Consultation on proposed amendments to the Valuation for Duty Regulations

The Canada Border Services Agency (CBSA) is proposing amendments to the Valuation for Duty Regulations.

According to CBSA the existing legislative and regulatory framework governing the methods of determining the value for duty (VFD) of imported goods creates an unfair advantage for non-resident importers (NRIs), which are businesses located outside of Canada that ship goods to customers in Canada.

This advantage exists due to NRIs’ ability to declare a lower VFD on goods they import to Canada by using an earlier sale price and not the sale to an actual buyer located in Canada that brought the goods into Canada. The earlier sale price that is used in these instances occurs in the earlier stages of the supply chain, including a sale transaction between a foreign-based manufacturer and an NRI.

The ability to declare a lower VFD means that these NRIs pay less customs duty on the goods they import into Canada when compared to Canadian importers, i.e. importers residing in Canada. Since Canadian importers are paying higher amounts of duties, the existing framework puts Canadian businesses at a competitive disadvantage, while simultaneously resulting in lost customs revenues to Canada in duties paid on lower VFD.

The proposed regulatory amendments would clarify which sale is to be used to calculate the duty on imported goods in order to address a regulatory gap that unduly benefits businesses located outside of Canada (NRIs) that ship goods to customers in Canada by (i) defining the term “sold for export to Canada”; and (ii) amending the definition of the term “purchaser in Canada”.

Draft regulations have been published in the Canada Gazette, Part I. Any interested parties, such as importers, businesses, and customs brokers, have until June 26, 2023 to submit written comments on the draft regulations.