News and Media
04/01/2012
CBP Bulletin Proposes Broader Use of Transaction Value for "Related Party" Sales and Post-Import Adjustments
In the December 28, 2011 issue of the U.S. Customs and Border Protection Bulletin CBP published a notice that proposes to provide guidance to the trade and revoke a ruling and similar treatment in order to allow transaction value for “related party” sales and post-importation adjustments to be more broadly used.
CBP states that before taking this action, consideration will be given to any written comments received by January 27, 2012. In addition, any party who has received a ruling or decision on the merchandise that is subject to the proposed revocation, or any party involved with a substantially identical transaction, should advise CBP by the date that written comments on the proposed ruling is due.
CBP is proposing to issue HQ W548314 to state that subject to meeting five factors, the transaction value method of appraisement will be allowed when a related party sales price is subject to upward and/or downward post-importation adjustments that are made pursuant to formal transfer pricing policies and specifically related (directly or indirectly) to the declared value of the merchandise. The post-importation adjustments are to be reported using Reconciliation.
The following five factors that must be adhered to are:
1. Written policy prior to import. A written “Intercompany Transfer Pricing Determination Policy,” which sets out how the transfer price is to be determined prior to the importation;
2. Importer is U.S. taxpayer. The importer/buyer is the U.S. taxpayer, and it uses its transfer pricing methodology in filing its corporate income tax returns;
3. Policy covers adjusted products. The company’s transfer pricing policy specifically covers the products for which the value is to be adjusted;
4. Specifies U.S adjustments. The policy specifies what adjustments must be made to the transfer price, and the company provides detailed explanations and calculations of the adjustments incurred and claimed in the U.S.; and
5. Adjustments maintain ‘arm’s length’ price. There is an absence of other conditions which may indicate that the compensating adjustments do not result in an arm’s length price between the parties.
CBP also states that its decisions to allow the use of transaction value for related party transactions and post importation adjustments will be made on a case-by-case basis.
Information on these and other recent developments can be obtained from our senior consultants.
