The Canadian Society of Customs Brokers (CSCB) has received a response from the Canada Border Services Agency
(CBSA) to a request for clarification on Customs Notice N-585, Deductions from the Price Paid or Payable (Paragraph 48(5)(b) of the Customs Act).
CSCB: Our interpretation of this notice is that importers must deduct certain amounts when they are included in the price paid or payable in order to arrive at the correct value
for duty of imported goods.
CBSA: Correct. Importers must comply with the legislative requirement to adjust identified in paragraph
48(5)(b). As indicated in Customs Notice N-585, this obligation must be satisfied when an importer has knowledge of the actual amount a charge for a deduction. N-585 refers the reader to D13-3-3, which provides
additional information on the identification of "actual transportation costs".
CSCB: However, this deduction cannot be taken
if documentation is not available to support that deduction. Is this interpretation correct?
CBSA: No. N-585 does not state that the
deduction cannot be taken. An importer is obliged to make a deduction if the actual amount is known at time of customs accounting. If documentation to support a deduction is not available at time of customs accounting
an importer can still make the deduction in their VFD calculation, but may be required to self-correct after importation if the deduction cannot be substantiated.
CSCB: In many cases, exporters indicate an amount in field 23(i) of the Canada Customs Invoice. (Field 23(i) is reserved for transportation charges, expenses and insurance from the
place of direct shipment to Canada, included in the invoice total). Does this mean that importers and brokers must determine whether or not the amount shown in field 23(i) can be validated before it can be deducted?
CBSA: No. An importer is not obliged to obtain documentation in support of a VFD calculation prior to customs accounting.
CSCB: With G7 1-step; PARS; and ACI - all designed to facilitate processing in advance of the arrival of the goods - this type of verification is
virtually impossible. Was this your intention?
CBSA: The intent of N-585 is to communicate that an importer is obliged to make
deductions identified in paragraph 48(5)(b) from the price of goods only when the importer knows that the amount of the charge included in the price is the actual charge for that item.
As well, if there is an
invoice on hand that indicates a certain amount of freight included in the value, and it is now mandatory to take the deduction, is there an obligation to confirm that the amount shown on the invoice is correct?
A deduction from the price of goods is only mandatory when an importer knows that the amount of the charge to be deducted is the actual amount of the charge.
CSCB: Or will the invoice on hand be enough to constitute reason to believe?
CBSA: Given the
response to the question immediately above, if an importer has only (for example) a sales invoice or CCI indicating that an amount for freight is included in the selling price and is not confident that the information
is correct, the importer is not obliged to make the deduction in their VFD calculation.
CSCB: What documents are acceptable in order to
support the amount deducted, especially in the case of freight deductions?
CBSA: N-585 refers the reader to D13-3-4, which identifies
documents (including freight invoices and bills of lading) acceptable to establish the place from which freight charges included in the price of goods can be deducted. However, any document completed by a party with
knowledge of the actual amount of a charge to be deducted from the price of goods could conceivably be used to support a calculation of value for duty.
CSCB: Currently, if goods are duty free, importers are not concerned with whether or not deductions are taken. There is no duty payable, and the GST is recovered through input tax
credits. By making it mandatory for importers to take deductions, another step has been added to the import process. The result is an uneven playing field between importers of duty free and dutiable goods, since
importers of dutiable goods who have not taken deductions are not obliged to correct, since the corrections would result in a refund of duty.
CBSA: All importers are required to comply with the legislative provisions of the Customs Act. If any importer is aware prior to customs accounting of the actual amount of a
paragraph 48(5)(b) deduction that is included in the price of goods, they are obliged to consider the deduction in their value for duty calculation. The differences in self-correction obligations between dutiable and
duty-free goods are not limited to the valuation program, and concerns in this area should be addressed to our Trade Incentives Programs colleagues. |
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