Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis.
In finding that s. 232(2) did not apply to the supply of crude made by Company A to Company B, CRA stated:
The reduction in consideration must relate to the original supply and may be made for any reason but must not depend on any action undertaken by the recipient or any supply made by the recipient. Furthermore, a reduction in consideration is not considered to have occurred if the goods are sold back to the original supplier. To be considered a reduction of consideration, it must be evident that the goods are being returned to the supplier rather than being sold to the supplier.