On May 30, 2012, US Customs and Border Protection (CBP) announced a change in its position as to when a price determined pursuant to a transfer pricing policy may be used for purposes of determining transaction value for CBP purposes. It is now CBP’s position that transaction value (e.g., the invoice price) may be used for customs purposes even when based on a price determined pursuant to a formula set forth in a transfer pricing policy. CBP also clarified that post-importation adjustments can be used to revise customs value to receive refunds (or determine additional duties).
CBP Has Historically Rejected Valuation Under the Transaction Value Method Where Post-Importation Adjustments Were Made Pursuant to a Transfer Pricing Policy
Transfer prices between US companies and their foreign affiliates give rise to issues under both income tax and customs valuation laws and regulations. Customs valuation laws differ from the tax requirements under which intercompany transfer prices are set. The preferred method of appraising imported merchandise for customs purposes is transaction value, which is defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain statutorily prescribed additions to the extent they are not already included in the price. Transaction value between related parties is acceptable if the circumstances of the sale of the imported merchandise indicate that the relationship did not influence the price actually paid or payable (“arm’s length”), or if the transaction value closely approximates “test values.” When value cannot be determined based on transaction value, imported goods must be valued according to one of five alternative bases of appraisement, according to a hierarchy. Importers generally prefer to use transaction value because it is less burdensome than the alternative bases of appraisement.
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