A "value for duty" must be declared for all goods imported to Canada in accordance with the valuation provisions of the Customs Act (the Act), regardless of the circumstances of their importation. The value for duty is the base figure on which duty you may owe on your goods is calculated. Even if you do not owe duty, the value for duty of goods must still be established so that any applicable assessment of the goods and services tax, provincial sales tax or harmonized sales tax may be calculated.
Sections 44 to 56 of the Act, Valuation for Duty Regulations, Direct Shipment of Goods Regulations and Currency Exchange for Customs Valuation Regulations address customs valuation requirements.
Methods of valuation
Value for duty must be established using one of the six methods of customs valuation identified in sections 48 to 53 of the Act:
- Section 48 - transaction value method
- Section 49 - transaction value of identical goods method
- Section 50 - transaction value of similar goods method
- Section 51 - deductive value method
- Section 52 - computed value method
- Section 53 – residual basis of appraisal method
You have to use the first of the six methods, the transaction value method, whenever possible to determine the customs value of imported goods.
If you cannot establish the value for duty of your imported goods using this first method, you must consider the alternatives in sequence and identify the method that is appropriate.
Memoranda in the D13 series specifically address customs valuation.
1. Transaction value method - Section 48 of the Act
The transaction value method is the primary method of valuation. It applies where goods are sold for export to Canada to a purchaser in Canada. Under this method, value for duty is based on the price paid or payable for imported goods with consideration to certain adjustments.
In order to determine whether your importation can be valued under this method, the following questions about the transaction between the vendor and the purchaser should be addressed:
- 1. Were the goods "sold for export" to Canada? Refer to Memorandum D13-4-2, Customs Valuation: Goods Sold for Export to Canada.
- 2. Were the goods "sold to a purchaser" in Canada? Refer to Memorandum D13-1-3, Customs Valuation: Purchaser in Canada.
- 3. Can the "price paid or payable" be determined? Refer to Memorandum D13-4-3, Customs Valuation: Price Paid or Payable.
- 4. If the purchaser and vendor are related, can you demonstrate that the relationship did not influence the price paid or payable for the goods? Refer to Memorandum D13-4-5, Transaction Value Method for Related Persons.
- 5. Are there any limitations on the use of the transaction value method such as, restrictions, conditions, or unknown subsequent proceeds? Refer to Memorandum D13-4-4, Limitations on the Use of Transaction Value Method.
If the answer to questions 1, 2, 3 and 4 is "yes" and there are no limitations, as outlined in question 5, the transaction value method must be used. The transaction value should be calculated with consideration to the adjustments to the price paid or payable identified in subsection 48(5) of the Act.
For more information refer to the Memoranda D13-4 sub-series.
2. Transaction value of identical goods method - Section 49 of the Act
If the transaction value method cannot be applied, consider this valuation method next. Under this method, the value for duty of your goods is based upon the transaction value of identical goods accounted for under the transaction value method.
The transaction value method of the identical goods can be adjusted if there are any differences in trade level, quantities, or transportation costs between the identical goods and the goods being appraised, to arrive at the value for duty of your goods (refer to Memorandum D13-5-1, Application of Sections 49 and 50 of the Act).
3. Transaction value of similar goods method - Section 50 of the Act
If the transaction value of identical goods method cannot be applied, consider this valuation method next. Under this method, value for duty is based upon the transaction value of similar goods accounted for under the transaction value method. This transaction value can be adjusted for any differences in trade level, quantities or transportation costs, in the same manner as in the transaction value of identical goods method (refer to Memorandum D13-5-1, Application of Sections 49 and 50 of the Act).
4. Deductive value method - Section 51 of the Act
If the transaction value of similar goods method cannot be applied, a valuation under the deductive method must then be considered unless you have requested that the order of application of Sections 51 and 52 of the Act be reversed.
Under this method, the value for duty is based on the most common selling price per unit of the imported goods to Canadian customers (at the first level of trade after importation). You can deduct from the most common selling price an amount that represents the commissions, or the profit and general expenses, incurred in selling the goods in Canada.
You can also deduct amounts for the transportation costs of the goods from the place of direct shipment to Canada, Canadian duties and taxes and the costs of assembly, packaging or further processing of the goods in Canada.
Costs in Canada for warehousing, distribution and delivery can also be deducted if they are not already included in the deduction for profit and general expenses.
For additional information on the deductive value method refer to the Memoranda D13-7 sub-series.
5. Computed value method - Section 52 of the Act
Under the computed method, value for duty is based on the cost of producing the imported goods, plus an amount for profit and general expenses that a supplier in the exporting country would incur when selling the same type of goods to customers in Canada, plus an amount for any assists that are not reflected in the production costs.
For more information, refer to Memorandum D13-8-1, Computed Value Method.
6. Residual basis of appraisal method - Section 53 of the Act
If all the previous methods of valuation have been examined and been found not to apply to the circumstances of the importation of the goods being appraised, you must establish your value for duty under the residual method of valuation.
The residual method does not identify specific requirements for determining value for duty. Rather, you reconsider the requirements of the first five methods in sequence and then flexibly apply the method that requires the least amount of adjustment using information that is available in Canada. The value for duty you establish using the residual method must be fair and reasonable, and should reflect commercial reality.
Memorandum D13-9-1, Residual Basis of Appraisal Method, provides examples of how the residual method might be applied.
You cannot establish a value for duty under the residual method using any of the following approaches:
- the selling price in Canada of goods produced in Canada;
- a system which provides for the acceptance for customs purposes of the higher of two alternative values;
- the price of goods on the domestic market of the country of exportation;
- the cost of production, other than a computed value that has been determined under Section 52 of the Act;
- the price of the goods for export to a country other than Canada;
- minimum customs values; or
- arbitrary or fictitious values.
In addition to explaining the requirements of the six individual valuation methodologies, the D13 memoranda series also provides instruction on establishing the value for duty of specific goods or in unique scenarios.
The Memoranda D13-2, D13-3, D13-10, and D13-11 sub-series provide information on specific valuation challenges that may be encountered when identifying the value for duty of imported goods.
Valuation program information
You have to keep complete records in support of your value for duty declaration for six years. If the Canada Border Services Agency (CBSA) asks for this information, you must make it available for review - refer to Memorandum D17-1-21, Maintenance of Records and Books in Canada by Importers.
Paragraph 152(3)(d) of the Act states that the burden of proof in any question relating to compliance with the provisions of the Act, lies with the person who is party to the proceeding, and not with the Crown. Items such as commercial invoices, agreements, cost allocation schedules, or proof of payment may support your value for duty declaration and calculations.
You have to declare the value for duty of all goods you import to Canada in Canadian currency. Values expressed in a foreign currency must be multiplied by the exchange rate recognized by the CBSA in effect on the date that the goods began their direct and uninterrupted journey to Canada. Information on how to identify the place and date of direct shipment of imported goods is included in the Memoranda D13-series.
If you have information giving you reason to believe that the value for duty you declared is not correct, an adjustment to your value for duty declaration may be necessary. For more information, refer to Memorandum D11-6-6, Self-Adjustments to Declarations of Origin, Tariff Classification, Value for Duty and Diversion of Goods.
Commercial importers may apply for a National Customs Ruling (NCR). An NCR is a written statement by the CBSA outlining how provisions of existing customs legislation apply to an importation. NCRs are provided as an administrative service for the convenience and guidance of individual importers. For more information on how to apply for an NCR refer to D11-11-1, National Customs Ruling (NCR).
For more information, within Canada call the Border Information Service at 1-800-461-9999. From outside Canada call 204-983-3500 or 506-636-5064. Long distance charges will apply. Agents are available Monday to Friday (08:00 – 16:00 local time / except holidays). TTY is also available within Canada: 1-866-335-3237.
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