TORONTO: The Canada Border Services Agency (CBSA) has made some significant changes to its position on the treatment of downward price adjustments in value for duty calculations, including situations in which the downward price adjustment is caused by a transfer pricing agreement between related parties. As discussed below, the changes amount to a complete reversal of the CBSA’s prior published positions on downward adjustments and, as such, will be of considerable benefit to many importers.
From a legal standpoint, it is noteworthy that paragraph 48(5)(c) of the Customs Act (the “Act”) disregards, for purposes of determining the value for duty, any rebate of, or other decrease in, the price paid or payable that is effected after importation. The CBSA’s previous position was that any post-importation rebate should be disregarded under paragraph 48(5)(c) of the Act even if the parties had agreed to the rebate prior to importation. The CBSA’s new position, as outlined in the Notice, appears to be in line with the March 21, 2014 ruling of the Canadian International Trade Tribunal (the “CITT”) in Hudson’s Bay Company v. President of the Canada Border Services Agency (AP-2012-067). In that decision, the CITT determined that a post-importation price reduction is not to be disregarded on the basis of paragraph 48(5)(c) of the Act to the extent that the reduction results from an agreement to reduce the price that was in effect at the time of importation. Indeed, the Notice makes it clear that paragraph 48(5)(c) actually addresses downward adjustments effected after importation but only where the agreement between the vendor and purchaser to reduce the price paid or payable of the imported goods is entered into after the importation of such goods. Under those circumstances, no correction of the declared value for duty of the goods can be made and no refund is available.
To this end, the CBSA states: “where an agreement in writing was in effect at time of importation to later reduce the [price paid or payable] of imported goods and the price reduction subsequently occurs, a correction made under the authority of section 32.2 of the [Act] is necessary if the importer is provided with specific information giving reason to believe that a declaration of value for duty is incorrect, and the correction would be revenue neutral.” On the other hand, where the correction would not be revenue neutral and would instead result in a claim for a refund of duties, the CBSA is now taking the view that the importer may request a refund of duties pursuant to paragraph 74(1)(e) of the Act.
