Value for duty and Non-Resident Imports to Canada

Canadian regulators are in the process of changing how to calculated the value for duty (VFD). The VFD is base amount on which duty is accessed. The proposed rules will affect non-resident importers (NRI's).Non resident importers can now import goods using a lower earlier sale price. While Canadian based importers declare a value of actual sale to the Canadian buyer.The consultation period has concluded.

With the increase of e-commerce shipments, imports from non-resident importers to Canada has grown.The proposed changes would update definitions related the terms “sold for export to Canada” and“purchaser in Canada”.

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Under the new rules:

VFD =Value for Duty = Transaction value of the last sale in Canada

• The importer of record may not be ultimate purchaser or buyer
• Does the importer always know the last sale price?And which sale in a series of transactions is the “last sale”?
• The customs invoice between exporter and importer of record may not reflect the VFD.
• Rules apply to all goods "sold for export to Canada"
• CBSA will oblige the importer to calculate VFD on the final domestic sale
• This affects all importers but the biggest impact will be for wholesalers

Note: Information in this post and all Jet Worldwide online content is for general information only.

If adopted:

• Increase declared values affecting payable duty and GST for imported goods
• The resident or non-resident importer must use its selling price rather than its purchase price for valuation.

Non-Resident Importer CARM Requirement

Price Between two Foreign Entities versus price to final customer

Canadian customs conducted a study using clearance data predominately from the imports of apparel and footwear. The analysis concluded:

• Nearly 30% of compliance verifications involving NRIs used an earlier, lower-priced sale between two foreign entities.
• Based on a sample, it was estimated that the declared value for duty averaged 44% lower

The declared value: Simple until it isn't

In its basic form, valuation is simple: The declared value is the transaction value. In other words, what the goods were sold for (including shipping and insurance) is the correct declared value. Seems simple! Yet, like all things related to money and international trade, it can get complicated.

The three main elements for assessing duty include:

• H.S. Classification
• Declared Value
• Country of Origin

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Re-Defining Declared Value for Non Resident Importers to Canada

From CBSA website:

TheCustoms Act identifies three requirements that must be met to apply the Transaction Value Method. These requirements are as follows:

• (a) The imported goods were sold for export to Canada;
• (b) The purchaser in the sale for export is the purchaser in Canada; and
• (c) The price paid or payable for the goods can be determined.

In short, the Transaction Value Method applies where goods are “sold for export to Canada to a purchaser in Canada.” The price of that sale is the basis for the calculation of customs duties and taxes.

Canada Gazette, Part 1, Volume 157, Number 21: Regulations Amending the Valuation for duty Regulations

Rules of Valuation to Canada

Globally, the value of imported goods is based World Trade Organization valuation rules. The primary - and easiest to determine method is the Transaction Value.It is to be used whenever possible.

The subsequent five methods can be exponentially more complex and used only if the criteria for the Transaction Value Method are not met.

The methods for valuation are applied in hierarchical order.

1. Transaction Value Method: Based upon the price paid (which is generally shown on the invoice).
2. Transaction Value of Identical Goods:Value determined under the first method of identical goods imported in similar conditions.
3. Transaction Value of Similar Goods: Value determined under the first method of similar goods imported in similar conditions.
4. Deductive Value: Based on the domestic selling price of the goods (or identical or similar goods) in Canada, less an amount that represents either the commission paid or the profit earned and general expenses incurred on a unit basis in selling the goods in Canada, as well as deductions for certain other elements.
5. Computed Value: Based on the cost of production of the goods, plus amounts that represent the profit earned and general expenses incurred on sales for export to Canada as well as additions for certain other elements.
6. Residual Method: Used only if all previous methods are not applicable. Under this method, the value will be derived from a flexible application of one of the previous methods of valuation set out in Customs Act (e.g. published price lists).

What is Intrinsic value?

Intrinsic value refers to the price of the goods themselves when sold for export. It excludes transport and insurance costs, unless they are inclusive in the price. If price includes shipping and insurance it must be separately indicated on the invoice. For goods of a non-commercial nature, the price which for payment for the goods themselves.

Canadian and International Resources: Rules for Declaring a Value.

Consignment versus Goods

The the term “consignment” refers that ship together from a single consignor to a single consignee. A consignment is covered by the same transport waybill and tracking number.

Registering for CARM for Non-Resident Importers

Non-Resident Importers must register in CBSA's CARM portal. Beyond entering your basic information, importers must assign a broker and submit a deposit or surety bond.

Non resident importers to Canada should be aware of the likely update to declared value process for goods imported to Canada.