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International Annual Review 2012

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Details

Service: Tax, Global Indirect Tax, Global Transfer Pricing Services, Global Compliance Management Services
Type: Regulatory update
Date: 6/1/2012

United States - Customs finalizes policy change relating to post-importation adjustments, if made pursuant to a formal transfer pricing policy

June 1: The U.S. Customs and Border Protection (CBP) this week announced that it has changed its position concerning the use of transfer pricing policies by finalizing a proposal to revoke a valuation ruling letter concerning the treatment relating to post-import adjustments made pursuant to a methodology specified in the importer’s formal transfer pricing policies. Customs Bulletin and Decisions, Vol. 46, No. 23 (May 30, 2012)

Proposed revocation

In late 2011, CBP issued a notice announcing that it was proposing to revoke a valuation ruling letter (HRL 547654) which provided that the transaction value did not apply because the price was not fixed or determinable pursuant to an objective formula prior to import because the price was within the control of the buyer and/or seller.

The proposal related to transfer pricing and the acceptability of post-importation adjustments, claimed pursuant to a formal transfer pricing policy.

See TaxNewsFlash-Transfer Pricing: United States - Customs proposes to revoke prior valuation ruling letter relating to post-importation adjustments, pursuant to a formal transfer pricing policy

Finalized revocation

CBP indicated in the bulletin released this week that its new policy is, subject to certain conditions, that the transaction value method of appraisement is not to be precluded when a related-party sales price is subject to 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. These adjustments (upward or downward) are to be taken into account in determining transaction value.

Also, CBP stated that importers that want to apply the transaction value method “are strongly encouraged to use” reconciliation to report the adjustments to CBP and to determine the transaction value.

In releasing a new “headquarters letter” (HQ W548314, May 16, 2012), CBP concluded that an importer’s transfer pricing policy may be considered a formula in place prior to import for purposes of determining the price within the meaning of 19 CFR §152.103(a)(1). Accordingly, adjustments to the price pursuant to the importer’s transfer pricing policy, and reported to CBP, can be taken into account in determining the transaction value.

CBP concluded that in the matter before it, the related-party prices were settled in a manner consistent with the manner that the seller settles prices in sales to unrelated buyers.

For more information, contact a tax professional with KPMG in the United States:

Steven R. Galginaitis

(703) 286 8211

(202) 533-3186

(212) 872-3659

(312) 665-1022

(631) 425-6057

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