Recipients of offset (IRB/ITB in Canada) transactions are frequently asked to sign formal Certifications confirming that your local content, or in Canada, Canadian Content Value (CCV) is true and accurate. To be clear, by signing this certification (which you most likely will have to to sell to large Government contractors), the liability is put onto you, the supplier, to ensure your CCV calculation is correct.
By definition, Canadian Content Value (CCV) is that portion of the selling price of a product or service that includes Canadian labour and materials. CCV does not include product components that were imported into Canada. For the purposes of IRB/ITB valuation, only the CCV of a particular work package is counted toward the completion of an IRB/ITB obligation. CCV is calculated by the Canadian offset recipient and shared with the IRB contractor for their reports. As described above, often the prime contractor will require the recipient of acknowledge through some form of language/a certification such as the following:
“Whereas _____INSERT YOUR COMPANY NAME__________has entered into an agreement with Global Defence Contractor (GDC) which will partially fulfill GDC’s Canadian IRB Obligation, AND WHEREAS such agreement requires that, as evidence of the achievement of Canadian Content Value by the Project, the Company shall submit this Certificate of Compliance to GDC;
NOW, THEREFORE, the Company declares and certifies as follows: i)The information contained in the Company’s annual report to GDC which reports achievement of the Canadian Content Value for this Reporting Year, is to the best of our knowledge and ability complete, true and correct; and ii) The Canadian Content Value shown in documents appended herewith has been determined in accordance with Attachment 1 to this certificate. IN WITNESS THEREOF THIS CERTIFICATE OF COMPLIANCE HAS BEEN SIGNED THIS _date______ BY THE COMPANY’S DULY AUTHORIZED REPRESENTATIVE.”
There are TWO methods by which you can calculate CCV; The Net Selling Price Method or the Cost Aggregate Method:
- begin with the total selling price of the product or service
- subtract the applicable customs duties, excise taxes and applicable GST, HST and all provincial sales taxes; and
- subtract any costs incurred as set out in Article 6.2 (Costs or Business Activities that are ineligible for IRB Credit)
In summary, the Net Selling Price Method starts with the Selling Price of the product or service being sold by the Supplier to the Prime Contractor with only the non-Canadian content items removed from that selling price. This formula is top down.
2) Cost Aggregate Method: Any product or service that cannot be assigned a substantiated selling price may have its CCV calculated as the aggregate of numerous factors that contribute to the product or service. Some examples include:
- the cost of parts produced in Canada, and the cost of materials to the extent that they are of Canadian origin;
- transportation costs, including insurance charges incurred in transporting parts and materials
- wages and salaries paid for direct and indirect production and non-production labour in Canada paid to Canadians or to permanent residents
- light, heat, power and water;
- workers compensation, employment insurance and group insurance premiums, pension contributions and similar expenses
The Cost Aggregate Method builds up Canadian value by adding in all profits, costs, and expenses accrued by Canadian activity while subtracting non-Canadian content. This formula is bottom up.
The OMX automated CCV calculator is accessed via the “Edit Company” menu through the “Products and Services” sub-menu. An example image is shown below:
Through this tool you can use either method to calculate your CCV and publish this content on your OMX profile, or should you wish to keep the total % private, at the final step of using the OMX CCV Calculator, you can elect to email yourself the spreadsheet.
Hayley@theomx.com 416 780 9544 ext 115