Third Time's a Charm - CBSA Pushes Customs Valuation Reform

For several years, the Canada Border Services Agency (CBSA) has sought to limit the ability of non-resident importers to self-assess duties, surtaxes and other taxes on imported goods based on their acquisition costs. In pursuit of this aim, the CBSA launched a third consultation in December 2025 that anticipates a fundamental reshaping of Canada's customs valuation framework through amendments to the Valuation for Duty Regulations, (SOR/86-792) (VFD Regulations). The deadline for stakeholders to make submissions to the 2025 VFD Consultation is January 23, 2026.

As described in our previous blog post, the CBSA has long aspired to introduce greater administrative discretion in determining which sale is the "last sale" upon which the transaction value of imported goods is based under the primary customs valuation method set out in the Customs Act. The stated purpose of the proposed amendments is to ensure that if importations occur as a result of a chain of sales at different trade levels, customs duties are charged on the price paid in the "last sale" in the chain, before the goods are sold between parties that have a substantial presence in Canada (based on characteristics now defined by the CBSA). 

The amendments would limit the scope of transactions that qualify as a "sale for export to Canada" and curtail the ability of certain Canadian importers from using intercompany transfer prices or other upstream sale transactions between two entities as the base value for duty if neither party is sufficiently "present" in Canada.

The CBSA has conducted two previous consultations, first on its conceptual proposals and then on draft regulatory text. This third consultation (the 2025 VFD Consultation) seeks feedback on the CBSA's description of its proposed amendments to address widespread concerns raised by stakeholders over the previous draft regulations published in 2023. The new proposed regulatory text has not been made widely available for public review. 

Based on the CBSA's descriptions of their proposal, the amendments to the VFD Regulations will give the CBSA significant discretion in how the Customs Act will apply to particular importation scenarios. The timeline for implementation of the amendments has not yet been identified by the government.

CBSA Discretion to Identify the Relevant Sale for Export to Canada

The Customs Act was amended in 2021 to permit the phrase "sale for export to Canada" to be defined in regulations, replacing the jurisprudence stemming from the Supreme Court of Canada's 2001 decision in Mattel. The CBSA's proposal maintains the definition of "sale for export to Canada" that it proposed in 2023 and adds exclusions for situations identified in Advisory Opinion 1.1 of the World Customs Organization’s (WCO) Customs Valuation Compendium. If the "agreement, understanding or any other type of arrangement—regardless of its form" is described by the examples, it will not qualify as a sale for export to Canada. 

The types of transactions that would be excluded include transactions: 

1. that provide goods free of charge (e.g., gifts, samples, promotional items);
2. in respect of consignment goods, where a consignee has been authorized to sell the goods on behalf of the owner of the goods (i.e., the consignor);
3. that pertain to the importation of the goods by an intermediary (e.g., sales agent), who never purchases the goods, for sale on behalf of the supplier;
4. between persons that are not separate legal entities (e.g., branches), in respect of the importation of the goods;
5. for the provision of goods in accordance with a leasing or rental contract;
6. in respect of goods supplied on loan, which remain the property of the sender; and
7. for the destruction of goods (e.g., waste or scrap), where the goods are not purchased but rather the sender pays for the destruction services.

Most notably, the CBSA's proposal contemplates that the CBSA would have the discretion to modify the list of excluded scenarios without involvement by the Minister and Governor in Council to amend the VFD Regulations or any limitation to ensure ongoing conformity with WCO requirements.

If an excluded situation would otherwise be the "last sale" in a series of transactions causing goods to be imported into Canada, the transaction value method cannot apply, and another valuation method must be used. 

Criteria to Exclude Transactions Between Certain Parties in Canada

One of the significant concerns raised during the previous consultation was that the CBSA's proposals would result in customs duties being charged on the value in a sale between two Canadian residents. The CBSA has responded to this feedback by explaining the criteria that would permit a sale between two parties with a substantial presence in Canada to be excluded. 

A transaction within a series will not qualify as a "sale for export to Canada" if both parties to the transaction are either:

1. an individual who ordinarily resides in Canada, or 
2. an entity that meets specified criteria establishing substantial presence in Canada. 

The specific wording of the 'substantial presence' criteria from the draft regulations has not been made widely public. The intention, however, appears to be that the criteria will supersede and build upon aspects of the existing "permanent establishment" concept, but specifically preclude the ability of multinational companies that have centralized procurement functions or that make certain other management decisions from outside of Canada from qualifying. For such entities, the sale to the next trade level may become the "sale for export to Canada" upon which the value for duty will be based.

We understand that the criteria in the draft regulations for a business to demonstrate a 'substantial presence' in Canada requires that all the following characteristics be present:

1. The entity's primary place of business be (physically) located in Canada and not be a branch of a foreign entity or a place of business of its representatives, agents, mandataries;
2. Goods are ordered and purchased from this primary place of business;
3. The personnel working from the primary place of business in Canada are empowered with decision-making authority over both the purchasing of and payment for goods by the entity, and for the day-to-day operations of the entity in Canada;
4. Requests from customers in relation to imported goods, including with respect to defects and returns, are processed in Canada;
5. Records, including books of account, are kept in Canada (noting that the proposal does not specify whether this requires a computer server for electronic records to be located in Canada);
6. The entity's primary bank account is in Canada;
7. The entity has fixed assets in Canada (with the meaning of fixed assets in this context not further defined); and
8. The entity is (or in the case of a partnership, the partners are) liable to pay income tax in Canada.

These criteria collectively create a high bar that a buyer and seller must each satisfy for a sale in a chain of sales to be disqualified as the sale for export to Canada. Certain businesses in Canada that currently qualify as a "purchaser in Canada" by virtue of having a "permanent establishment" under the current VFD Regulations may no longer be entitled to base the value for duty on their acquisition cost. Rather, a company that has set up a permanent establishment for valuation purposes will be required to calculate duties, surtaxes and other taxes based on the selling price in any "agreement, understanding or any other type of arrangement—regardless of its form" between it and its Canadian customers.

All businesses importing goods into Canada – especially those engaged in resale – should carefully review the proposed changes to assess their potential impact on dutiable values and what operational changes may be necessary to preserve their current approach to customs valuation. In particular, subsidiaries or branches of foreign-headquartered companies that rely on intercompany management and administrative services to support their operations in the Canadian market may be significantly impacted. Stakeholders are encouraged to submit feedback to the CBSA’s consultation process before the January 23, 2026 deadline.

The Bennett Jones' International Trade & Investment group has industry-leading expertise in Canadian customs valuation matters. For guidance on how these proposed measures may affect your business, or for assistance in preparing effective submissions, please contact Sabrina A. Bandali, George W. H. Reid, Jessica B. Horwitz or another member of the Bennett Jones trade team.