Update: On Sept. 28th, the Canada Border Services Agency (CBSA) published the comments it received during the consultation period. In response to the comments, the CBSA indicated its policy objective is that value for duty will not be determined based on the price in a sale from a Canadian resident importer to a Canadian customer. However, until the final regulation language is released, it is unclear if this objective will be realized.
Executive summary: Proposed amendments to value for duty regulations
The Canada Border Services Agency (CBSA) is proposing changes to the calculation of value for duty for customs purposes that may increase custom duties. Comments on these changes from interested parties can be submitted to the CBSA until July 26, 2023.
A practical insight on amendments to customs valuation
The Canada Border Services Agency (CBSA) has issued a proposed regulatory change to the customs value rules which will impact how value for duty (VFD) is determined. The VFD forms the base upon which customs duties and sales taxes are levied on imported goods. In particular, the CBSA will be looking to calculate any applicable customs duties1 owing on the value in the last sale for import purposes. The proposed change will likely lead to significant increases in customs duties and additional operational and finance costs for certain importers. The CBSA is seeking comments on these proposed changes from interested parties until July 26, 2023.2
Importers should review both their current and prospective duty profiles to get a sense of what the proposed change may mean to their business. As indicated in the below example, the difference between customs duty levied on the purchase price by the importer versus customs duty levied on the importer’s resale price in some cases contemplated in the proposed regulatory change will cause an increase in duties and taxes owing. Higher duties will also increase the costs for security to enjoy expedited customs release prior to payment and impact cash flow.