax because it is not considered part of a continuous outbound freight movement.