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News February 3, 2026

Canada’s “Last Sale” Rule: The 2026 Guide for E-commerce Sellers and NRIs

The Canada Border Services Agency (CBSA) is overhauling the Value for Duty Regulations to establish a "Last Sale" mandate, requiring duties to be calculated on the retail price of goods sold to Canadian consumers. The primary goal is to level the playing field for Canadian merchants by closing loopholes that allowed foreign merchants to calculate duties on a lower, upstream transaction value, rather than punishing legitimate domestic brands.

Last updated: February 2, 2026

The Canada Border Services Agency (CBSA) is finalizing amendments to the Value for Duty Regulations with the aim of leveling the playing field for Canadian merchants, rather than punishing legitimate domestic brands. This overhaul focuses on closing loopholes that have allowed certain foreign merchants and multi-tiered e-commerce structures to calculate duties on a lower, upstream transaction value.

The proposed amendments primarily address two distinct use cases that lead to undervaluation:

Constraining the NRI’s Use of COGS for Pre-Sold Goods

The legitimate Non-Resident Importer (NRI) model permits foreign merchants to act as the Importer of Record and declare their Cost of Goods Sold (COGS) as the value for duty, but only if the goods are imported as unsold inventory without a pre-arranged sale to a Canadian customer. The new enforcement efforts clarify and reinforce that:

  • The moment a retail sale to a Canadian customer occurs before the goods arrive, the sale triggers the export to Canada.
  • In such cases, the NRI must declare the final retail price as the basis for duty, not the COGS.
  • The reform constrains the ability of NRIs to claim a duty value using upstream, lower-priced transactions after a retail sale has already taken place.

Disregarding Intercompany Transfers by “Paper Subsidiaries”

The reforms eliminate the advantage previously held by foreign merchants using a “paper subsidiary” B2B2C model. These nominal Canadian entities, which often lack genuine local presence, employees, management control, or operational substance, are used to declare a low intercompany transfer price (sometimes 60–80% below retail) as the value for duty.

The CBSA is clarifying that:

  • A nominal entity does not qualify as a “Purchaser in Canada” if it lacks a fixed place of business and merely serves as a “conduit” or “pass-through” for a pre-ordained structure.
  • The intercompany transfer price will be disregarded if businesses don’t pass a strict eight-point “Substantial Presence” test to be considered a legitimate resident entity for valuation purposes.

    2026 Compliance: Substance Over Form

    The CBSA’s move to substance-based enforcement means customs compliance will increasingly be assessed based on the economic substance of transactions rather than documentation alone. This change is intended to close valuation loopholes that disadvantage Canadian merchants while minimizing disruption for compliant businesses.

    • No More Conduits: If your Canadian entity doesn’t have employees, management control, or a physical presence, it will be treated as a mere “conduit” rather than a real buyer.
    • The “Last Sale” Rule: 2026 reforms ensure that the value at the border reflects the final transaction that caused the goods to be exported.
    • Audit Scrutiny: The CBSA has warned that future audits will specifically target these simplified B2B2C models and “related-party” pricing structures to stop undervaluation.

    When Upstream Valuation May Still Be Possible

    Declaring value based on upstream cost remains an option only in limited, specific scenarios:

    1. Speculative Inventory: Goods are imported as inventory with no pre-arranged sale to a Canadian customer.
    2. Genuine Canadian Enterprises: The importer is a resident entity carrying on substantive business in Canada.
    3. Post-Importation Resale: The downstream sale occurs only after the goods have been fully imported and cleared into Canada.

    Compliance Corner: The Substantial Presence Matrix

    To rely on an earlier sale price and exclude a domestic transaction from the “last sale” calculation, CBSA is proposing that a business must prove it is a legitimate resident entity by meeting all eight of the following conditions:

    Condition
    1.Business Activity
    2.Fixed Location
    3.Contractual Authority
    4.Capital Assets
    5.Personnel
    6.Income Tax
    7.Books and Records
    8.Non-Conduit Status
    Mandatory Requirement
    Must actually carry on business in Canada, not just be incorporated.Must manage day-to-day operations and returns locally.
    Must have a physical office or facility (no mailboxes or virtual offices).
    Must have real authority to enter into purchase or sale arrangements.
    Must possess capital assets in Canada used for business operations.
    Must have employees in Canada performing operational or managerial functions.
    Must file Canadian income tax returns (GST registration alone is insufficient).
    Must maintain all business books and records within Canada.
    Cannot function merely as a "pass-through" for a pre-ordained structure.

    Note on Regulatory Status: These criteria reflect the current proposed framework. Please note that these requirements may be revised or refined once the final ruling is officially issued.

    Key Insights

    • The “Last Sale” Mandate: Customs duties must now be charged on the last sale in a supply chain that causes goods to be exported to Canada.
    • Redefining “Sale”: A “sale” no longer strictly requires a traditional transfer of title; it includes agreements, understandings, or arrangements—such as online checkout events—regardless of when title officially passes.
    • Domestic Sale Inclusion: Transactions previously considered “domestic” are no longer excluded by default. They are only excluded if both parties are genuine “resident” persons.
    • End of the “Paper Subsidiary”: Minimal business presence is no longer sufficient. Entities must pass a strict eight-point “Substantial Presence” test to be considered a resident for valuation purposes.

    Preparing for the New Reality

    The transition to ‘last sale’ valuation in 2026 isn’t just a paperwork change; it’s a fundamental repricing event for anyone selling D2C into Canada.For U.S. e-commerce sellers, this means traditional “first sale” strategies are likely at an end for pre-sold goods. Importers should immediately conduct a Cost Recalculation. If your current margins rely on valuing imports at cost, you must model them based on the retail sale price to ensure continued profitability under the new enforcement regime.

    Authored by Thomas Taggart

    Head of Global Trade | Passport

    Thomas Taggart is a cross-border commerce leader with more than 20 years of experience in international shipping and regulatory affairs. As the Head of Global Trade, Thomas helps ecommerce brands go global by simplifying international trade, tax, and product compliance issues. Prior to Passport, he brought international shipping solutions to market through multiple roles in UPS’s product development organization.