MEMORANDUM D13-3-2

Ottawa, March 9, 2001

SUBJECT

RELATED PERSONS
(CUSTOMS ACT, SECTIONS 45 TO 53)

This Memorandum reflects amendments to sub-section 45(3) of the Customs Act contained in Bill C-23 which received Royal Assent on June 29, 2000, and outlines the effect upon the application of various methods of valuation of provisions in the Customs Act pertaining to related persons.

GUIDELINES AND GENERAL INFORMATION

1. Under subsection 45(3), persons are related to each other if:

(a) they are individuals connected by blood relationship, marriage, common-law partnership or adoption within the meaning of subsection 251(6) of the Income Tax Act;

(b) one is an officer or director of the other;

(c) each such person is an officer or director of the same two corporations, associations, partnerships or other organizations;

(d) they are partners;

(e) one is the employer of the other;

(f) they directly or indirectly control or are controlled by the same person;

(g) one directly or indirectly controls or is controlled by the other;

(h) any other person directly or indirectly owns, holds or controls five per cent or more of the outstanding voting stock or shares of each such person; or

(i) one directly or indirectly owns, holds or controls five per cent or more of the outstanding voting stock or shares of the other.

2. The existence of a relationship is relevant to the determination of the value for duty in the following situations:

(a) under paragraph 48(1)(d), the transaction value determined in a sale between related persons cannot be used as the value for duty unless the requirements of that paragraph are met (see Memorandum D13-4-5, Transaction Value Method for Related Persons (Customs Act, Section 48) );

(b) under paragraph 48(3)(a), when establishing the acceptability of the transaction value in a sale between related persons using the test values, the transaction value of identical or similar goods, which are likewise sold to a related person, cannot be used (see Memorandum D13-4-5); and

(c) under paragraph 51(3)(a), a sale between related persons cannot be used to determine the "price per unit" when valuing goods using the deductive value method (see Memorandum D13-7-1, Determination of the Price Per Unit (Customs Act, Section 51) ).

REFERENCES

ISSUING OFFICE -

Origin and Valuation Policy Division
Trade Policy and Interpretation Directorate

LEGISLATIVE REFERENCES -

Customs Act, sections 45, 48 to 53
Income Tax Act, subsection 251(6)

HEADQUARTERS FILE -

7034-5-25

SUPERSEDED MEMORANDA "D" -

D13-3-2, June 1, 1986

OTHER REFERENCES -

D13-4-5, D13-7-1

Services provided by the Canada Customs and Revenue Agency are available in both official languages.

This Memorandum is issued under the authority of the Commissioner of Customs and Revenue.