The Skechers Ordeal | Clearit.ca

Clearit.ca's Blog on Customs Brokerage and News Updates

Canadian Customs Appraisal, Cost Sharing Agreements & The Skechers Ordeal

One of the only constants in life is change. No matter what is happening – there will always be change. With regards to government policies, change is inevitable. Every government worldwide is continually changing laws and policies, in order to adapt d improve.

Canadian Customs

The Canada Border Services Agency (CBSA) is no different. Importers have seen extreme changes to Canadian customs valuation law and policy during the beginning of 2015.

While detailed, these new changes indicate that importers may receive customs duty refunds when connected with downward transfer pricing adjustments. These adjustments reduce invoice prices that were based on the customs value of the imported goods.

These changes have finally taken place after a long and heated battle between the importing community and the CBSA. While intriguing, many of the newly implemented policy changes essentially give multinational importers opportunities on one hand and take away other ones on the back side. Many speculate that the Canadian government will make up the loss of revenue from the new policy by conducting more in-depth verifications of customs values when declared by party importers.

The Skechers Ordeal

One importer that decided to challenge some of the changes was Skechers. The American-based company challenged the ruling of the President of the CBSA, in which he declared that certain payments for research and development, with regards to a cost-sharing agreement, were dutiable.

In the case, Skechers USA Canada Inc. v The President of the Canada Border Services Agency – the Federal Court of Appeals (FCA) withheld the CBSA policy of treating research and development costs as part of the post-importation payments.

Clarifying The Changes

Skechers was unable to win their case because they did not fully qualify and justify their reasoning to the FCA. Skechers did not prove their research and development costs were not in respect of the goods, or that the costs were not necessary for the production of the product. The company also struggled to prove that general payments were unaffected by the imported goods.

Canada Reviewing Customs Valuation Practices

Cases like the Skechers one will continue to spring up from time to time in Canada. The Canadian customs valuation practices are continually changing and evolving. The best thing an importer to Canada can do is to stay ahead of the game by developing a deep understanding of the policies working for you and against you. As each change is implemented, multinational importers like Skechers must strive to continually make the policies work in their favor.