Companies that import goods from related foreign parties may soon be eligible to more easily implement post-import pricing adjustments required under transfer pricing policies and advanced pricing agreements. In a modification of its long-standing approach, U.S. Customs and Border Protection (CBP) issued a ruling on May 30, 2012 setting forth the agency’s new policy toward the treatment of post-import pricing adjustments for related party transactions. Under the new policy, which comes into effect on July 30, 2012, CBP will allow related parties to use the transaction value (i.e., the price actually paid or payable for the goods) in the appraisal of imported merchandise, even where post-import pricing adjustments apply, provided that: the companies’ transfer pricing policy constitutes an objective formula, as determined by an analysis of enumerated criteria; and the parties demonstrate that the relationship did not influence the price. The ruling was in response to a Request for Internal Advice that had been under review by CBP for nearly ten years.
A large percentage of imports into the United States involve trade between related parties. In fact, related-party trade accounted for over 40% ($1,295 billion) of the total goods imported into the United States during 2010. For tax purposes, U.S companies typically implement formal intercompany transfer pricing policies to ensure that the relationship of the parties does not impact the price of intercompany sales. To replicate the price of an arm’s-length transaction, these transfer policies often provide for various post-import adjustments to the transfer price.
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