Industry News

CBSA Re-evaluates Dutiability of Certain Post-Importation Charges

September 3, 2009


In June 2009, the Canadian government approved a change to its Customs Act requiring that certain subsequent proceeds be added to price paid or payable for the purposes of calculating value for duty.  The Canadian Border Service Agency’s (CBSA) guidelines regarding the change in law are published in Memorandum D13-4-13.

Importers, particularly those dealing with related party sales into Canada, should pay close attention to CBSA’s new interpretation of “subsequent proceeds.”   According to CBSA, “subsequent proceeds” includes “any type of payment made by a purchaser after the importation of goods into Canada.”  In addition, the Customs Act provides that the payments may be made to the vendor directly or indirectly through a third party. 

As an example, CBSA’s Memorandum analyzes whether management or administrative fees should be dutiable.  Historically, CBSA had held that such charges were not part of the transaction value of imported merchandise.  However, according to the change in law, such amounts “may meet the criteria to be subsequent proceeds, since the payments are remitted to the vendor after the importation of goods and they are often based on the resale, disposal, or use of the goods in Canada.”  In order to determine whether such fees may be excluded from the transaction value in accordance with their current “discretionary administrative policy,” CBSA recommends the evaluation of three factors:

·        the services were rendered to operate a business in Canada

·        the amount of the charge was in accordance with an arm’s length agreement

·        the services provided are “justified” for operating the business in Canada

As a result, multi-national importers may need to revisit the valuation of their merchandise imported into Canada.  If you have any questions about whether a post-importation charge should be included in the transaction value of merchandise imported into Canada or for additional information pertaining to this recent change in CBSA policy, please contact a Barnes/Richardson attorney.