Not All Design Costs Count For Duties!

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For businesses importing goods into Canada, the transaction value method (“TVM”) is the most commonly applicable method for determining the value for duty (“VFD”) under the Customs Act. However, for Canadian subsidiaries of foreign businesses, disputes often arise with the Canada Border Services Agency (“CBSA”) over VFD-related issues such as (1) the relevant “sale for export”, (2) purchaser in Canada status, and (3) inclusion of various design costs.

In a recent decision, the Canadian International Trade Tribunal (“CITT”) found that a Canadian subsidiary of a US business qualified to use the TVM and that certain design costs for unsuccessful models of imported goods do NOT need to be included in the VFD.