Wednesday, September 15, 2010

Rumored Changes to Customs Valuation Treatment of Transfer Pricing

(Lexology – Arent Fox LLP)

Recently, word has spread in the importing community that US Customs and Border Protection (CBP) is contemplating changes to the way it interprets the customs valuation statute related to income tax transfer pricing rules for related party pricing, and more specifically, to compensating adjustments. These potential changes could affect the declared value of imported goods (and consequently the import duties/fees paid on those goods) for large companies with many related party sales according to a transfer pricing formula.

The overlap between customs valuation rules for imported merchandise and income tax transfer pricing rules for related party pricing has been debated in trade circles for at least the past decade. Multinational corporations (MNCs) must set transfer pricing policies in accordance with Section 482 of the Internal Revenue Code; and most major players have a bilateral Advance Pricing Agreement (APA) with the Internal Revenue Service (IRS) and a foreign income tax authority. Read more here.