A “value for duty” must be declared for all goods imported to Canada in accordance with the valuation provisions of the Customs Act (the Act), regardless of the circumstances of their importation. Since the value of imported goods determine the amount of customs duty, Canadian Customs authorities are getting more strict about the enforcement of rules for the correct valuation of imported goods. It is for this reason, more and more compliance verification audits are focusing on the issue of area of valuation of traded good. Importers are, therefore, required to keep complete records in support of import value for their duty declaration. If customs authorities ask for this record, importer must make available documents like: commercial invoices, agreements, cost allocation schedules, proof of payment, or other data that will support their value for duty declaration and calculations.
WHAT TRANSMANNA CAN DO FOR YOU ?
If you want to make sure that your imported items are correctly valued for duty and you are not in any difficult situation, please contact us for your assistance. Transmanna can use our expertise to make sure that:
- Examine your import export polices, processes, and procedures etc.
- Understand the nature of traded products with cost structure, pricing and production.
- Review all the related import documents with exiting and required record keeping practices.
- Evaluate all your value determination methods and try to find out any mistakes and recommend the correct ways of determination of values.
- Explain all the steps involved in the valuation of imports for customs duty.
How Value is Determined ?
Canada and most of her trading partners value imported goods based on the rules included in the World Trade Organization’s Valuation Agreement , which is also referred to as the Customs Valuation Code. This code establishes a fair, uniform and neutral system for valuing goods in accordance with commercial reality, and prohibits the use of arbitrary or fictitious customs values. Its goal is to ensure that the customs value of all goods entering all countries is established using the same rules, and that the valuation of goods is not a barrier to trade. Following are the six valuation methods which are applied in this hierarchical order
Six Value Determination Methods
|1||Transaction Value Method||
Transaction value method takes into account the price paid by the exporter to importer for the goods as per sales contract plus some adjustment for fees, commissions, insurance, packing and transportation etc.
|2||Transaction Value of Identical Goods Method||
If actual transaction value is not available then the transaction value of identical goods is used provided the physical characteristics, quality is similar, goods produced by the producer of the goods being valued (some exemption apply) and goods are produced in the same country as the goods being valued and exported into Canada about the same time as the goods being valued.
|3||Transaction Value of Similar Goods Method||
If the transaction value of identical goods is not available, then transaction value of similar goods is used provided the physical characteristics and quality is similar, goods perform the same function and goods are produced in the same country as the goods being valued and exported into Canada about the same time as the goods being valued.(Not necessary by same person).
|4||Deductive Value Method||
Deductive value is determined on the basis of the unit sales price in the domestic market of the imported goods being valued or of identical or similar goods after making deductions for such elements as profits, customs duties and taxes, transport and insurance, and other expenses incurred in the country of importation.
|5||Computed Value Method||
In order to determine the value for duty under the computed value method, it is important to know the cost of production of the goods being appraised. Then amounts are added to account for profit made and expenses incurred on sales for export. The total amount forms the basis for calculating the value for duty of the goods being appraised.
Finally, when non of the above methods solve the valuation problem, then we use “Fall back/Residual Method wherein we reconsider the requirements of the first five methods in sequence and then flexibly apply the method that requires the least amount of adjustment using information that is available in Canada.
Value for duty cannot be established under the residual method using the following approaches:
- the selling price in Canada of goods produced in Canada;
- the price of goods on the domestic market of the country of exportation;
- the cost of production, other than a computed value that has been determined for identical or similar
- goods under section 52 of the Customs Act
- the price of the goods for export to a country other than Canada;
arbitrary or fictitious values.