Tax alert

A practical insight on proposed amendments to customs valuation

Jun 13, 2023
Business tax

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. 




Duty rate


Value for tax

Import Goods and Services Tax

Total duties and taxes

Current VFD – Purchase price







Regulatory change – Sale price3










Importers that currently import and do not pay customs duty or pay limited customs duties should also review these changes as the goods imported may be found to be subject to customs duty at a later date upon verification by the CBSA.

Current Customs Value Rules

Transaction Value Method (TVM) is the presumptive method required to be used to value imported goods.5 The TVM is the price paid or payable in the sale for export to a purchaser in Canada. The CBSA has noted gaps in the current regulatory regime that have allowed importers to utilize in some cases an earlier sale in the supply chain to determine the transaction value. These earlier sales tend to have a lower price resulting in lost duty revenue and creating unfair advantages for non-resident importers and Canadian importers without a “significant” presence in Canada and/or attachment to a transaction. The current CBSA D Memoranda D13-1-3 highlights in detail the CBSA current policy position on the interpretation and application of the “purchaser in Canada” requirements as they relate to TVM.

Proposed changes

The CBSA is proposing use of the “last sale” in many cases to determine the VFD when using the TVM. The last sale will be defined as the arrangement to transfer goods for the purpose of being exported to Canada. It does not consider the timing of the transfer of ownership. The CBSA provides various examples of the “last sale” in the proposed regulatory change consultation notice. In one of the examples, a Canadian company which purchases its inventory from a foreign supplier with no prior agreements to sell the inventory in Canada. The goods are then sold to Canadian customers from inventory. The CBSA states that the last sale would be the sale from the foreign supplier to the Canadian company as this sale caused the inventory to be exported to Canada. Conversely, in their examples the CBSA is somewhat silent on how this “last sale” would apply to purchases and imports by Canadian companies with significant presence that drop ship to their Canadian customers. Some businesses in Canada may use shipping hubs located outside Canada to supply their Canadian customers. The absence of examples on this point may lead to disputes if the CBSA’s position is not further clarified.

To bring “purchaser in Canada” in line with the last sale rule, the CBSA is also proposing to redefine this term as whomever purchases or will purchase the goods. There will be no consideration of whether this person, which includes corporations, is the importer or the person making payments related to the goods. 

Potential impact for middle market companies

According to the CBSA, growth in e-commerce and a decline in brick-and-mortar stores have exacerbated the problem of VFD being determined based on a sale earlier in the supply chain. Companies that operate in the e-commerce space will consequently likely be impacted by these proposed changes. Similarly, companies whose sales into Canada are managed through third-party importers and warehouses will also likely be impacted by these rules.

The revised definition of “purchaser in Canada” will remove any link to “residency” or “permanent establishment”. This revised definition may change who is considered the Canadian purchaser of a particular good for the purposes of determining VFD.

For any good whose VFD is currently determined earlier in the supply chain than the last sale, these new rules will likely result in a higher VFD and by extension, higher custom duties.

Coming into force

The proposed language of the amendments may be modified because of these consultations. The CBSA has not established a fixed date on which these proposed changes will come into force.

1Duties definition – see sec. 2 Customs Act (R.S.C., 1985, c. 1 (2nd Supp.))
2Canada Gazette, Part 1, Volume 157, Number 21: Regulations Amending the Valuation for Duty Regulations
3Certain deductions may be allowed and should be reviewed see 48(5)(b) of the Customs Act
4The increase in amounts owing including the GST will result in higher operational costs for security/bond purposes
5See 45-53 of the Customs Act (R.S.C., 1985, c. 1 (2nd Supp.))

RSM contributors

  • Cassandra Knapman
  • Jaime Seidner
    Managing Director

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