Companies importing dutiable goods into Canada have an easier path to obtaining certain duty refunds thanks to a decision obtained from the Canadian International Trade Tribunal by a team led by Sandler, Travis & Rosenberg, P.A. However, the CITT ruling also creates new obligations for some companies that import goods from related firms under a transfer pricing policy. ST&R will conduct a webinar Feb. 5 to review global valuation rules and how they affect your transactions.

In Hudson’s Bay Company v. President of the Canada Border Services Agency, the CITT ruled that when there exists at the time of importation a written agreement to later reduce the price paid or payable for imported goods, importers may file for a refund of the duties paid on the difference in price. In addition, the CITT determined that when such a discount is actually paid is no longer the determinative factor as to whether the importer is eligible for a refund. This has resulted in a change in policy by the CBSA, which has traditionally not permitted duty reductions arising from discounts that are paid after the date of importation or when downward year-end transfer pricing adjustments were recognized. 

This decision could be especially important in cases involving related parties under a transfer pricing scenario. This is because importers that purchase goods from a related company have not previously been able to obtain refunds in cases where they have had a year-end downward adjustment in the transfer price. The CBSA has, however, fully expected these importers to submit self-corrections in cases where there is an upward year-end adjustment.

On the other hand, the change in CBSA policy also means that companies that import goods from related companies under a transfer pricing policy will now have to file self-corrections not only when they have upward adjustments but also when they have downward adjustments and the goods are duty-free. This is because the CBSA requires importers to self-correct declarations that are incorrect within 90 days of the importer having reason to believe that its declaration is incorrect. This policy applies whether or not the correction results in additional duties being owed but does not apply if the correction would result in a refund. Importers should also note that CBSA Notice 15-001 modifying the agency’s policy in light of the CITT decision makes clear that the 90-day period begins “when the net total of upward and downward transfer price adjustments occurring in a fiscal period is identified.”

For more information on the CITT decision or the CBSA’s resultant change in policy please contact Charles Crowley at (212) 549-0134 or Larry James at (613) 882-7190.

The CITT decision is an example of how changes in valuation rules can affect your bottom line. ST&R’s Lenny Feldman will conduct a webinar Feb. 5 to provide an overview of the rules utilized by most of the world – the World Trade Organization’s Valuation Agreement – and their impact on valuation decisions. Click here for more information or to register.

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