Amendments to the CBSA’s Valuation for Duty Regulations (Regulations) first proposed in May 2023 (Amendments) continue to hang in the balance. The Canada Border Services Agency (CBSA) recently released a summary of proposed revisions, open for consultation with the importing community and other stakeholders until January 23, 2026 (Consultation).
Background
The Amendments seek to significantly alter the legislative framework underpinning key findings made by the Canadian International Trade Tribunal (CITT) in 2021 and 2022 regarding use of the transaction value method and what constitutes “a Purchaser in Canada”. In May 2023, the CBSA introduced the Amendments, which were subject to a 60-day consultation period. In October 2023, the CBSA published 400+ comments which were largely critical of the Amendments, given the uncertainty that they would create for Canadian importers. In May 2024, the CBSA published their “What We Heard” report summarizing the public comments.
At a high level, the Amendments outline which “sale” is to be used when calculating the value for duty of imported goods to Canada. The Amendments propose a “last sale” approach to customs valuation, which has the potential to increase the declared value for duty of imported goods, directly increasing duties and taxes owing, and indirectly increasing the cost of doing business in Canada. One significant criticism was the possibility that the Amendments would require importers to declare the value of a Canadian domestic sales transaction as the declared value for duty. We write about the Amendments in detail here.
Consultation
On December 3, the CBSA launched a new consultation regarding proposed revisions to the Amendments, which remains open until January 23. The consultation seeks the views of all stakeholders and, in particular, Canadian resident importers and Canadian subsidiaries of foreign parents. The consultation, alongside encouraging written comments, asks importers to complete a questionnaire.
The questionnaire asks importers to: (i) review 9 sales scenarios and indicate if each applies (and to what percentage of importations into Canada), (ii) provide information on what percentage of total imports into Canada are declared under each value for duty code; and (iii) provide an importer’s annual declared value for duty and duty paid (excluding surtaxes and excise taxes) for each year from 2019-2024.
The CBSA has summarized three proposed revisions to the Amendments, intended to address comments received in the 2023 consultation; however, the legislative text has yet to be published.
The three proposed revisions to the Amendments are as follows:
1. Exclusions for what constitutes a “sale to export”. Accordingly an “agreement, understanding or any other type of arrangement” does not include scenarios where the following are imported: gifts, promotional items, samples, consigned goods, importation by sales agent, sales between branches, rental/leased goods, loaned goods, destruction of goods.
2. If one of the excluded scenarios (from Revision 1) is the “agreement, understanding or any other type of arrangement” in a series of transactions, the importer cannot rely on the transaction value method in order to value the goods.
3. Sales between two people located in Canada that meet specific conditions illustrating a “substantial presence in Canada” will not be considered an “agreement, understanding or other type of arrangement” that would otherwise be the basis for customs valuation. The conditions include the following:
- having its primary place of business physically located in Canada, which cannot be met through the use of a branch or agent
- having decision-making power over the day-to-day operations in Canada
- having the functions in relation to the ordering and purchasing of the goods carried out at its place of business in Canada
- processing requests in relation to the goods, such as with respect to defects and returns, in Canada
- keeping its books and records in Canada
- holding its primary bank accounts in Canada
- having fixed assets in Canada
- paying income tax in Canada
Next Steps
Businesses importing goods into Canada should carefully review the Amendments (as previously published in Part I of the Canada Gazette here) alongside the proposed revisions to determine if there is any impact on their supply chains. Businesses impacted by the Amendments should consider responding to the Consultation and providing a detailed description of the adverse impact of the proposed revisions, and how any adverse impact might be remedied. Businesses should also consider commenting on when the Amendments will come into force.
While the CBSA has not committed to publication of the legislative text of the Amendments with the proposed revisions, importers should continue to review the publications in Part I (should regulations be subject to further consultation) and Part II (should the regulations be in final form) of the Canada Gazette for the Amendments and any new or revised D-memoranda and Customs Notices advising of their interpretation and coming into force date.
