Chapter 3: Incorrect Product Valuation

Chapter 3: Incorrect Product Valuation

Every product arriving at the Canada border must be assigned a “valuation” that is used for a number of purposes, including assessing duties and other taxes, collecting accurate statistics and determining applicability of additional legal requirements.  However, determining the correct valuation can be complicated, since many factors may need to be addressed.  

CBSA provides six different methods for determining valuation, based on the unique characteristics of a specific product.  Importers are instructed to use the first of those methods, the transaction value method, whenever possible. If value for duty cannot be determined using the transaction value method, then alternatives should be utilized, in sequence, until an appropriate valuation can be determined.

Transaction value method

In general, according to CBSA, the value listed on a commercial invoice should be the price a buyer in Canada has paid for a product (and not the amount the goods will be sold for).  This is called the product’s transaction value, and should also reflect money paid for commissions, assists, royalties, production costs and packaging, and these items should be included on the commercial invoice.  

Transaction value of identical goods method

If the transaction value method cannot be applied, this method should be considered next.  Under this method, the value for duty is based upon the transaction value of identical goods accounted for under the transaction value method.

Transaction value of similar goods method

Under this method, value for duty is based on the transaction value of similar goods accounted for under the transaction value method.  

Deductive value method

Under this method, value for duty is based on the most common selling price per unit of the imported goods to Canadian customers.  

Computed value method

This consists of the cost of producing the imported goods, plus an amount for profit and general expenses that a supplier in the exporting country would incur when selling the same type of goods to customers in Canada, plus an amount for any assists that are not reflected in the production costs.

Residual basis of appraisal method

The residual basis of appraisal is used when all previous methods of valuation have been unsuccessful in determining valuation.  Under this method, requirements of the first five methods are considered – in sequence. A shipper then flexibly applies the method that requires the least amount of adjustment using information that is available in Canada.

CBSA’s Valuation Help is Available

To help importers properly determine valuation, CBSA makes available a publication, “Importer’s Valuation Guide:  How to determine customs value for duty.”  This publication provides an overview of each valuation method, and a step-by-step process to follow in identifying the appropriate method for a particular product.

Once a valuation is determined, that information is provided to CBSA and is listed on required Form-B3, C the Canada Customs Coding Form.

Customs agents will review, and if a valuation seems questionable, will either delay the shipment, pending additional information, or possibly reject the claim outright, and impose a financial penalty on the importer.