"What You Need to Know About ‘Value for Duty’ When Importing to Canada"

The Canada Border Services Agency (CBSA) has designated customs valuation as one of the three major audit priorities.In particular, according to Memorandum D13-3-1 (dated April 7, 2014), customs valuation must be determined using six methods prescribed under Sections 47 to 53 of the Customs Act, applied in sequential order.(Source: Official CBSA documentation)

What is Customs Valuation?

For all imports, it is mandatory to determine the Fair Market Value (FMV) in Canadian dollars.This requirement applies regardless of whether the goods are dutiable, and includes:

• Samples

• Refurbished goods

• Warranty replacements

• Short-shipped items

The 6 CBSA Customs Valuation Methods(Sections 48 to 53 of the Customs Act)

At True Fulfillment, we assist clients in navigating these methods based on real-world experience.The six valuation methods must be reviewed in the prescribed order, unless otherwise requested by the importer (see Section 47(3)).

1. Transaction Value – Section 48

This is the primary method, based on the actual price paid or payable by a purchaser in Canada.Adjustments may be required for associated costs such as freight, insurance, or royalties.To be accepted, the declared price must meet the conditions of subsection 48(1), including:

• Was the sale made for export to Canada?

• Is the buyer located in Canada?

• Can the price be clearly determined?

📌 Reference: Memorandum D13-4-1

2. Identical Goods – Section 49

If transaction value cannot be used, the value is based on the sale of identical goods exported to Canada.Adjustments may be made for differences in quantity, commercial level, or shipping terms.

📌 Reference: D13-5-1

3. Similar Goods – Section 50

If identical goods are unavailable, the value is based on similar goods that are comparable in function, use, origin, and commercial interchangeability.Adjustments can also apply.

📌 Reference: D13-5-1

4. Deductive Method – Section 51

This method starts with the Canadian resale price of the goods, from which deductions are made for:

• Selling commissions

• Profit margins

• Freight and handling

• Duties and taxes

Importers may request to reverse the order of Method 4 and Method 5 (see Section 47(3)).

📌 Reference: D13-7-1, D13-7-3

5. Computed Value – Section 52

This method uses the cost of production, plus:

• General expenses

• Profit margin

Requires full access to the manufacturer's financial records.Importers may opt to reverse the order of Method 4 and 5 as allowed.

📌 Reference: D13-8-1

6. Residual Method – Section 53

Used when none of the previous five methods are applicable.This is a flexible method, intended to derive a fair and commercially realistic value with minimal adjustments.

📌 Reference: D13-9-1

Practical Pitfalls to Avoid

• All values must be reported in Canadian dollars, using the exchange rate on the date the goods began their direct and uninterrupted journey to Canada.

• For related party transactions, importers must prove that the declared price has not been influenced by the relationship. Otherwise, another valuation method must be used.

• Complete documentation (invoices, contracts, costing sheets, etc.) must be retained to support the declared value.Lack of supporting evidence may result in liabilities for the importer.

Tips for Execution

• Always review all six methods in order.However, Methods 4 and 5 may be reversed upon importer request under Section 47(3).

• CBSA memoranda (e.g., D13-4-1, D13-5-1, etc.) contain practical examples and guidance by valuation type.

• The CBSA Valuation Handbook includes calculation templates for practical use.

True Fulfillment is Here to Help

We provide consulting based on real import and e-commerce cases in Canada, including:

• Analysis of transaction structures, related party status, and cost adjustment elements

• Full review and documentation of the valuation process before import

• Assistance in preparing supporting documents for CBSA audit

Canadian E-Commerce: Opportunity or Risk?

Only sellers who are well-prepared for customs valuation can enjoy safe and sustainable growth.If you have any questions, feel free to reach out—True Fulfillment is your reliable partner from customs clearance to fulfillment.