How to determine the price paid or payable for imported goods

For customs valuation purposes, the price on the commercial invoice is not always the same as the price paid or payable.

The price paid or payable is the starting point for determining the value for duty of many goods imported into Canada.

It can affect how much you ultimately owe in duties and taxes. Getting it wrong can mean underpaying or overpaying at the border, and the Canada Border Services Agency (CBSA) can reassess your declaration later if the value you reported is not supported.

In this article, we explain what counts as the price paid or payable, what is included and excluded, and what happens when the amount can’t be determined.

What is the price paid or payable?

Under the Customs Act, the price paid or payable is the total of all payments made, or to be made, by the purchaser to or for the benefit of the vendor for imported goods.

This includes direct and indirect payments, whether they happen before, during, or after importation.

Once established, this amount becomes the starting point for calculating the value for duty under the transaction value method, before any required additions or allowed deductions are applied.

What payments are included in the price paid or payable?

The CBSA provides several examples of amounts that may form part of the price paid or payable. These include:

• Storage expenses when the goods are stored abroad at the time of the sale for export to Canada and the costs are paid to or for the benefit of the vendor
• Warranty payments included in the selling price, paid separately to the vendor, or paid to a third party when required by the vendor
• Payments made to settle a debt owed by the vendor
• Price increases under a price escalation clause in the sales agreement
• Export duties and taxes imposed by the country of export on the imported goods
• Foreign sales taxes, including certain local or state sales taxes and value added tax, unless they have been refunded, or are to be refunded, to the purchaser before the goods are imported into Canada

If you later find that the value for duty on your Commercial Accounting Declaration (CAD) was incorrect because a required payment was left out, you generally must correct the declaration within 90 days if the correction results in an amount payable or is revenue neutral.

What amounts are not included in the price paid or payable?

Some amounts can reduce the price paid or payable, while others do not form part of it. These can include:

• Discounts that reduce the price before or at the time the goods are imported
• Certain price reductions made under a written agreement that was already in effect when the goods were imported
• Goods and service tax (GST) charged by the vendor on the imported goods

Timing is usually the deciding factor. For cash discounts, the reduced price may be accepted even if you have not yet paid for the goods at the time of importation, provided the discount arrangement was agreed to before the goods were imported and its conditions are ultimately met.

For other price reductions, a lower price agreed to after importation generally cannot reduce the price paid or payable unless the reduction was already covered by a written agreement in effect when the goods were imported.

Credits work differently. Even if a credit lowers what you actually pay, it doesn’t reduce the price paid or payable if it comes from a separate, earlier transaction.

What if the price paid or payable cannot be determined?

In some transactions, there may be no identifiable price paid or payable. In others, the requirements for using the transaction value method may not be met. For example, goods imported on consignment are not considered to have been sold for export to Canada.

If the price paid or payable cannot be determined, or another requirement of the transaction value method is not met, you will need to determine the value for duty using the next applicable customs valuation method.

How Cole International can help

Cole International provides trade consulting and customs brokerage services to help Canadian importers understand their customs valuation obligations.

If you need help determining the price paid or payable and the value for duty of your imported goods, reach out to one of our trade professionals.