On January 4, 2013, the federal Canadian tribunal with appellate
jurisdiction relating to customs valuation, among other subjects,
schooled multinationals on their obligations to meet the
evidentiary burden of proof relating to declared values for duty.
In particular, the tribunal found that once the Canada Border
Services Agency (CBSA) meets its obligation to prove that an
importation has taken place, the burden of proof relating to all
elements of the import declaration shifts to the importer. The
importer must establish that the values are as it has appraised
them, and not as have been re-determined by the President of the
CBSA. This is long standing law, but placed in the context of
related party cross border transactions, it informs multinational
importers of their particular obligations as they relate to the
nature of the sale for export (i.e. which party is the vendor to
the purchaser in Canada) and the potential dutiability of services
rendered by the related vendor (or affiliates) to the
In Jockey Canada, AP 2011-008, the importer/purchaser
took the position that it purchased goods in sales for export
to Canada from unrelated Asian entities and related Caribbean
entities. There were admittedly incidental related party purchases
from Jockey International Inc pursuant to a written Sales &
Distribution Agreement under which prices were set at Canadian
wholesale price less 35%. Jockey International also provided a
number of services, including management services. Documentary
evidence was not probative that Jockey International was only a
service provider, and the tribunal held that it was vested in and
transferred title to the goods in sales for export to Jockey
Canada; the claims by Jockey Canada that the Asian and Caribbean
suppliers were the vendors in the sales for export to Jockey Canada
were dismissed by the tribunal. Most compelling was the evidence of
accounting and tax records which, in the view of the tribunal,
supported the position that Jockey International was the only
vendor, disconcerting as the value for duty was determined to be
based on the wholesale price less 35%, a higher result than if
based on prices charged by the Asian and Caribbean suppliers.
The case result is a lesson to multinational organizations that
support Canadian business through supplies of goods, services and
intellectual property. Planning related party commercial
transactions in a fashion that provides duty relief is acceptable,
but in addition to meeting the letter of the law, supporting,
probative documentation must accurately reflect the legal positions
taken. Attention should be paid to customs books and records, tax
returns, commercial documentation, and contracts evidencing sales
and service contracts.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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While that agreement mandated export measures on Canadian softwood lumber exports destined for the United States, it also protected those lumber exports from the potential imposition of onerous import measures by the U.S.
On September 29, 2016, the Supreme Court of Canada issued its first tariff classification decision since Canada signed the International Convention on the Harmonized Commodity Description and Coding System in 1998.
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