Values should be calculated in the following manner taking into account the adjustments provided in subsection 48(5) of the Customs Act.
a) Price paid or payable for the goods including all direct and indirect payments to the vendor or for his benefit
b) Additions, if applicable (if not already included in a), above
- Commissions incurred by the purchaser (selling commissions only)
- Packing costs (domestic and export packing)
- The value of assists i.e. goods or services supplied free or at a reduced cost by the purchaser for use in connection with the production and sale for export of the imported goods
- Royalties and license fees related to the sale of the goods
- Subsequent proceeds, accruing to the vendor
- Transportation, insurance and associated costs up to and at the point of direct shipment
c) Deductions, if applicable (if included in a), above
- Transportation, insurance and associated costs from the point of direct shipment
- Construction, erection, assembly costs, etc., after importation
- Import duties and taxes
The following provides a guideline to each of the costs itemized:
Transportation & Associated Costs
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Are there transportation and associated costs related to the transportation of goods to the place in the country of export from which the goods are shipped directly to Canada? Place of direct shipment is defined as the place from which the goods begin their direct and uninterrupted journey to Canada with no stoppage at intermediate points except for transshipment.
Are there any discounts and rebates currently prevalent, where there is a price reduction, either at the time of the transportation contract or subsequent to the agreement? Is that amount deducted in determining the actual transportation costs being claimed on the Canada Customs Invoice?
Transportation and associated costs comprise:
1. the cost of transportation (this charge will normally include freight charges directly associated with the movement of goods, i.e. the cost of moving freight by vehicle, aircraft, waterborne craft, or any other contrivance);
2. loading, unloading and handling charges (this category may include, in addition to the obvious charges, customs brokers' and freight forwarders' fees; lighterage; as well as the cost of filling and emptying reusable commercial containers, i.e. container freight station charges);
3. other charges and expenses associated with transportation (this category includes general transportation costs such as export documentation fees; inspection charges; weight and measurement certificates; demurrage; warehousing fees at the port of embarkation; gassing or fumigation fees; refrigeration, etc); and
4. the cost of insurance relating to transportation (this category specifically relates to the cost of insurance covering loss or damage in transport).
Assists( Back to Top)
Are assists provided in relation to your imported goods? Are they included in the value for duty? If they are not included, how are they accounted for with Customs?
1. "Assists" is a term used to describe any of the following goods or services provided directly or indirectly by the purchaser of the goods, free or at a reduced charge for use in the connection with the production and sale for export of imported goods:
- materials, components, parts and other goods incorporated in imported goods;
- tools, dies, moulds and other goods utilized in the production of imported goods;
- any materials consumed in the production of imported goods; and
- engineering, development work, art work, design work, plans and sketches undertaken elsewhere than in Canada and necessary for the production of imported goods.
2. Engineering, development work, art work, design work, plans and sketches which are undertaken in Canada are not regarded as assists.
Royalties and License Fees( Back to Top)
Are any royalties or license fees paid to your vendors? If so, to whom and for what reason? Is the amount included in the declared value for duty for goods imported into Canada?
1. Royalties and license fees are regarded for customs purposes as payments made or to be made in consideration of the acquisition or use of a protected right.
2. Royalty and license fees are paid for the acquisition or the right to use, copyrights, patents, trademarks or designs.
3. Patents, trademarks, and copyrights are rights granted under national law for the protection of intellectual property.
4. the term payments made in respect of the goods means the remittance to the vendor, or a third party, is in some way related to the goods being imported.
5. For customs purposes, a royalty or license fee payment is considered to be a condition of sale when goods cannot be purchased (under either the terms of the royalty or license fee agreement or the purchase/sale agreement for the goods) unless a royalty or license fee is, or is agreed to be, paid. The obligations for payment may be either an explicit or implicit condition of sale.
Commissions and Brokerage( Back to Top)
In determining whether commissions and brokerages charges affect the value, the following must be considered: (It should be noted that the term "brokerage" does not refer to charges by a customs broker for services rendered in respect of the clearance of the goods through customs)
1. Is the agent related to the vendor?
2. In the case of orders cancelled or amended by the purchaser, does the agent have to take a proprietary interest in the goods or necessarily assume the responsibility for re-selling the goods?
3. Where shipping and handling costs exceed or are less than the amount agreed to by the purchaser, does the agent absorb the excess or retain the difference?
4. Does the agent at any time acquire, or is the agent liable to acquire, a proprietary interest, or assume risk of ownership, in the goods?
5. Does the agent assume, at any time, the risk for damaged or lost goods?
6. If the agent pays the vendor for the goods, does the agent obtain, for his own account, any discounts or rebates given by the vendor?
7. Does the purchaser control the activities of the agent by specifying; the quantities to be purchased? The name(s) of the vendor(s)? the type and quality of the merchandise? The price to be paid? The method and time of the shipment?
8. Does the agent receive from the purchaser all necessary funds prior to being responsible for paying the vendor for the goods?
9. Is the commission charged based on a percentage of the invoice price?
Agents and Brokers( Back to Top)
Agent
Agents are persons who buy or sell goods, possibly in their own name, but always for the account of a principal
Selling Agent
Selling agents are persons who act for the account of a vendor; they seek customers and collect orders and, in some cases, may arrange for storage and delivery of the goods.
Buying Agent
Buying Agents are persons who act for the account of a purchaser and perform their functions out of funds provided by that purchaser.
Broker
Where the term "broker" is in use, it generally refers to agents who do not act on their own account; they act for both vendor and purchaser and usually have no role other than to put both parties to the transaction in touch with each other.
Discounts( Back to Top)
Discount refers to an arrangement whereby the vendor, in return for the purchaser's undertaking certain obligations or accepting or meeting certain conditions, reduces the amount of the price paid or payable for the imported goods.
This can include terms discounts (1% 10, net 30), trade discounts, and volume discounts. If the importer is taking the discount, it can be deducted from the transactional value. However, if the discount is deducted at the time of clearance, and not used at the time of payment to the vendor, the value used at the time of Customs clearance must be amended. Similarly, if a discount is not deducted at the time of clearance, but is used at the time of payment to the vendor, the accounting entry at Customs must also be amended.
Warranties( Back to Top)
Where the selling price of imported goods includes a payment for a warranty or a purchaser pays a warranty payment separately to the vendor in respect of the imported goods, such a charge is considered to be part of the price paid or payable for the goods and is included in the transaction value.
Storage Expenses( Back to Top)
Storage expenses paid by the purchaser either directly or indirectly to or for the benefit of the vendor for goods stored abroad at the time of the sale for export to Canada are part of the price paid or payable. For example, a vendor agrees to sell goods to a purchaser for a specified price, provided that the purchaser also pays to an independent warehouse operator the cost of storage for the goods which accrued before the sale. Since this storage payment is for the benefit of the vendor, it is included in the price paid or payable for the goods.
Credits in Respect of Earlier Transactions( Back to Top)
The reasons a credit is granted by a vendor may include, but are not limited to, the following:
1. a manufacturing fault in goods previously supplied;
2. damage suffered by the goods in an earlier shipment; or
3. the goods do not conform to contract specifications (e.g., different kind or quality of goods)
In any of the above situations, the vendor and the purchaser may agree on compensation and arrange for a credit to be granted. The price paid or payable for a subsequent transaction may be invoiced at the usual selling price for the goods, less the amount for the credit. Where this occurs, the credit amount is to be disregarded when calculating the price paid or payable for the goods being appraised. Whether the credit amount can be used as the basis for a re-appraisal of the goods to which it relates is a question of fact to be decided on a case-by-case basis.
Settlement of a Debt( Back to Top)
Where a purchaser settles a dept on behalf of the vendor, that is, for his benefit, then that debt is included as part of the price paid or payable for the goods and deemed to be dutiable for Customs purposes.
Price Escalation Clauses( Back to Top)
A price escalation clause is a clause inserted in a contract of sale which permits, under specified conditions, upward adjustments in price. If the price paid or payable increases, due to the existence of a price escalation clause, after the goods are sold for export, the increase is to be reflected in the price paid or payable for the goods.
Export Duties and Taxes( Back to Top)
The amount of any duties and taxes that are paid or payable to the government of the country of export in respect of the imported goods by reason of the goods having been exported is to be treated as part of the price paid or payable for those goods.
Subsequent Proceeds( Back to Top)
If some portion of the proceeds of the subsequent resale, disposal, or use of the imported goods by the purchaser accrues to the vendor, directly or indirectly, then the value of that portion is to be included in the transaction value.
Export Packing Costs( Back to Top)
The following costs and charges or expenses, incurred by the purchaser in respect of the goods imported, are to be included in the transaction value:
1. packing costs and charges, including the cost of cartons, cases, and other containers and coverings that are treated for customs purposes as being part of the imported goods; and
2. all expenses of packing incident to placing the goods in the condition in which they are shipped to Canada.
It should be noted that both labour and material costs are to be considered in determining the expenses of packing incident to placing the goods in the condition in which they are shipped to Canada
Costs Arising After the Goods Have Been Imported( Back to Top)
Any reasonable cost, charge, or expense that is incurred for specified services provided after importation, if identified separately from the price paid or payable for the goods, is not to be included in the transaction value of the goods. The specific services are:
· construction
· erection
· assembly
· maintenance, and
· technical assistance
It should be noted that "reasonable cost, charge, or expense" is an amount which the importer is able to substantiate with documentary evidence
Import Duties and Taxes( Back to Top)
Duties and taxes such as those levied under the Customs Tariff, the Excise Tax Act, the Excise Act and the Special Import Measures Act, would, if they form a part of the price paid or payable and are identified separately, be deducted from that price. The amount for those duties and taxes may be identified separately on the invoice presented to customs or expressed as a percentage of the price paid or payable. In all cases, the amount to be deducted from the price paid or payable must be the actual amount of Canadian duties and taxes levied.
Quota Payments( Back to Top)
The term "quota" in respect of imported goods refers to a right granted in an exporting country to an allocation of a specified quantity of certain goods for export to Canada. The goods identified in the quota will be under some form of export restraint negotiated by the appropriate authorities in Canada and the country of export. The total quantity which may be exported is usually allocated by the authority in the country of export, free of charge, among manufactures who have a history of exporting to Canada. The quota is then used by the exporter to obtain the necessary export license to authorize the export of a specified quantity of the goods to Canada.
Quotas are generally sold or charged for in four ways;
a) charged for by the original holder, together with the goods he has manufactures and sold to the importer;
b) sold without accompanying goods, by the original holder to an exporter of goods;
c) sold without accompanying goods, by the original holder to a middle man, or broker, who in turn sells to either an exporter of goods, or to an agent in the country of export who is acting on behalf or the importer; or
d) sold without accompanying goods, by the original holder to an agent in the country of export who is acting on behalf of the importer.
In situation a), above, the amounts invoiced for the goods and the quota, whether or not invoiced separately, will be considered to be payments made or to be made, in respect fo the goods, directly to the vendor. As such, they will form part of the price paid or payable for determining the value for duty of the imported goods.
Where the exporter of the goods has purchased quota as described in items b) and c), and either sells the goods to an importer at a price which is sufficient to recover both the cost to him of the quota and the selling price of the goods, or invoices the importer separately for the goods and the quota, the total amounts invoiced to the importer for the goods and the quota are to be taken into account in determining the price paid or payable for the goods. This applies even if the exporter was acting on behalf of the importer when he bought the quota.
In circumstances described in items c) and d), where the importer, through his agent, acquires and pays for the quota and is free to choose from which vendor the goods are purchased, the payment for the quota is to be included in the price paid or payable.