Consultation on Proposed Revisions to Valuation for Duty Regulations

January 23, 2026

Email: ctpd/dpsce@cbsa-asfc.gc.ca

Commercial and Trade Policy Division
Traveller, Commercial, and Trade Policy Directorate
Strategic Policy Branch
Canada Border Services Agency
Dear Sirs/Madams:

Re: Consultation on revisions to previously proposed amendments to the Valuation for Duty Regulations
The Canadian Bar Association (CBA), through its Commodity Tax, Customs and Trade Section and the International Trade Section (the “CBA Sections”), is responding to the “Consultation on revisions to previously proposed amendments to the Valuation for Duty Regulations”.¹

The CBA is a national association representing over 40,000 legal professionals, including lawyers, notaries, law professors, and students across Canada. Our mandate includes promoting the rule of law, improving access to justice, advocating for effective law reform, and providing expertise on how legislation impacts Canadians’ daily lives. The CBA Sections comprise approximately 2,500 members and work to enhance awareness and understanding of legal and policy issues in international law, including commodity taxation, customs, and trade.

The CBA Sections share CBSA's commitment to ensuring Canadian businesses compete on a level playing field and that customs duties are properly collected. However, as discussed in detail below, the proposed approach creates complexity and uncertainty that may impose costs exceeding the revenue benefits, while creating potential trade conflicts with Canada's partners.

1. Background

On December 3, 2025, the Canada Border Services Agency (the “CBSA”) published a notice of consultation regarding revisions to the previously proposed amendments to the Valuation for Duty Regulations (the “Regulations"). At the same time, the published notice referred to three intended revisions in paraphrased language, a copy of the proposed draft of the Regulations was not publicly provided and was not provided to the CBA Sections until significantly later, on December 30, 2025.

The published notice included the following statements:

"The CBSA is committed to transparency and open dialogue with the importer community. We work to ensure that importation requirements are clear, fair, and consistently applied. We aim to safeguard the Canadian economy by enforcing regulations that foster equitable trade and eliminate any unfair advantages, helping Canadian companies to compete on a level playing field."

The CBSA also asked for feedback on “key concerns” raised during the 2023 consultations, which are stated to be:

• Unintended inclusion of domestic sales as a sale for export to Canada; and
• Misalignment with the Customs Valuation Agreement.

However, as discussed in more detail below, the consultation process lacked transparency and did not achieve the CBSA’s stated objectives. Moreover, the CBSA's revised Regulations entrench the use of domestic sales as export sales to Canada, create uncertainty, and, contrary to Parliament's intent, continue the misalignment with the rules of international trade established in the WTO Customs Valuation Agreement.².

2. Submission

The CBA Sections make the following recommendations:

• The Regulations should be released in full to the public, and an adequate consultation process should be undertaken that clearly sets out the CBSA’s objectives and considers the previously provided submissions on how to satisfy those objectives in a way that is consistent with the WTO Customs Valuation Agreement.
• The Regulations should be revised to reflect Parliament’s stated intention when it introduced the “purchaser in Canada” requirements, including that:
  • The Regulations should be simplified so that importers can readily comply.
  • Vague terms in the Regulations should be clarified.
  • The Regulations should not require importers to establish conditions based on information beyond their knowledge and control.
  • The Regulations should not purport to delegate powers to the CBSA in a manner contrary to the delegation of regulation-making powers vested in the Governor in Council under section 164 of the Customs Act.
  • The Regulations should be written consistently with the WTO's rules and the WTO Customs Valuation Agreement, as expected by Canada’s international trading partners and as expressed by the Supreme Court of Canada: The Regulations serve as the basis for computing duty on importation and should not rely on the valuation of domestic sales transactions.

3. Discussion

The CBA Sections have significant concerns with the consultation process, which lacked transparency and open dialogue with the importing community. In addition, the proposed Regulations do not achieve CBSA's stated objectives and would have significant negative effects on resident and non-resident importers, including small businesses in Canada. Without a cost-benefit analysis, there is substantial risk that compliance costs and economic disruption could far exceed the additional duty collected by the CBSA, at a time when Canadian businesses are already struggling with inflation and the increased cost of imports due to changes in global tariff policy.

Specifically, the consultation process lacked transparency and openness, and the Regulations are extraordinarily complex, generate uncertainty, are inconsistent with the WTO Customs Valuation Agreement and international customs principles, and are inconsistent with Parliamentary intent.

A) Lack of transparency and openness

The CBA Sections are concerned about the lack of transparency and openness in the consultation process, which provided unequal information to different members of the importing community. The 52-day consultation period from December 3, 2025, to January 23, 2026, is extremely short, given the holiday period and the broad and significant implications of the proposed Regulations. We understand that several trade associations' extension requests were denied. More importantly, the Regulations were not widely published.

While we appreciate that some of our members received a draft copy of the Regulations, along with certain other associations and importers, recipients were asked not to share the consultation draft with the CBA's membership writ large, or with their colleagues or clients. Our colleagues, clients, and other interested parties had access only to the CBSA's summary of the regulatory changes under consideration; however, the summary did not provide sufficient detail to assess the potential unintended consequences of the proposed changes accurately. The published summary cannot be considered accurate and fulsome advance notice of the Regulations on which importers could rely because the paraphrased summary language mischaracterizes the actual wording of the proposed regulatory text in material respects. This consultation has not met the requirements of the Cabinet Directive on Regulation³, which mandates open, transparent, and inclusive consultation that engages meaningfully with regulated communities and with decision-making supported by evidence and robust cost-benefit analysis. A transparent, open process involves providing the same information to all interested parties.

The lack of transparency is particularly concerning because the proposed Regulations, as drafted, are likely to have a very significant and negative effect on both resident and non-resident importers, Canadian resident companies that have integrated some of their operations with their non-resident parent or related entities, and indeed even wholly Canadian resident companies that engage in importing goods for further distribution in Canada. Under the proposed Regulations, transactions involving many Canadian entities would no longer qualify as sales for export, even if the purchaser has a very substantial physical presence in Canada and is subject to filing returns under the Income Tax Act. Not being able to share the details of the Regulations with these entities in a manner that allows them to respond to the CBSA’s consultations is not fair or equitable.

The CBSA should release the full text of the Regulations to the general public, clearly define its intended objectives, with supporting evidence of the challenges being addressed, and initiate a longer and more substantive consultation process, involving meetings with interested associations and/or industry groups, to receive comments and submissions with a view to arriving at regulations that are consistent with the CBSA’s objectives and also with the WTO Customs Valuation Agreement and that of Canada’s trading partners.

B) The proposed Regulations are extraordinarily complex, creating uncertainty.

Under the proposed Regulations, a significant change is that determining the correct duty value will be a complicated, and in many cases impracticable, process for many importers. To declare the correct value for duty, the proposed Regulations will require the importer to:

1. Identify all the agreements, understandings, or any other type of arrangements in a supply chain that meet the definition of a sale for export, including even those to which they are not a party.
2. Determine whether the particular agreement, understanding, or arrangement is the one respecting the last a of ownership in the supply chain; and
3. Whether the agreement, understanding, or arrangement identified in (b) is excluded from being the sale for export to a purchaser in Canada based on specific attributes of, and activities undertaken by, each of the parties to that agreement, understanding, or arrangement.

Unfortunately, key terms in the Regulations for the first requirement (identifying the relevant agreements) are vague and are likely to result in substantial litigation and judicial interpretation.

In addition, the second requirement (determining which agreement governs the last transfer of ownership) is an uncertain exercise and inconsistent with WTO rules. Again, this is expected to result in further substantial litigation and judicial interpretation.

Finally, the third requirement is based on information that is unlikely to be known to the importer. With respect to the third requirement in particular, the stated purpose of Revision 3 in the CBSA’s consultation notice is to exclude sales between two persons located in Canada from being considered the “sale for export to Canada”. However, the Regulations are structured to mandate the inclusion of such sales only if both parties to the transaction satisfy all 8 specific conditions, and to impose a reverse-onus on the importer to demonstrate that its import transaction meets those conditions. While the importer would know their own facts, it is unlikely they would know enough about their customer to determine whether all the conditions are met.

In general, the uncertainty created by these vague draft Regulations is expected to result in significant non-compliance and litigation, essentially requiring importers to restructure their businesses after complying with the existing “purchaser in Canada” provisions over the past 30+ years.

a) The “sale for export to Canada” may not be the sale of the goods to the legal importer.

As we noted in our submission in 2023⁴. It is critical that Canada, as a signatory to the WTO Customs Valuation Agreement, adhere to the internationally accepted principle that a sale for export must, by definition, involve an actual [legal] sale agreement between the parties. There is no suggestion in World Customs Organization materials that an “understanding” or an “arrangement” between two parties would be sufficient to satisfy the legal definition of “sale” for export to the country of importation, or that the terms "understanding", "arrangement", and "sale" can or should be interpreted as interchangeable. Even in Canada, the terms “understanding” and “arrangement” in the proposed Regulations are vague and inconsistent with long-established common law jurisprudence regarding the legal definition of a "sale". In addition, the phrase “for the purpose of exporting [the goods] to Canada" is also vague. As the intended meaning of these terms is unclear, importers will have difficulty identifying the potential agreements, understandings, or arrangements that may constitute the relevant sale for export to Canada under these provisions, particularly where complex supply chains with multiple sales and channels are involved.

Also, the importer may not be a party to the agreement, understanding, or arrangement in a series of transactions. The determination as to which "agreement", "understanding", or "arrangement" in a series that has been made for the purpose of exporting the goods to Canada for sale to a purchaser in Canada is fraught with uncertainty. As discussed above, it would also result in the transaction value being determined in a manner wholly out of line with WTO rules and the laws of Canada's largest trading partner to the south. In the current environment of trade tensions and potential tariff actions, creating unnecessary regulatory divergence from U.S. practices risks providing additional grounds for trade retaliation or dispute.

b) The “last transfer of ownership” requirement (proposed Subsection 2.01(3))

The final "transfer of ownership" concept raises significant questions and uncertainty about how an ownership transfer will be identified and determined for customs valuation purposes. Neither the summary nor the proposed Regulations provides any indication of how this critical issue will be analyzed in practice, or how the "last transfer" will be identified. As noted, what matters is the timing of the ownership transfer—not the timing of the sales agreements themselves.
Unless the parties expressly address it in their written agreement, the determination of when ownership transfers in a sales contract is a matter of provincial jurisdiction. Approaches differ across Canada, including under Quebec’s civil law regime. This creates an initial threshold issue: one must first determine the applicable law and then assess whether, and when, ownership transfers under that law.

Another issue is whether this framework will require multiple, concurrent ownership-transfer analyses depending on the jurisdiction. For example, if the buyer is located in Ontario rather than Manitoba, or if the goods enter Canada through Quebec rather than British Columbia.

This is yet another example of how onerous and difficult appraising the value of goods could become if these proposed Regulations are enacted. Determining the value for duty under the transaction value method should not be this complex.

c) Importers are unlikely to know, or have a right to know, the information needed to exclude a domestic transaction from being the last “sale for export."

To exclude a domestic transaction from being the last “sale for export”, the Regulations require the following information that is unlikely to be known by the importer:

(1) Sales to an individual who “ordinarily resides in Canada”. While sales to an individual who ordinarily resides in Canada would be excluded, a resident retailer would not know whether the individual purchasing their product is ordinarily resident in Canada. The individual could be a student, a temporary resident, or a visitor. Of even greater concern, an importer who is not the retailer would not be privy to such a transaction. Even if the importer were a retailer selling directly to individuals, they have no way of knowing if those individuals ordinarily reside in Canada or are acting as purchasing agents for a business.

(2) Sales to persons other than individuals. For a sale transaction made between persons other than individuals to be excluded from consideration as the “sale for export to Canada”, both persons must satisfy all eight specified conditions. The resident importer/vendor may have no knowledge or right to know the information relevant to satisfying these conditions. For example:

(i) each person’s “primary place of business” must be physically located in Canada and must be the place from which its employees work, but a “branch” is excluded outright, as are offices or places of business of any of its agents or representatives. A person may have several places of business, and it may operate through remote workers, which is especially common after COVID-19. Thus, this requirement is out of touch with current business practices. A foreign-based company may operate in Canada through a "branch”, but that branch may have many employees and significant operations in Canada. It may generate valuable revenues subject to Canadian income tax. There is no basis to exclude a branch from consideration as a person with a significant presence in Canada. Furthermore, the importer who sells to such a person will not necessarily be in a position to confirm whether they are selling to the “primary place of business”, a "branch", or the premises of its agents or representatives. For example, an arrangement between a Canadian retailer and a Canadian branch of a non-resident entity incorporated in another jurisdiction would be treated as a sale for export to Canada and subject to import duties, regardless of the Canadian branch's size.

(ii) the person "orders and purchases the goods from its primary place of business". While the importer may receive orders from its customer from a particular place, the vendor will not be in a position to know or assess whether that is the customer's "primary" place of business. There should be no requirement that a “place of business” in Canada be the “primary” place of business of the person.

(iii) the person has "decision-making power over the purchasing of and payment for the goods, and over its day-to-day operations in Canada". To what extent a person has such powers is not known to the other contracting party, and thus it is not reasonable to impose this sort of knowledge requirement on the parties. A principle of corporate law is the "indoor management rule," which provides that a corporation is considered to be acting in compliance with its internal procedures. It is neither reasonable nor consistent with longstanding corporate law principles to require one party to investigate whether its customer or vendor has decision-making authority to buy or sell goods, or from which jurisdiction that authority is exercised.

(iv) the person “processes requests in Canada from its clients in relation to goods it imports, including with respect to defects and returns”. Companies often outsource issues involving defects and returns or have a policy of disposing of such products or donating them to charity. A party may deal with the varied manner in which returns or defects should not cause a transaction involving that party to qualify (or not) as a “sale for export to Canada”. Additionally, some manufacturers expressly require purchasers to deal with the manufacturer for defects and returns, rather than the immediate vendor, and it is not clear why this should affect customs valuation.

(v) the person “keeps its records, including books of account, in Canada". All importers are already required to keep import records in Canada, but may receive permission from the CBSA to keep such books outside of Canada. Given that the CBSA regularly grants such permission to maintain books and records outside of Canada, the place where books and records are kept should have no bearing on whether a transaction qualifies as a “domestic” transaction or a possible “sale for export to Canada”.

(vi) the person "holds its primary bank accounts in Canada". It is not reasonable to expect a party to know or to enquire whether the other contracting party has its “primary” bank accounts in Canada. Such a requirement has no place in a regulation seeking to define the “sale for export to Canada”.

(vii) the person "holds fixed assets in Canada". It is not reasonable to require a party to know or inquire of the other party to a transaction whether it holds fixed assets in Canada, nor is it clear how this requirement is relevant to the valuation of imported goods. Furthermore, "fixed assets" is not defined, and if interpreted based on the common legal and commercial meaning this requirement could have the effect of allowing only businesses that own capital equipment to be a "purchaser in Canada", meaning that many non-manufacturing companies or Small and Medium Enterprises that may not own physical assets beyond some minor movable property such as laptops, merchandise inventory or office furniture would not qualify.

(viii) the person is “liable to pay income tax in Canada”. This is the only relevant requirement for determining whether a purchaser has a substantial presence in Canada, thereby constituting a "purchaser in Canada" contributing to the Canadian economy. In the CBA Sections’ view, the fact that a person is liable to pay income tax in Canada is all the evidence required to show that the person has a sufficient presence in Canada such that the transaction involving it should not be considered in the determination of a “sale for export to Canada”, and would have the added benefit of bringing customs valuation law in line with income tax law. However, it should be clear that while a person may be “liable” to pay income tax, it should not be necessary for purposes of showing substantial presence in Canada that the person actually pays income tax, as the amount of income tax payable in a given tax year could be affected by many factors, including profits, depreciation expenses, etc., which is not relevant to the valuation of imported goods. The only condition or requirement necessary to offset any customs duty “loophole” is that the person is resident or deemed resident in Canada for purposes of the Income Tax Act and, as such, is required to file income tax returns in Canada; this would mean that such a person is incorporated in Canada or has a substantial permanent residence in Canada under international tax treaties. This can be confirmed in discussions with the Canada Revenue Agency.

There are numerous additional examples we can provide of problems with each of the listed criteria. Still, to keep the submission shorter, we have identified only some of the more significant ones. The specified conditions currently in draft paragraph 2.01(4)(b) of the Regulations will result in fewer transactions qualifying for transaction value, contrary to the intent of Article VII of the GATT and of the WTO Customs Valuation Agreement. Similarly, contrary to CBSA's objective, the sale for export on which duty is payable will include domestic sales in Canada between entities that the average person would consider "residents" of Canada.

C) 'Not consistent with the WTO Customs Valuation Agreement

The CBSA’s interpretation of the “misalignment with the Customs Valuation Agreement” appears to focus on how its proposed broad definition of “sale for export to Canada” might conflict with the list of “excluded situations” identified in Advisory Opinion 1.1 of the World Customs Organization’s Customs Valuation Compendium. Thus, Revision 1 adds a new subsection to ensure that excluded situations identified in Advisory Opinion 1.1 of the World Customs Organization's Customs Valuation Compendium are not considered a "sale for export to Canada". The CBSA specifically identifies “consignment arrangements”, leased goods, and other scenarios where there is no transfer of title of the goods in an annex to the notice.

However, the draft Regulations do not align with the consultation document. Instead, draft subsection 2.01(2) of the Regulations seeks to incorporate by reference an as-yet-unpublished Customs D-memorandum (D13-1-4) “as amended from time to time”.

This is a problematic delegation of authority as it would permit the CBSA to change laws and regulations applicable to customs matters solely by revising a Customs D-memorandum. However, the authority to make regulations is exclusively granted to the Governor-in-Council under section 164 of the Customs Act. While we acknowledge that section 164.1 of the Customs Act authorizes any regulation made under the Act to incorporate by reference any material regardless of its source and either as it exists on a particular date or as amended from time to time, it would be improper for the CBSA to be able to “amend” its own D-memo in such a way that its contents extends beyond the Advisory Opinion 1.1 situations and thus would have resulted in a substantive change to the Regulations without any involvement by the Governor-in-Council.

Apart from the foregoing, and as stated in the CBA’s 2023 submission, we remain concerned that the proposed Regulations are incompatible with the WTO Customs Valuation Agreement. The Preamble to the WTO Customs Valuation Agreement sets out certain general principles of customs valuation by which WTO member countries are expected to abide, including:

… to provide greater uniformity and certainty …

The intent of the Valuation Agreement is for WTO member countries to apply the valuation rules uniformly, ensuring that they are predictable and certain.
… the basis for valuation … should, to the greatest extent possible, be the transaction value of the goods being valued …

The Valuation Agreement intends that the Transaction Value method be applied wherever possible.

… customs value should be based on simple and equitable criteria consistent with commercial practices …

Despite the foregoing, the proposed draft Regulations stray from uniformity with Canada’s trading partners, create confusion, lead to many more instances in which an alternative to transaction value will be applied, and are not based on simple and equitable criteria.

A significant inconsistency between the draft Regulations and the WTO Customs Valuation Agreement is the use of domestic sales as the "sale for export to Canada", which is specifically not contemplated by the Valuation Agreement. As the CBA noted in its 2023 submission, the World Customs Organization Customs Valuation Committee, in its Commentary 22.1, concludes that

… in a series of sales situation, the price actually paid or payable for the imported goods when sold for export to the country of importation is the price paid in the last sale occurring before the introduction of the goods into the country of importation, instead of the first (or earlier) sale. This is consistent with the agreement's purpose and overall text. (emphasis added)

However, the draft Regulations instead will require valuation to be based on a post-importation domestic transaction involving a buyer and seller in Canada if each of the eight conditions specified in draft paragraph 2.01(4)(b) are not satisfied. As the Customs Valuation Committee has stated in its Commentary 22.1, the CBSA's approach is not consistent with the purpose and overall text of the agreement. The CBA recommends that the “Revision 3” amendment be rescinded because it will result in the valuation of imported goods being based on post-importation domestic transactions. At a minimum, the "Revision 3" criteria should apply only to the status of the importer and not be extended to parties and transactions entered into after the importation of the goods.

This misalignment is particularly evident in e-commerce and drop-shipment supply chains. Under the proposed amendments, customs valuation for e-commerce drop-shipment models would likely be captured when there is no business with a substantial presence in Canada in the supply chain. As a result, the value for duty would be based on the sale to the Canadian end customer. This outcome is inconsistent with the 2024 World Customs Organization Guidelines on E-Commerce Fulfilment and its Implications for Customs, which conclude in Case Study 2 that valuation should be based on the transaction between the vendor and the drop-shipper as it reflects the actual commercial value of the goods, and not on a post-importation domestic or consumer-facing transaction.
Therefore, the CBSA’s proposed Regulations are inconsistent and even further misaligned with the WTO Customs Valuation Agreement than the previous version of the draft Regulations on which the CBSA commented in 2023.

D) Not consistent with WTO Rules or Parliament’s Intentions

Canada’s customs valuation rules are not unique to Canada and must be based on international legal agreements to which Canada is a party. They are based on Article VII of the General Agreement on Tariffs and Trade and on the Agreement on Implementation of Article VII of the GATT, also known as the "Customs Valuation Agreement". There is nothing in Article VII or in the Customs Valuation Agreement that requires or allows a member country to require valuation to be based on the price charged to a “resident” as opposed to a “non-resident” importer. However, the draft proposed Regulations clearly and specifically impose such a requirement, which makes the draft revisions inconsistent with the WTO Customs Valuation Agreement and the customs valuation laws of Canada's trading partners, such as the United States and the European Union.

Furthermore, a “residency” requirement was not the intention of Canada's Government when the "purchaser in Canada" provisions were first enacted as part of the Customs Act in 1995, through the passage of Bill C-102 (S.C. 1995, c.41). For example, during the third reading debate, Mrs. Diane Brushett (Cumberland-Colchester, Lib.), stated as follows (at 1215):

The transaction value of goods shall be determined by ascertaining the price paid or payable for the goods when the goods are sold for export to Canada. We have changed that. The proposed amendment to subsections 45(1) and 48(1) is that we define the purchaser in Canada. The value for duty of goods is the transaction value of those goods if the goods are sold for export to Canada to a purchaser in Canada. Those are the key words, "purchaser in Canada", and the price paid or payable for those goods can be determined. This is not a change in the business process here. It is simply a clarification”. (emphasis added)
Mrs. Brushett addressed presentations made to the Finance Committee regarding this change, which was about this amount to a residency requirement. She was inconsistent with WTO rules and the laws of Canada's trading partners, and she confirmed that these changes were not intended to create a new requirement and that they were consistent with international trade rules (at 1220):

Presentations were made to our committee … in opposition to this bill, more specifically to this very section, "purchaser in Canada". They said this is a residency requirement; this is new. We argued that it was not new, that it was simply clarification, identifying the purchaser in Canada, and that it had been the practice of Customs and Tariffs Canada for the past decade; it was simply clarification, and we complied, not confrontation, with our world trading partners. (emphasis added)

It should be noted that these statements of legislative intent from the Bill C-102 debate are consistent with the Supreme Court’s statement in Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc., 2001 SCC 36, [2001] 2 S.C.R. 100 (“Mattel”), that “[r]esidency is a concept that is totally foreign to the determination of value for duty under the Customs Act” (para. 40), and that for “the purposes of determining whether a sale is for export, the residency of the purchaser or of the party transporting the goods is not material” (para. 45).

The CBSA’s “Revision 3” will most certainly impose a residency requirement and further misalign Canada with its trading partners, contrary to the Government’s expressed intentions when first implementing the "purchaser in Canada" provision. Should this be the Government's intention, a formal public consultation, including pre-publication of the draft Regulations in Part I of the Canada Gazette and referral to relevant Parliamentary Committees, should be required before any such changes are made to Canada’s customs valuation laws.

If this does not occur, the CBSA risks raising the ire of Canada’s trading partners and undermining its reputation as a country that abides by international trade rules. These concerns are especially poignant in today's political environment, in which Canada is actively seeking to strengthen its international trade arrangements, and trading partners may be seeking trade irritants to leverage in negotiations. The CBA Sections take the view that avoiding unnecessary regulatory divergence that could be characterized as discriminatory or non-compliant with international obligations is essential for advancing Canada's trade policy interests.

E) CBSA’s Revision 2 leads to valuation based on domestic sales transactions

The CBSA’s Revision 2, as incorporated into proposed subsection 2.01(5) of the Regulations, proposes that the transaction value method will not apply where the “last sale” is an excluded situation by reference to Advisory Opinion 1.1. However, the provision provides that if an excluded situation arises in an earlier sale in a series of sales, it will not disqualify the transaction from the transaction value method. When considered in light of draft subsection 2.01(5), this approach could result in the valuation of imported goods based on a domestic transaction, which is contrary to the CBSA's expressed intent for the draft regulations.

The Supreme Court of Canada in Mattel has stated that

For valuation under s. 48 of the Customs Act, the relevant sale for export is the sale by which title to the goods passes to the importer. The importer is the party who has title to the goods at the time the goods are transported into Canada (para. 45).

Based on the foregoing, the approach taken by the Canadian International Trade Tribunal is to determine which is the appropriate "sale for export" and then to consider whether the purchaser in such sale for export is a "purchaser in Canada". If not, then transaction value does not apply, and the subsequent valuation methods must be considered in hierarchical order, as required by the Customs Act.

The proposed Regulations, if they take effect, would replace the Supreme Court’s decision by requiring in proposed subsection 2.01(3) instead that if “the goods are subject to two or more agreements … the applicable agreement for [sold for export to Canada definition] is the one respecting the last transfer of ownership of the goods in the supply chain…". Should the proposed Regulations be implemented, then it follows that the phrase “sale for export to Canada”: (per subsection 2.01(2)) “does not refer to” any excluded situation as per Advisory Opinion 1.1 and is determined by: “not taking into account” domestic sales (sales in which both of the parties satisfy the requirements of Revision 3 or subsection 2.01(4)).

Thus, by operation of the various provisions, the “last sale” could be one of a series of sales occurring before any of the above-referenced excluded sales. However, by virtue of Revision 2 and subsection 2.01(5), should the last sale be a sale that is excluded and in respect of which only one of the parties meets the conditions of subsection 2.01(4), there will be no “sale for export”, meaning that a subsequent valuation method must be considered in hierarchical order, pursuant to the Customs Act. However, if the "last sale" involves a transaction in which both parties satisfy the conditions for a "domestic sale" in subsection 2.01(4), that sale will be used as the “sale for export to Canada”. This approach removes the possibility that an earlier appropriate sale could qualify as the “sale for export to Canada”. Instead, it could result in a valuation of goods improperly based on a domestic sale between two persons resident in Canada.

4. Summary and Conclusion

The consultation process has not been transparent and does not represent an "open dialogue" with the importer community. The CBSA has not released the full text of the proposed Regulations to the general public, but has only released selected summaries of the revisions. In addition, the proposed Regulations do not achieve the CBSA’s stated objectives, lack clarity, introduce uncertainty into the meaning of “sale for export to Canada”, impose unreasonable and impracticable burdens on importers to establish, and thus improperly lead to valuation based on domestic sales transactions.

As a constructive alternative, we request that the proposed Regulations not proceed in their current form and, instead, that there be a formal public consultation, including publication of the full draft regulations, cost-benefit analysis and hearings before appropriate Parliamentary Committees to ensure Canada’s intentions align with the significant changes to the Canadian customs valuation regime proposed by the CBSA.
The CBA Sections appreciate the opportunity to provide comments on these proposed regulatory changes and respectfully request a meaningful opportunity for further engagement before the regulations are finalized. We remain available to engage further and provide additional technical input that effectively address CBSA's revenue and enforcement concerns while maintaining WTO compliance, practical administrability, and consistency with Canada's international trade commitments.

Yours truly,
(original letter signed by Noel Corriveau for Jesse Waslowski and Ljiljana Stanic)