On January 14, 2014, the Canada Border Services Agency (CBSA) issued a revised version of D-Memo D-13-4-9 “Royalties and License Fees”. The revisions do not involve extensive changes to the CBSA’s existing policies. The revised version of the D-Memo includes only minor amendments of a housekeeping nature.
This presents an opportunity for importers of goods into Canada (and especially subsidiaries of foreign parents or multinational entities) to review whether they are properly adding royalties and license fees to the price paid or payable in the proper circumstances and at the appropriate time as required by the Customs Act (Canada) and CBSA policies. Take a moment to review D-Memorandum D-13-4-9 (it is not very long). Pay particular attention to Appendix A, which contains 6 somewhat helpful examples.
Also review Appendix 6, which is the CBSA’s view of 3 court cases:
1. Polygram (AP-89-151 and AP-89-165 (CITT));
2. Reebok (AP-92-224 (CITT) and A-642-97 (Federal Court of Appeal); and
3. Mattel Canada (2001 SCC 36 (Supreme Court of Canada).
While there may be (are) additional legal interpretation of these cases, the CBSA’s Appendix B summaries of the jurisprudence provides useful guidance about how the CBSA sees the decisions. They are communicating how they plan to apply the decisions.
If your activities are not consistent with the CBSA’s stated policies, it may be time for a discussion about risk mitigation and potentially a voluntary disclosure.