Clarify last-sale rule for import valuation

Summary#

This is a proposed change, published in the Canada Gazette on May 27, 2023, that would change how the value for duty (the price used to calculate customs duties) is chosen for goods imported into Canada. The goal is to close a gap that lets some foreign-based sellers (non-resident importers) use an earlier, lower-priced sale instead of the sale that actually caused the goods to be brought into Canada.

What it does#

• Defines “sold for export to Canada” so a “sale” can include agreements, purchase orders, intents to purchase, and other arrangements that cause goods to be sent to Canada.
• Says that when goods go through several sales before entering Canada, the VFD must be based on the last sale that caused the goods to be exported to Canada (the “last sale rule”).
• Changes the definition of “purchaser in Canada” so it means the person who buys (or will buy) the goods in that final sale, and removes references to “resident” and “permanent establishment.”
• The amendments are proposed (not yet in force) and would come into force when section 212 of the Budget Implementation Act, 2021 takes effect. The Canada Border Services Agency asked for comments within 30 days of publication.

Who's affected#

• Non-resident importers (NRIs) — businesses based outside Canada that sell and ship goods to Canadian buyers.
• Canadian importers and retailers who compete with NRIs.
• Cross-border e-commerce sellers, customs brokers, and freight providers who help bring goods into Canada.
• Canada Border Services Agency (CBSA), which enforces customs valuation rules.
• It is unclear exactly how many individual businesses will see price or duty changes; the proposal cites past verification data showing many affected NRIs were in the United States.

Why it matters#

• The change aims to level the playing field between foreign-based sellers and Canadian importers by stopping the use of an earlier, lower-priced foreign sale to set customs value.
• The government expects higher customs revenue if the rule is applied: an estimated $181.8 million in duties in 2023, rising to $273.2 million by 2031, with an average of $224.7 million per year over the next decade. The agency also estimated an earlier period gap of about $14.7 billion in undeclared value (2016–19) and roughly $150 million in additional duties annually for NRIs.
• For consumers, the CBSA expects any price increases to be small because NRIs may absorb higher duties rather than raise retail prices. That outcome is an expectation, not a certainty.
• This is a proposed regulatory change. It would bring Canada closer to international customs valuation practice (the World Customs Organization “last sale” approach), but it still needs to complete the regulatory process before it becomes law.