How to Calculate Value for Duty for Canadian Imports

As an importer, you must declare a value for duty on every shipment into Canada.

This figure sets the base for duty and tax calculations, and the Canada Border Services Agency (CBSA) relies on it to verify compliance.

While the HS code determines the duty rate, the value for duty provides the amount to which that rate is applied. Together, they establish the customs duties owing on your shipment.

Accurate valuation protects your imports from CBSA re-determinations that can result in interest charges and monetary penalties under the Administrative Monetary Penalty System (AMPS).

More importantly, it helps clear your shipments smoothly without any delays at the border.

The value for duty is calculated using one of six valuation methods set out in the Customs Act. Once the appropriate method is applied, certain costs must be included or excluded to arrive at the final figure.

Read on to learn how to determine and declare value for duty.

What is value for duty?

The term “value for duty” refers to the value of your imported goods and is the starting point for calculating duties and taxes.

The value for duty isn’t always the same as the invoice price you pay your supplier as per the commercial invoice, because certain costs must be added and others deducted.  

It is determined according to the rules outlined in the Customs Act and the D13 Memoranda.

These rules align with the World Trade Organization’s Customs Valuation Agreement, ensuring that all importers use fair and consistent methods—no matter where the goods are coming from. 

The 6 methods for determining value for duty

 1. Transaction value

This is the primary and most commonly used method, outlined in Section 48 of the Customs Act.

It is based on the price actually paid or payable for the goods when sold for export to Canada, provided that the sale is genuine, documented, and not affected by conditions or relationships.

This price must then be adjusted to add certain costs, such as commissions, packing, assists, royalties, resale proceeds, transportation, insurance, etc.

It must also exclude post-import charges, such as Canadian duties and taxes, inland transport, installation or assembly in Canada, and any rebates after import. 

2. Transaction value of identical goods

If the transaction value method cannot be used, Section 49 of the Customs Act allows you to base the value for duty on the transaction value of identical goods imported into Canada around the same time.

The goods must be the same in every way, including physical characteristics and quality. They must also originate from the same country and ideally be produced by the same manufacturer.

3. Transaction value of similar goods

When no identical goods are available, you can use the value of similar goods, as per Section 50 of the Customs Act. 

These are goods with comparable characteristics, the same function, and similar materials. They must be produced in the same country and preferably by the same or a comparable manufacturer.

4. Deductive value

If transaction values of identical or similar goods cannot be used, Section 51 outlines the deductive value method that you can use.

This method begins with the unit price at which the imported goods (or identical/similar goods) are sold in Canada and works backward to establish the value for duty.

In this case, from the resale price, you deduct amounts such as profit and general expenses, commissions, transport and insurance costs incurred in Canada, and duties and taxes.

5. Computed value

As per Section 52 of the Customs Act, the computed value method builds the value for duty from the ground up.

It is based on the cost of production in the country of export, including materials, direct labour, overhead, packing, and a reasonable profit for the manufacturer.

Because it requires detailed production cost data, this method is less frequently used.

 6. Residual method

If none of the other methods can reasonably be applied, the residual (fallback) method can be used, as outlined in Section 53.

For this method, a reasonable value for duty is determined using principles that are consistent with the WTO agreement.

This may involve adapting elements of the previous methods.

The transaction value method is always used first, moving on to the next method only if the one before it cannot be applied.

However, the deductive and computed methods can be applied in reverse order if you have written approval from your regional CBSA Client Services Office.  

Calculating the value for duty can be challenging, and it’s always best to consult a customs broker through this process.

Inclusions and exclusions

After choosing the valuation method that works best for your case, you should identify what costs are included and excluded from your calculations.

That’s because not all costs are part of your value for duty.

Here are the general inclusions and exclusions, as per Memorandum D13-4-7, Adjustments to the Price Paid or Payable:

Inclusions

Your value for duty must reflect the price paid to the seller and other costs related to bringing the goods into Canada. Add these to the price paid or payable when calculating the value for duty:

• Selling commissions
• Packing costs (including labour and materials)
• Assists you provided to the supplier
• Royalties and licence fees payable as a condition of the sale
• Transportation costs and insurance charges (up to the point of direct shipment to Canada)
• Any proceeds from resale that are returned to the seller 

Exclusions

Costs that arise after the goods arrive in Canada, or that are not directly tied to the sale for export, should not be included in the value for duty. These cover:

• Buying commissions paid to your purchasing agent
• Import duties and taxes
• Transportation costs and insurance charges within Canada
• Post-importation activities carried out in Canada (construction, erection, assembly, maintenance, or technical assistance)
• Payments for the right to reproduce the imported goods in Canada

Declaring the value for duty code

When accounting for imported goods, a two-digit value for duty code must be declared.

This code tells the CBSA about the relationship between the buyer and seller, as well as the valuation method used.

How the code is structured

• The first digit shows the relationship between the vendor and the purchaser:
  • 1 = Vendor and purchaser are not related
  • 2 = Vendor and purchaser are related
    
    
• The second digit shows the valuation method applied:
  • 3 = Price paid or payable without adjustments
  • 4 = Price paid or payable with adjustments
  • 5 = Transaction value of identical goods
  • 6 = Transaction value of similar goods
  • 7 = Deductive value
  • 8 = Computed value
  • 9 = Residual method

Example

If you purchase goods from an unrelated supplier and use the transaction value without adjustments, your value for duty code would be 13. 

If you are related to the supplier and declare using the computed value, your code would be 28.

How Cole International can help

Figuring out the right value for duty can quickly become challenging, especially when multiple suppliers, production countries, and other fees are involved.

That’s why many Canadian importers turn to experts for guidance.

At Cole International, we offer customs brokerage and trade consulting services to help Canadian businesses determine and declare value for duty accurately and stay compliant with CBSA regulations.

Our customs experts work with importers every day to:

• Apply the right valuation method under the WTO framework and Canada’s Customs Act
• Review transactions and ensure all dutiable costs are properly included
• Prepare documentation to support declarations and reduce the risk of adjustments and corrections

We don’t believe in guesswork. We get it right the first time. 

If you need to determine and declare the value for duty for your imports, please reach out to one of our trade professionals.