Appeal No. AP-2001-094
16 June 2003
Appeal No. AP-2001-094
This is an appeal from a decision of the Commissioner of the Canada Customs and Revenue Agency (the Commissioner) dated December 10, 2001, concerning the value for duty of goods imported by AAi.FosterGrant of Canada Co. (AAi Canada) during the period from September 1998 to December 1999. In his decision, the Commissioner states that the value for duty of goods imported by AAi Canada should be determined in accordance with the transaction value with respect to the sale between AAi Canada's U.S.-based parent and Canadian retailers. The Commissioner contends that, during the period at issue, AAi Canada did not qualify as a "purchaser in Canada".
AAi Canada argues that it qualifies as a "purchaser in Canada" pursuant to subsection 2(1) of the Valuation for Duty Regulations. Therefore, the value for duty should be based on the intercompany selling price for the goods applied between it and its U.S.-based parent.
HELD:
The appeal is dismissed. The Tribunal is of the view that AAi Canada did not carry on business in Canada during the period at issue. AAi Canada's employees did not have direct access to funds with which to conduct business. While some of the sales revenue generated in Canada was deposited into AAi Canada's bank accounts, these funds were immediately transferred to an account in the United States, to which none of AAi Canada's employees had access. These banking arrangements clearly had an impact on AAi Canada's ability to carry on business, since its employees in Canada had no capacity to pay for goods and services required for the Canadian operations. AAi Canada's employees negotiated contracts with customers, but worked within parameters determined by its U.S.-based parent. AAi Canada performed primarily administrative functions in Canada, such as ordering merchandise, creating and purchasing display racks for placement in stores and showing merchandise to customers.
Since AAi Canada was not carrying on business in Canada during the period at issue, it neither was a resident of Canada nor did it maintain a permanent establishment in Canada, as these terms are defined in the Valuation for Duty Regulations. Consequently, it was not a "purchaser in Canada", for the purposes of the Customs Act, and the transfer price for goods established between AAi Canada and its U.S.-based parent cannot form the basis for appraising the transaction value for the goods imported by AAi Canada during the period at issue.
This document is available on the CITT web site at the following address:
http://www.citt-tcce.gc.ca/appeals/decision/ap2b094_e.asp