Question

please discuss Memo D13, vAluation. please discuss the differences between section 48-53 of the customs act.

Answer 1

Memoranda in the D13 series specifically address customs valuation. Information about the individual valuation methods is given in Memorandum D13‐3‐1, Methods of Determining Value for Duty

1.   Under the Customs Act (the Act), the primary basis of determining the value for duty of imported goods is the transaction value method. This method and the five alternative methods of determination are identified in sections 48 to 53 of the Act. The sequential order of these methods must be followed in order to determine the value for duty. The first of these methods, which can be applied to the circumstances of the transaction involving imported goods, must be used. In only one instance can the sequence in which the methods appear in the legislation be altered: the order of application of sections 51 and 52 of the Act can be reversed at the request of the importer. Section 47 of the Act contains the provisions relating to the sequential application of the various methods of valuation.

2.   The primary basis of determination and the five alternate methods are as follows:

Section 48 – The transaction value method
Section 49 – The transaction value method of identical goods
Section 50 – The transaction value method of similar goods
Section 51 – The deductive method of valuation
Section 52 – The computed method of valuation
Section 53 – The residual method of valuation

3.   Certain D Memoranda explains in detail the application of each method of valuation.

Transaction Value Method (Section 48 of the Customs Act)

4. The transaction value method is the primary method of valuation. It applies where goods are sold for export to Canada to a purchaser in Canada. Under this method, value for duty is based on the price paid or payable for imported goods with consideration to certain adjustments.   

You must determine if your goods were imported to Canada as a result of a sale. A sale requires a transfer of ownership of goods for a monetary amount (a price). While not an exhaustive list, examples of situations that would not be considered a sale for export to Canada are: goods imported on consignment, leased goods, barter transactions, trade‐ins, goods invoiced at no charge, package deals

Transaction Value Method of Identical Goods (Section 49 of the Customs Act)

5.  Under the transaction value of identical goods method, you calculate the value for duty of the goods you are importing based on the value for duty of other identical goods that were imported to Canada at the same or substantially the same time and accounted for under the transaction value method. "Identical goods" are defined in subsection 45(1) of the Customs Act and include goods that are the same in all respects, produced by or on behalf of the same person, and in the same country as the goods being appraised. You can adjust the customs value of the other identical goods to allow for differences in trade level, quantity, and transportation costs with the goods being valued. The resulting adjusted customs value of identical goods is an acceptable value for duty for the goods you are importing.

Transaction Value Method of Similar Goods (Section 50 of the Customs Act)

6. "Similar goods" are defined in subsection 45(1) of the Customs Act and include goods that closely resemble and are capable of performing the same functions, and that are produced by or on behalf of the same person, and in the same country as the goods being appraised. You can adjust the customs value of other similar goods to allow for differences in trade level, quantity, and transportation costs with the goods being valued. The resulting adjusted customs value of similar goods is an acceptable value for duty of the goods you are importing. It may be difficult for you to establish the value for duty of your imported goods under either the transaction value of identical or similar goods methods. Data in support of your declaration may only be available from other importers of identical or similar goods.  

Deductive Method of Valuation (Section 51 of the Customs Act)

7. Under the deductive value method, the value for duty is based on the importer's most common selling price per unit of the goods to Canadian customers (to persons at the first level of trade after importation). You can deduct from the most common selling price an amount that represents the commissions, or the profit and general expenses incurred in selling the goods in Canada. You can also deduct amounts for transportation costs from the place of direct shipment to Canada, Canadian duties and taxes and the costs of assembly, packaging or further processing of the goods in Canada. Costs in Canada for warehousing, distribution, and delivery can also be deducted if not already included in the deduction for profit and general expenses.

Computed Method of Valuation (Section 52 of the Customs Act)

8.   The computed value is the cost of producing the imported goods, plus an amount for normal profit and general expenses, that a firm in the exporting country would incur when selling the same type of goods to Canadian customers, plus an amount for any assists that are not reflected in a producer's costs. To use the computed value method, you must have detailed knowledge of the costs of producing the imported goods. Due to the confidential nature of such information, this valuation method is generally only used by an importer who is related to a vendor who is also the manufacturer of the goods.

Residual Method of Valuation (Section 53 of the Customs Act)

9.  If you cannot value your imported goods under the transaction value method or the four subsequent methods, you must use the residual method of valuation. The residual method does not identify specific requirements for determining a value for duty. Rather, you 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. The value for the duty you establish using the residual method must be fair and reasonable and should reflect commercial reality.

10. Appendices A to D to this memorandum contain calculation sheets, one for each method of valuation, which importers may use as an aid to assist in determining the value for duty. These sheets are not part of the documentation requirements for importing goods into Canada as contained in Memorandum D1-4-1, CBSA Invoice Requirements, and need not be submitted with entry documents. However, importers may wish to keep the calculation sheets on file in order to facilitate a review by the Canada Border Services Agency (CBSA) should this prove necessary.