The Canada Border Services Agency (CBSA) is proposing amendments to the Valuation for Duty Regulations that will help Canadian importers compete on a more level playing field with foreign-based imports, and address lost customs revenue to the Government of Canada in duties paid on lower value for duty declarations.

Currently, Canada’s regulatory framework on determining the value for duty of imported goods does not align with international consensus established at the World Customs Organization. This creates an unfair advantage for foreign-based importers as they can declare a lower priced sale in the trade chain to value their goods and pay less duty on imported goods.

Creating a definition for “sold for export to Canada” and changing the definition of “purchaser in Canada” would allow the CBSA to address this misalignment. The proposed regulatory amendments will provide a consistent and reliable method for calculating the value for duty for all imported goods.

The issue

The method currently being used to determine 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 because non-resident importers can 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. 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 solution

The proposed regulatory amendments would define the term “sold for export to Canada”, and amend the definition of the term “purchaser in Canada”.

Clearly defining these terms would ensure that the VFD of imported goods is based on the sale that caused the goods to be imported to Canada, and will ensure that the term “sale” is given a broad meaning that includes purchase commitments or purchase orders, as well as intents to purchase, arrangements, and any other type of understanding that causes goods to be imported to Canada.

According to the CBSA, the proposed regulatory amendments would:

  • ensure that Canadian importers that compete with NRIs are not at a disadvantage as a result of the current regulatory framework, which allows the latter to declare a lower purchase price when calculating VFD;
  • provide a legal basis to ensure the government collects duties on the sale that brought the goods to Canada, thereby preventing revenue leakage stemming from NRIs ability to declare an earlier sale in the supply chain;
  • ensure that Canada meets its obligations under the World Trade Organization’s Customs Valuation Agreement and to Canada’s trading partners regarding the methods of calculating VFD; and
  • ensure that Canada fosters a fair and predictable environment for the trading community that is consistent with the objectives of free and liberalized trade and in compliance with the internationally agreed methods of calculating VFD.

In addition, these amendments would contribute to Canada’s domestic economic recovery priorities by minimizing the risk of foregone customs revenues, creating enforceable measures that generate revenue, removing any incentive for businesses to minimize their operations or presence in Canada, and removing disadvantages to Canadian businesses in a post-COVID-19 environment.

Have your say

The CBSA is looking for comments on the draft regulations from importers, customers brokers, and other interested parties until June 26.

You can view the full amendment proposal and learn how to submit your feedback here.

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