What we heard report: Proposed regulatory amendments to the Valuation for Duty Regulations

Between May 27 and July 26, 2023, the Canada Border Services Agency (CBSA) invited interested parties to share their views on the proposed regulatory amendments to the Valuation for Duty Regulations. The proposed amendments seek to provide greater certainty when determining which sale for export to Canada to a purchaser in Canada should be used to determine the transaction value of goods under section 48 of the Customs Act.

The proposed regulatory amendments are to:

1. define the term "sold for export to Canada"
2. amend the definition of the term "purchaser in Canada"
3. clarify which sale is to be used to calculate the duty on imported goods
4. align with international obligations established at the World Customs Organization
5. level the playing field between resident importers and non-resident importers
6. reflect modernized business practices
7. provide greater certainty and predictability for the importing community
8. give the CBSA the authority to enforce the collection of the correct amount of revenue from import duties owed to the Government of Canada on lower value for duty declarations

In total, 335 individuals submitted feedback, either as representatives of a company, an industry body, or in anonymity. Feedback was received via the Treasury Board’s Online Regulatory Consultation System, by mail, and by email.

What we heard

The CBSA appreciates the views expressed by respondents through the consultation process. The detailed feedback sends a clear message that Canada’s trade chain partners are engaged and committed to working with the government to ensure that a consistent approach to valuing imported goods is achieved.

Many respondents supported the policy intentions behind the regulatory amendments, notably to ensure that, in a series of sales, the last sale to the buyer in the country of import (Canada) and not an earlier sale between 2 foreign entities is used as the basis for determining the value for duty. However, there was also substantial feedback raising concerns that the proposed language may not achieve the overall intent and could lead to unintended consequences.

The main concern was the potential for the proposed regulatory language to cause domestic sales to be used to determine the value for duty. Respondents expressed this could lead or contribute to:

• uncertainty for importers
• misalignment with the Customs Valuation Agreement established by the World Trade Organization (WTO)
• the need to reveal confidential pricing information
• increased costs for businesses
• increased inflation to Canadians as a result of increased value for duty

Due to the perceived potential for such unintended consequences, respondents requested the amendments be clarified to ensure the intent is achieved and Canadian resident importers are not impacted.

The CBSA also received comments surrounding the overall regulatory development process. Many respondents expressed interest in being part of the process and wished to be more involved prior to full implementation of these regulatory amendments. The comments relating to the timing of implementation were mixed, with some respondents requesting a delay in implementation to allow industry to adjust their practices.

CBSA response

As indicated in the consultation notice published on the CBSA's website on September 28, 2023, the policy objective is not to use a price in a sale between a Canadian resident importer and its Canadian customer as the basis for determining the value for duty. The CBSA does not anticipate the administration of these regulatory amendments to change anything for Canadian resident importers who are currently declaring their purchase price from their foreign supplier. Non-resident importers who currently declare their purchase price from their foreign supplier, as opposed to their sale price to a buyer located in Canada, will incur higher duty costs resulting from the regulatory amendments. However, this is necessary to level the playing field for all importers and achieve the objectives of the proposed regulatory amendments.

CBSA subject matter experts are working diligently with the Department of Justice to ensure the intent expressed in the Canada Gazette Part I is achieved, including consideration of all comments received. The CBSA understands the importance of clearly defining the terms "sold for export to Canada" and "purchaser in Canada" and appreciates the feedback provided in this regard.

The CBSA would like to thank all of the individuals that participated in the formal and informal consultative processes that have taken place as part of the regulatory development process, and values all of the feedback received. Amendments to the proposal are being considered to address stakeholder feedback and ensure clarity of the regulatory language.

Following implementation, the CBSA will be providing further clarification of the regulatory amendments through policy updates. These policy updates will be made publically available on the CBSA's website.