&&Aircraft are sub-leased from Europe for the winter season. The aircraft are entering Canada under temporary importation. Before the import date, Sunwing requests a 1/60th program with the CRA for aircrafts that have not been in the country for more than 24 months. If approved by the CRA, Sunwing uses the VFD on the agreed value of the aircraft, not on the lease instalment payments.

&&Sunwing has requested a ruling on the correct method to determine the VFD of aircraft that are being temporarily imported into Canada under the 1/60th program.&&&&In this scenario, Sunwing has been granted authorization from the Canada Revenue Agency (CRA) to determine the value of the imported aircraft under subsection 215(2) of the Excise Tax Act and section 14 of the Value of Imported Goods (GST/HST) Regulations, as 1/60th of the value for duty of the aircraft for each month or part of a month that the aircraft remains in Canada, plus any remaining duties payable in respect of the aircraft. Under this authorization, Sunwing is also required to meet the Customs requirements as outlined in Departmental Memorandum D8-1-1 Administrations of Temporary Importation (Tariff Item No. 9993.00.00) Regulations with respect to the processing and control of temporary import documents and export documentation and procedures. These two provisions require that the aircraft are subject to duties and taxes (including GST/HST) on their full value.&&&&Sunwing has been using the full agreed value of the aircraft as per the Short Form Extended Charter Agreement between Sunwing (the Lessee) and Smartwings (the Lessor) to determine the VFD.&&&&Under the Customs Act, the primary basis of determining the value for duty of imported goods is the transaction value method (section 48 of the Customs Act). As these goods are leased or rented they do not meet the requirement of being sold for export to Canada under the transaction value method. Therefore, in accordance with subsection 47(2) of the Customs Act, the subsequent methods of valuation must be considered in sequential order, i.e. sections 49 through 52 of the Customs Act.&&&&Under sections 49 and 50 of the Customs Act, the value for duty is based on a previously determined value that was established under the transaction value method for identical or similar goods. As there is not a previously established transaction value of identical or similar goods, these methods are not applicable.&&&&Under section 51 of the Customs Act, the value for duty is based on a price per unit derived from a sale of goods after importation. As there is no sale after importation, this method is not applicable.&&&&Under section 52 of the Customs Act, the value for duty is based on the computed value which is the cost of producing the imported goods, plus an amount for profit and general expenses and any assists that are not reflected in the production costs. As Sunwing is not the producer of the imported good(s) and they have not provided any such information, this method is not applicable.&&&&Section 53 (Residual Method) of the Customs Act states:&&&&"Where the value for duty of goods is not appraised under sections 48 to 52, it shall be appraised on the basis of&&(a) a value derived from the method, from among the methods of valuation set out in sections 48 to 52, that, when applied in a flexible manner to the extent necessary to arrive at a value for duty of the goods, conforms closer to the requirements with respect to that method than any other method so applied; and&&(b) information available in Canada."&&&&The value for duty established using the residual method must be fair and reasonable, and should reflect commercial reality. This method under Section 53 of the Customs Act, is to be used to calculate the VFD of the aircraft that are being temporarily imported into Canada.