Clearit.ca's Blog on Customs Brokerage and News Updates
When importing into Canada, many importers find it difficult to determine how to declare the value of any goods that they are bringing into the country. This is largely due to the many different regulations and rules that have to be taken into account when you are determining value. Compliance is one of the three factors that can be looked at in a Canada Border Services Agency audit, although it is one of the least considered. Due to the intricacies of the different situations, the valuation of foreign purchases can be different, depending upon different factors. What do you need to consider?
The first thing that you need to understand is what valuation is. In simple terms, the CBSA has a requirement that any goods brought into Canada need to have a value assigned in order for the importer to pay the correct duty and taxes. No matter what is coming into the country, it is still required that the importer declare a fair market value on the goods. This includes samples, replacements, etc., as well as goods that you are bringing in to resell.
Determining Valuation of Goods
There are six methods that can be used to determine valuation of goods as laid out in the Customs Act and the World Trade Organization’s Valuation Agreement. By evaluating these methods in sequence, an importer can ensure that they are valuing at a realistic level, rather than a made up or arbitrary value. Here are the six methods laid out in order:
This is the most often used method to value goods. It normally is used when goods are brought into the country for resell to a purchaser. This valuation is based on what is paid or will be paid for the goods, in combination with certain adjustments that can come into factor. This is the first method to consider when you are trying to find the value of imported goods to declare.
- Price paid is the payments that are made directly or indirectly to the vendor from the purchaser.
- Price payable is the amount that is owed to the vendor, and this payment may be made indirectly or directly.
Transaction Value of Identical Goods
This method of valuation uses identical goods that are the same in all aspects as the goods that you are valuing. The only differences allowed are minor appearance changes that do not affect value. To use this method, the goods have to be manufactured in the same country as the appraised goods.
Transaction Value of Similar Goods
Under this valuation method, you base it on goods that will closely resemble the goods that you are valuing. To meet the factors of this method, the goods have to perform the same function, be made in the same country and by the same manufacturer, and be interchangeable commercially with the goods that are being appraised.
Deductive Method of Valuation
If the first three do not apply, then you will consider the deductive valuation method. This one is based on the common selling price per unit from other Canadian importers to the goods that you are importing. This selling price is then used to come up with the value for your imported goods.
Computed Valuation Method
This method uses the production cost of the goods with some additions for profit expectancy and general costs that are paid by producers when selling to a Canadian importer. All of this is computed together to come up with a value.
Residual Valuation Method
This method does not have specific requirements. It is instead based on one of the other methods (in sequence) and requires less adjustment. This value has to be based on reality commercially, and it must be fair market value.
It is important to note that the final value for goods and the duty/taxes owed can be influenced by different factors, including:
- Relation between the parties buying and selling (are you related?)
- Whether the goods are new or used
- Goods that were rented or leased, rather than sold
- Allowable deductions or additions to the good’s value
Understanding how to come up with a fair market and realistic value is essential to ensure that you pay the duties and taxes that are due. Otherwise, you could be setting yourself up for issues if you are audited by the CBSA. For more information and help in valuing your goods, visit clearit.ca.