(416) 864 - 6200

Tax & Trade Blog

  • Home
    Home This is where you can find all the blog posts throughout the site.
  • Categories
    Categories Displays a list of categories from this blog.
  • Tags
    Tags Displays a list of tags that have been used in the blog.
  • Bloggers
    Bloggers Search for your favorite blogger from this site.
  • Archives
    Archives Contains a list of blog posts that were created previously.

CBSA Changes Policy Regarding Downward Price Adjustments

Posted by on in Trade Law
  • Font size: Larger Smaller
  • Hits: 4055
  • Subscribe to this entry
  • Print

Although importers have regularly been subject to paying additional customs duties on their imports as a result of subsequent upwards price adjustments, importers had been limited in their ability to obtain a refund or reduction in duties where subsequent downward price adjustments were made.  However, a recent change in Canada Border Services Agency (CBSA) policy in light of a 2014 Canadian International Trade Tribunal (CITT) decision now provides importers with an expanded ability to claim reductions in duty in the context of downward price adjustments.

Subsection 48(5) of the Customs Act deals with adjustments of the price paid or payable (PPP).  Paragraph 48(5)(c) states that reductions or rebates “effected” after the goods are imported are not to be included in PPP adjustments.

At issue in HBC v. CBSA (CITT Appeal No. AP-2012-067), was whether discounts granted to HBC by its supplier, Macy’s, were “effected” prior to or subsequent to importation.  Although HBC and Macy’s had entered into an agreement outlining the terms of the discounts prior to importation, the actual discounts themselves were not paid until Macy’s issued a cheque after importation. 

The CITT held that in order to effect a price reduction, the reason for the rebate must exist before importation, and not be dependent on a condition that can only be met after such importation occurred.  In this case, the agreement for the rebate existed prior to importation and became effected upon HBC’s purchase of the particular product, prior to importation.  The fact that Macy’s did not pay the rebate until after importation did not trigger s. 48(5)(c). Accordingly, HBC was entitled to a refund of duty paid, in accordance with the downward price adjustment.

On January 19, 2015, the CBSA released Customs Notice 15-001, “Treatment of Downward Price Adjustments in Value for Duty Calculations”, which explicitly referenced the HBC case. The Notice indicates that CBSA will accept corrections for downward price adjustments where a written agreement was in effect at the time of importation that later reduces the PPP of imports, and the price reduction in fact occurs after importation.  If the price reduction results in a decrease of value for duty the importer may elect to pursue a refund of duties pursuant to paragraph 74(1)(e) of the Customs Act.  The CBSA will also now consider rebates resulting from downward price adjustments pursuant to transfer price agreements between a vendor and related purchaser. Such requests can be made for imports going back four years from the date of the Notice. 

Notably, in addition to offering importers an option to submit a correction to pursue a refund of duty where PPP is reduced, the Policy states that it is necessary that the importer make corrections under section 32.2 of the Customs Act, where the importer is provided with specific reason to believe that a declaration of value is incorrect (e.g. too high or too low), and the correction would be revenue neutral. Accordingly, CBSA is taking the position that there is a positive obligation on importers to submit corrections under section 32.2 where a downward PPP adjustment is effected before import on duty free goods.  Theoretically, CBSA has always taken this same position with respect to upward PPP adjustments on duty free goods.

CBSA’s new policy better accords with the wording of the Customs Act and results in a more complete picture of the value for duty of importations, as compared to CBSA’s previous approach. 

The CITT’s decision in HBC and CBSA’s parallel policy change are welcome news to importers who may be able to take advantage of downward price adjustments to obtain refunds.  Retroactively, where rebates or discounts have been applied to imports subject to duty, importers should marshal any evidence that such discounts/rebates were effected prior to importation, make such corrections and apply for a refund.  Going forward, practitioners should ensure that transactions are structured in such a way that any potential rebate or discount is effected prior to importation by means of written agreement between importer and supplier, in order to minimize customs duties.  

From a more “defensive” perspective, importers should also consider whether any downward PPP adjustments have been made on duty free goods, as CBSA has made clear that corrections are required to be made in such circumstances.  The extent to which CBSA will enforce and apply penalties in such a situation remains to be seen.  

Last modified on


  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest Saturday, 03 June 2023

Toronto Office

24 Duncan Street, Third Floor, Toronto, Ontario, M5V 2B8 Canada
Phone: (416) 864-6200| Fax: (416) 864-6201

Client Login

To access the Millar Kreklewetz LLP secure client file transfer system, please log in.