Proposal to amend the valuation for duty regulations

( Disponible en anglais seulement )

26 octobre 2023 | Daniel Kiselbach, MBA, Satinder Bains, Thomas Ghag

The Canada Border Services Agency (“CBSA”) is proposing amendments to the Valuation for Duty Regulations (Canada) (the “Regulations”). The CBSA takes the position that the current valuation rules provide an unfair advantage to non-resident importers (“NRIs”). The CBSA notes that NRIs have been able to use a sales price at an earlier stage of the supply chain to appraise the value for duty (“VFD”) declared to the CBSA. The proposed amendments are intended to target this perceived unfairness.

If enacted, the proposed amendments will result in the most significant changes to customs valuation rules in more than a generation. They are designed to require valuation declarations on the basis of the last sale in the supply chain that causes the goods to be brought into Canada (the “Last Sale Rule”). The price of the last sale is generally the highest price in the supply chain that causes goods to be brought into Canada. Since customs duties are based on the value of goods, the effect of the Last Sale Rule in the proposed amendments to the Regulations will be to drive up customs duty costs. Global traders should consider options for dealing with the Regulations to mitigate the effects of the Last Sale Rule if and when the proposed amendments are enacted.

Transaction value method

The primary method of appraising the VFD of imported goods is the transaction value method. Subsection 48(1) of the Canadian Customs Act (the “Customs Act”) sets out three requirements that must be met in order to apply the transaction value method. These requirements are:

  1. the imported goods were sold for export to Canada;
  2. the purchaser in the sale for export is the purchaser in Canada; and
  3. the price paid or payable for the goods can be determined.

The Supreme Court of Canada (“SCC”) in a decision in 2001 (Mattel Canada Inc. v. Her Majesty the Queen) provided guidance on the interpretation of the term “sale for export.”  That case held that  under section 48 of the Customs Act: (1) the relevant sale for export is the sale by which title to the goods passes to the importer; (2) the importer is the party who has title to the goods at the time the goods are transported into Canada; and (3) the importer may be the intermediary or the ultimate purchaser, depending on which party actually imports the goods into Canada. At present, a determination of whether a sale is for export exists does not necessarily involve the last sale in the supply chain in which goods have been brought into Canada.

The proposed amendment will uncouple the “sale for export” from the “transfer of title to the importer.” The term “sale” will be redefined to include agreements, arrangements or any other type of “understanding” that cause the goods to be exported to Canada. The proposed amendments will provide that if the goods are subject to more than one sale for export to Canada, the applicable transaction for VFD will be the last sale in the supply chain that brought the goods into Canada, irrespective of the chronological order of the sales. In short, the Last Sale Rule will mean that in a series of sales, the last sale to the buyer in Canada (and not an earlier sale between two foreign entities) must be used as the basis for appraising the VFD.

Purchaser in Canada

An analysis of whether or not there has been a sale for export to a “purchaser in Canada” is essential in order to value goods under the transaction value method. The transaction value method is the primary customs valuation method and is based on the price paid or payable for goods. Once the relevant “sale for export” has been identified, it is necessary to determine whether the purchaser in that transaction is a “purchaser in Canada.”

Sections 2 and 2.1 of the Regulations set out the requirements that a party must meet in order to be considered a purchaser in Canada.  A party will qualify as a purchaser in Canada either as (a) a resident individual or business, (b) a permanent establishment in Canada, or (c) neither a resident nor a non-resident having a permanent establishment, but importing goods for the purchaser’s own use or on the basis of speculation of future sales. Many global traders have planned their importation methods to minimize customs duties based on the current legislation. One typical planning structure is to create a Canadian subsidiary and operate a Canadian business in a “permanent establishment” that fits the “purchaser in Canada” definition.  In general, a qualifying “permanent establishment” is operated as a fixed place of business through which the business is operated by one or more employees or dependent agents. In this type of scenario, it is open to the Canadian subsidiary to declare the value for duty of goods based upon their supply price (not the ultimate Canadian consumer price).


The proposed amendments to the Regulations would completely change the current legislative scheme. The terms “permanent establishment” and “resident” would no longer be employed. The proposed amendments would instead focus on the valuation of goods based on the last sale to a Canadian customer/buyer in the supply chain.  The existence of a permanent establishment would no longer be useful for customs planning and duty minimization purposes. It will still be open to global traders to import unsold inventory and declare the value for duty of those goods based upon their foreign supply price, however, this is not  pragmatic solution for many businesses.  In light of this, many businesses have opposed the enactment of the proposed legislation. We are now waiting to hear from the Government of Canada as to whether or not it intends to enact the regulations as proposed or whether or it will try to incorporate the comments it has received.

Should you have any questions, please reach out to a member of Miller Thomson’s Global Trade and Customs group.

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