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In brief

On May 27, 2023 the Canada Border Services Agency (CBSA) introduced amendments (“Amendments“) to the Valuation for Duty Regulations (“Regulations“), which will alter existing Canadian customs valuation rules. The Amendments intend to clarify the “sale” used to establish the value for duty under the transaction value method for all goods imported into Canada. Effectively, the Amendments propose a “last sale” approach to customs valuation, which has the potential to increase the declared value for duty of imported goods, directly increasing duties and taxes owing, and indirectly increasing the cost of doing business in Canada. 

The Amendments, published on May 27, 2023, are subject to a 30-day consultation period which closes on June 26, 2023. The Amendments, the supporting Regulatory Analysis Impact Statement, and the information regarding how to submit comments on the proposed Amendments are available here.

What are the proposed changes to existing Canadian laws?

The Customs Act (“Act“) sets out the six hierarchical methods to establish the declared value for duty (VFD) of imported goods. The “Transaction Value Method” is the first, and most commonly applied method, under which the VFD is calculated using the price paid or payable in the sale for export of the goods to a purchaser in Canada, as adjusted up or down for certain costs (e.g., assists, royalties and licensing fees, transportation fees).

Sale for Export

“Sale for export” is not defined in the Act or Regulations; however, the Supreme Court of Canada has narrowly interpreted this legislative terminology to mean a sale where there is a transfer of title.

The Amendments introduce the following definition of “sold for export to Canada”:

2.01 (1) For the purposes of subsection 45(1) of the Act, sold for export to Canada means, in respect of goods, to be subject to an agreement, understanding or any other type of arrangement — regardless of its form — to be transferred, in exchange for payment, for the purpose of being exported to Canada, regardless of whether the transfer of ownership of the goods is completed before or after the goods are imported.

(2) If the goods are subject to two or more agreements, understandings or other types of arrangement described in subsection (1), the applicable agreement, understanding or arrangement for the purposes of that subsection is the one respecting the last transfer of the goods in the supply chain among the transfers under those agreements, understandings or arrangements, regardless of the order in which the agreements, understandings or arrangements were entered into.

Under this new definition, the relevant sale for calculating VFD is the “last sale”. This means that the declared VFD will be the price of the last transaction that causes the goods to be imported into Canada. Transaction is defined as “agreements, understandings or arrangements”. A sale or an agreement to sell is not a prerequisite; a sale does not need to be concluded prior to the importation of goods. Accordingly, this new definition vitiates the connection between a transfer of title and the sale for export to Canada for purposes of “sold for export to Canada”.

Purchaser in Canada

The Amendments repeal the current definition of “purchaser in Canada”. Currently, the Regulations list the criteria to determine whether an entity is a “purchaser in Canada”, which have subsequently been interpreted by Canadian courts and tribunals. The criteria on whether an entity is a “purchaser in Canada” are as follows:

  1. A resident, an entity the management and control of which is in Canada.
  2. A non-resident with a permanent establishment.
  3. A person who is neither (1) nor (2) and who imports the goods for their own consumption in Canada, or for sale if the person has not entered into an “agreement to sell” the goods to a Canadian resident before the purchase of the goods (i.e., importation on speculation).

The Amendments propose to define “purchaser in Canada” as the person who purchases or will purchase the goods in the relevant sale for export to Canada:

2.1 For the purposes of subsection 45(1) of the Act, purchaser in Canada means, in respect of goods that are the subject of an agreement, understanding or any other type of arrangement referred to in section 2.01, the person who, under that agreement, understanding or arrangement, purchases or will purchase the goods, regardless of whether the person is the importer of the goods or when the person makes payments in respect of the goods.

Accordingly, the Amendments purport to remove the link between the concepts of “resident” and “permanent establishment”. In other words, a minimal business presence in Canada using a permanent establishment will no longer be sufficient under the law to constitute a “purchaser in Canada”.

What is the legal effect of the Amendments?

In short, the proposed Amendments will cause the declared VFD to be based on the “last sale” price of the transaction that causes the goods to be imported into Canada. The current method, of assessing when title transfers, or whether the purchaser is a resident or maintains a permanent establishment will be moot.

Have the Amendments come into force?

The Amendments are not yet law. The Amendments were published in Part 1 of the Canada Gazette for a 30-day consultation period. The government has not specified when the Amendments will come into force and become law.

Who is impacted by the Amendments?

The government states that the draft amendments target non-resident importers (NRI). As drafted, the Amendments will also affect Canadian resident importers. There will also be knock-on effects on costs for retailers, wholesalers, and e-commerce sellers. Canadian consumers will also be indirectly affected by these Amendments, as the cost of doing business for retailers will increase. Those costs will likely be passed on to Canadian consumers.

Were the Amendments expected?

In July 2021, the CBSA launched a preliminary consultation regarding amendments to the Regulations (“Consultations“), where it proposed to 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. The Consultation was completed and there were no further communications from the CBSA to the public prior to the Amendments being published in the Canada Gazette on May 27, 2023.

What are the enforcement concerns for importers once the Amendments are in force?

Importers that are declaring a VFD that does not reflect the transaction price of the sale to an “actual buyer located in Canada that brought the goods into Canada” may be subject to a future trade compliance verification focused on valuation. We expect that verifications will focus on the “sale” or transaction that results in the goods being imported into Canada. The CBSA purports to interpret “sale” broadly to include purchase commitments, purchase orders, intents to purchase, arrangements, and any other type of understanding that causes goods to be imported into Canada.

Importers failing to value their goods in compliance with the Amendments may be subject to adjustments to the declared VFDs of their imports, interest at a punitive rate, and administrative monetary penalties.

What is the rationale behind the Amendments?

The Amendments are in response to a developing body of cases where the Canadian International Trade Tribunal has held that the appropriate transaction for the declared VFD is the transaction between a foreign manufacturer and an NRI. In this scenario, the NRI fulfills the order to the Canadian-resident buyer and the lower transaction price (between the foreign manufacturer and the NRI) is the declared VFD, and not the transaction price between the NRI and the Canadian-resident buyer. The CBSA has historically challenged this method of valuation and considers it a regulatory gap in the application of the transaction value method, which unfairly benefits NRIs.

Will the CBSA enforce the Amendments immediately or will there be a transition period?

The CBSA has not explicitly stated whether there will be a transition/grace period for enforcement of the Amendments once they become law. However, the CBSA has stated that it would aim to conduct communication and outreach activities in order to inform internal and external stakeholders on the Amendments, which suggests that there will be some forewarning to importers before the coming into force of the Amendments and their subsequent enforcement by the CBSA.

What are the recommended next steps for importers affected by the Amendments?

Importers should contact their legal counsel to discuss the effects of the proposed Amendments on their Canadian supply chain and the methodology applied to determining the VFD of imported goods.

Baker McKenzie’s Canadian trade and customs team has the requisite experience and expertise to advise on the Amendments and how they will affect an importer’s Canadian supply chain.


Julia Webster is a disputes and international trade lawyer. She advises companies on trade remedies, free trade agreements, blocking measures, customs compliance, anti-corruption laws, economic sanctions, AML compliance, supply chain ethics, and cross-border M&A.


Jacqueline Rotondi practices commercial, regulatory, competition and international trade law as a member of Baker McKenzie's Global International Commercial and Trade Groups.

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