While the value for duty shows the amount used for customs valuation purposes, the value for duty code identifies the circumstances behind that value.
When you import goods into Canada, you need to report a value for duty code on your Commercial Accounting Declaration (CAD).
If the wrong code is used, it can create inconsistencies in your declaration and, where it reflects an underlying value for duty error, may lead to corrections, reassessments, or penalties.
In this article, we explain how value for duty codes work, what the three digits mean, and how the code reflects the way your goods were valued.
A value for duty code is a three-digit code reported on the CAD to indicate the circumstances behind the declared value for duty.
It tells the Canada Border Services Agency (CBSA) how the value for your goods was determined by identifying three things:
Each of the three digits in the value for duty code represents a different piece of information. Here’s how it works:
The first digit indicates the condition of the goods.
The second digit indicates whether the vendor and purchaser are related as defined under Subsection 45(3) of the Customs Act.
A parent company and subsidiary, companies under common control, partners, or certain individuals connected by family relationships may be considered related persons.
Being related does not automatically prevent you from using the transaction value method. Where the vendor and purchaser are related persons, transaction value may still be used if the relationship did not influence the price paid or payable, or if the price closely approximates an acceptable test value.
The third digit identifies the basis used to determine the value for duty.
Codes 3 and 4 both relate to the transaction value method, which is the primary method of customs valuation and must be used whenever its requirements are met.
The difference is whether adjustments under section 48 of the Customs Act were required. These can include adjustments for certain commissions and brokerage, packing costs, assists, royalties and licence fees, subsequent proceeds, transportation and insurance costs, and applicable deductions.
If the transaction value cannot be used, the alternative valuation methods must generally be considered in the order established by the Customs Act: transaction value of identical goods, transaction value of similar goods, deductive value, computed value, and finally the residual method. The deductive and computed methods may be reversed at the importer’s request.
Consider a transaction in which the goods are new, the vendor and purchaser are related parties, and the value for duty is based on the price paid or payable.
The correct value for duty code to declare on the CAD would be 024 (0 for new goods, 2 for related parties, and 4 for price paid or payable with adjustments.
Cole International provides trade consulting and customs brokerage services to help Canadian importers understand customs valuation requirements and accurately report their import transactions on their Commercial Accounting Declaration.
Reach out to one of our trade professionals to discuss which valuation method to use and to determine which value for duty code applies to your goods.