Deductive Value of Imported Goods Method

Transaction Value of Similar Goods Method

If no identical good exists, the next valuation method to be applied is for similar goods.

Apple's new iPad may have unique features; yet the iPad is similar to a computer netbook. Therefore, customs can assess the iPad's value based on a comparable netbook product.

Section 50 of Canada's Customs Act applies to the similar goods method.

Deductive Value of Imported Goods Method

If no similar good exists, the deductive value method is applied. A host of expenses may be subtracted from the imported item's purchase price.

Potential deductions are:

• International freight and insurance
• Volume and quantity discounts taken at the time of purchase
• Cash and early payment discounts
• Buying commissions from an agent working for the importer

Also per Section 51 of Canada's Customs Act , any advertising or promotion incurred in the export country must be deducted.

Similarly, any credits from a prior shipment have to be accounted for separately. Like the advertising and promotion charges, if credits had been lumped in with charges on the importer's commercial invoice they must be subtracted from the calculated value for duty.

Computed Value Method

There can also be additions required to calculate the transaction value of an imported good. These are applied according to the computed value method described in Section 52 of Canada's Customs Act.

Examples of items to be added are charges incurred in the country of export, such as:

1. Counselor fees
2. Customs brokerage fees
3. Deferred quantity discount from the foreign vendor
4. Domestic warehouse charges and rent
5. Inland insurance premiums
6. Inspection charges
7. Port charges
8. Price escalations if price of product goes up before goods are shipped from the export countries
9. Royalties, licensing fees, trademarks and patents that the vendor charges
10. Special export duties or taxes
11. Storage expenses incurred outside Canada
12. Vendor selling commissions
13. Weighing of goods charges.

Other items to be added to the import's computed value are:

1. Fitted cases
2. Non-returnable bottles, cans and drums
3. Pallets, which may be included for safety purposes
4. Special export cases and packing like waterproof paper.

Also to be added are the following 3 items that involve legal and intellectual property rights:

1. "Canadian assist" charges for any design assistance that a Canadian company provides to the exporter such as materials, tools, plans and sketches
2. Subsequent proceeds that the importer pays the exporter for re-selling the imported goods
3. Warranty payments to vendor.

Residual Method of Valuation

The last way for assessing the dutiable value of an import is called the residual method. The residual method is based on an item's market value, as defined in Section 53 of Canada's Customs Act.

Simplifying Complex Valuation Methods

Smaller importers should be aware that the value of a commercial import shipment is often not the same as what they paid to the exporter.

Consulting a customs broker or working with the Canada Border Services Agency can help ensure that the correct transaction value is used to calculate import duties and taxes.

Source: Suite101