CBSA Proposes Far-Reaching Changes to Canadian Customs Valuation Law

Bennett Jones LLP

Bennett Jones LLPProfound changes to the Valuation for Duty Regulations are on the horizon. We previously alerted readers that the federal government of Canada had included a number of provisions in its 2021 budget that would impact international trade and customs regulation in Canada. Among these were changes to customs valuation law intended "to improve duty and tax collection by ensuring that goods are valued in a fair and consistent manner by all importers as a means to level the playing field between domestic and foreign businesses."

Budget 2021 introduced changes to amend the definition of certain statutory terms through regulation. Exercising this power, the Canada Border Services Agency (CBSA) is consulting with stakeholders to gather views about its proposed changes to Canada's customs valuation regulations. Comments are due by July 4, 2021. If adopted, the proposed changes would significantly alter the criteria applied to determine the relevant sale transaction, and therefore the basis upon which customs duties (and GST) are calculated. These changes would affect the manner in which multinational enterprises organize their corporate affairs, international commercial transactions, supply chains for importations of purchased goods and procurement of services and intellectual property.

Under Canadian law, the primary basis upon which the value for duty is determined is the transaction value (i.e., the price paid or payable in the "[sale] for export to Canada to a purchaser in Canada"). The statutory phrases, "sale for export" and "purchaser in Canada," have been judicially considered by the Canadian International Trade Tribunal and the Federal Court of Appeal. The proposed measures appear to be directed to ostensible gaps between judicial interpretation and government policy as implemented by the CBSA, and seek to address key elements of the transaction value methodology that have been the subject of controversy between the CBSA and Canadian importers.

Given the extent of foreign investment in Canadian business, and the migration and centralization of many business functions to foreign affiliates, the proposed changes will have widespread effects. The time is ripe for Canadian importers to undertake a review of the impact of these changes on their business processes and costs.

The Consultation Notice

The CBSA Consultation Notice summarizes the purposes and hoped-for consequences of implementation of the proposed regulatory changes, together with examples of hypothetical sales transactions that illustrate the impact of the proposed changes in ordinary commercial situations.

The proposed regulatory changes are described in the Consultation Notice as follows:

1. Define the scope of "sold for export to Canada" to specify the relevant transaction for export which forms the basis of the transaction value of the goods.

This proposal would ensure that the value for duty of imported goods determined under the transaction value method is based on the sale that causes the goods to be exported to Canada (i.e., the last transaction in the commercial chain, irrespective of the chronological order of the sales). Under the proposal, the term "sale" would be constructed in a broad sense, which would include any type of arrangements that cause the goods to be exported to Canada.

2. Clarify the definition of "purchaser in Canada," as well as the associated definitions of "resident" and "permanent establishment," and ensure the relevant sale for export forms the basis of the transaction value of the goods.

The intent of these proposals is to remove any ambiguity on how to qualify as a "permanent establishment." To qualify, the person would need to:

  • be the purchaser of the goods imported to Canada;
  • have a fixed place of business in Canada, through which the goods are purchased; and
  • have the authority to enter into the arrangement/sale (the permanent establishment could not, under this proposal, be a conduit in the sale).

A non-resident importer, who does not have a permanent establishment, would only qualify as a purchaser in Canada if the goods were imported:

  • for their own use; or
  • on speculation of future sales (meaning the sale of the goods to a person in Canada was not arranged in any way before the goods arrived in Canada).


The identification of the sale for export amongst a series of potential transactions in a supply chain of goods shipped to Canada informs the amount of customs duties payable. Where the selected transaction is that taking place at a subsequent trade level in the supply chain, it will significantly increase duties (and GST) payable because of markups earned at each level. The proposed definition of a "sale for export" introduces an equivalence between the last sale in the chain and the sale for export that is not in harmony with the current judicial approach to the determination of the relevant sales transaction for the purpose of the transaction value method.

The changes to the definition of a "purchaser in Canada" introduces additional criteria that require not only a certain type of commercial presence in Canada, but also the undertaking of specific procurement functions within the territory of Canada. Importers, particularly those who obtain procurement and sales services from foreign affiliates, may find that these regulatory changes profoundly impact their entitlement to use the transaction value method based on the importers' purchase of goods from a foreign vendor, and give rise to a higher base upon which duties/GST are calculated.

The CBSA's proposed interpretation is likely intended to promote investment and employment in Canada, as well as to encourage the performance of functions undertaken within Canada's borders in respect of international commercial procurement and sales to Canadian customers.

The members of Bennett Jones' International Trade group have experience in these matters. By successfully addressing and in appropriate cases challenging many of the CBSA's customs valuation policies on behalf of our clients, we have made important contributions to the state of customs valuation law in Canada, prompting the federal government to take action. We know the law, we know where it has been, where it is going and we are particularly adept at its navigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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