Abstract The complications of the National Energy Program have satisfied even the most gregarious appetites: now customs duty issues related to exploration, development and production of Canada's non-renewable energy resources are promising to excite the palate. The menu offers a wide selection: legislative amendments for the conventional; exotic constitutional issues ifyou delight in the offshore. But watch out. it's not always a free meal! This month, Tax Topics reviews some of the emerging issues in the customs area on matters related to resource exploration, development or production. We focus on what's ahead: traps and pitfalls opportunities and savings. Introduction In recent years coping with tax changes has become a daily preoccupation at companies operating in Canada's oil and gas industry. Life as the tax administrator has not been easy or dull. If recent developments in the customs area hold true, the tax administrator will soon have to buy a "customs" hat and, in some cases, he may want to put it on retroactively. This article intends to describe in non-technical terms, a few of the emerging customs issues as they might affect the oil and gas industry, especially the players upstream. Furthermore, for easy reference, a few guidelines to the administration of customs duties are set out in the Appendix. Tariff rates-oil & gas industry Until recently, customs duties have not been of significant concern to companies engaged in conventional drilling programs. As a rule, a series of specific end use tariff items providing low or free rates of duty has governed the importation of a broad range of goods intended for use in the chain of exploration development- production of Canada's oil and gas reserves. The majority of these end use items are found in the 49XXX series of the Customs Tariff. Except where specifically named elsewhere, goods imported for a qualifying end use are dutiable at the rate set out for these end-use classes. Depending on the use, duty is assessed either at rates that range from 8.4% to 12.1% or, as often the case, no duty is assessed. In some cases, the' end use class names the goods (e.g., blow-out preventors, derricks for drilling rigs, draw works); other end use classes refer to a basket clause (e.g., all other machinery and apparatus for use in...). Rates of duty also vary depending on whether or not the named goods or a good falling within a basket clause, "is of a class or kind made/not made in Canada." Finally, so as not to discourage the manufacture in Canada of goods qualifying for low or duty-free end use rates, materials imported for use in their manufacture are allowed duty-free entry. As a result, duty-free status has been gained by companies engaged in conventional drilling programs (or their suppliers) on the purchase or importation of a large portion of their capital acquisitions, including:masts or derricks for drilling, servicing or work-over rigs;drilling, servicing or work-over rigs;well logging equipment;