What Is The Value For Duty On Rescue Puppies | A Customs Valuation Case Study
What is the value of a rescue puppy? What a silly question... man's best friend is invaluable! Those cute bundles of happiness that greet you each day with a wagging tail and eagerness to go outside are a part of our family. However invaluable our four-legged companions may be to us, Customs needs a Customs valuation also known as Value For Duty (VFD) placed on them when importing into Canada. Therefore in this blog, we will take a closer look at a recent import we completed on some rescue dogs from Idaho.
Nothing is free in the eyes of Customs. To determine the value of seemingly free, invaluable or complimentary items, you must use one of the 6 Methods of Determining Customs Valuation. This blog post explained the methods must be ruled out, one-by-one, beginning with transaction value.
What Are The 6 Methods Of Valuation?
The six methods are:
- Transaction Value: The value for duty is based on the price paid or payable
- Transaction Value of Identical Goods: The value for duty an established value for duty of identical goods
- Transaction Value of Similar Goods: The value for duty an established value for duty of similar goods
- Deductive Method: The value for duty on the most common selling price (per unit) of the goods sold to Canadian Consumers
- Computed Method: The value for duty is the cost of production, profit, and general expenses
- Residual Method: Used when none of the above will do
How To Value Free Goods
When we received the call from our client who was wanting to import a family of dogs from a U.S. shelter that could no longer keep them, we rose to the challenge. We were under a time limit to determine the value for duty as the shelter in Idaho was running out of space.
As previously mentioned, with items like samples, replacements, warranty items, short-shipped goods, importers are required to declare a fair market value, even if in the end payment of duties and taxes may be unnecessary. But was the value for rescue puppies the same?
In the case of the puppies, Canada Border Services Agency (CBSA) has a specific D-Memorandum on how to come to a correct value for duty.
Transaction Value Method
It states that the Transaction Value method should be used. Now, you may wonder, "how can it be used when there is no transaction taking place"?, Well, there is. CBSA states that:
"Where goods are sold for export to Canada, to a purchaser in Canada, and the Price Paid or Payable (PPP) of the goods can be determined, the transaction value method is to be used to determine the VFD. The PPP is defined as all of the payments made or to be made by the purchaser to or for the benefit of the vendor."
Some of those payments would be:
- Adoption fee(s)
- Veterinary charges
- Foreign permits
- Any other costs associated with exporting the animal from the U.S.
- Permits acquired in Canada
- Veterinary charges paid in Canada
Transaction Value Of Identical Or Similar Goods Method
If any of the above costs were not incurred, CBSA states that:
"If no money is paid by the importer to acquire the rescue animal, the VFD must be determined using an alternate valuation method. No VFD shall be determined by arbitrary or fictitious amounts."
In looking at our 6 Methods of valuation, and knowing that they must be ruled out one-by-one, starting with Transaction Value, if Transaction Value cannot be used, the next option must be Transaction Value for Identical then Similar goods.
For example, if after this import, our client wanted to import another rescue dog from the same shelter in Idaho, of an identical breed and similar age, but no PPP was in place, the VFD should be the same VFD used in the previous import.
If there is no identical or similar established value for duty, move down the list to Deductive method.
In this method, you would find an established selling price in Canada for the same breed and similar aged dog. They would then use that figure less the profit earned and costs associated with importing the animal (veterinary costs, permits, etc.) to establish a value for duty.
Questions To Ask Yourself When Determining Value For Duty
The above methodology can be applied to many seemingly "free goods". When looking to import them into Canada, we suggest you ask yourself the following questions. They will help to determine which method you should use:
- Will you be selling the goods to a buyer for a price?
- If you are not selling the goods, is there a selling price established on an identical or similar item?
- If you are not selling the goods, and there is no established value for identical or similar goods you've previously imported or sold, is there an established selling price within Canada for the same goods?
- If you are not selling the goods, and there is no established value for identical or similar goods, and established selling price within Canada by another vendor for the same goods, was there a cost to making the item?
In this case, the rescue puppies and mom were imported using the Transaction Value Method. The adoption fees, veterinary charges, and permits were added up to establish the value for duty. They have since been adopted and are happy and healthy new additions to Canada.