On 25 April, the World Customs Organisation (WCO) announced that an important new instrument had been finalised at the 42nd Session of the Technical Committee on Customs Valuation which took place in Brussels from 18-22 under the chairmanship of the United States of America. According to the WCO, the instrument contains a case study illustrating a scenario where Customs took into account transfer pricing information in the course of verifying the customs value.
As you might well know the World Trade Organisation (WTO) Valuation Agreement sets out the methodology for establishing the customs value, used as the basis for calculating customs duties, and which foresees that Customs may examine transactions between related parties where they have doubts that the price has been influenced by the relationship. Then, the Organisation for Economic Cooperation and Development (OECD) developed guidelines for establishing the transfer price, that is the price for goods and services sold between controlled or related legal entities, in order to determine business profit taxes where businesses are related.
Over recent years, the similar objectives but different methodologies of transfer pricing and customs valuation have been noted and it has been recognised that business documentation developed for transfer pricing purposes may contain useful information for Customs. An earlier instrument of the technical committee, commentary 23.1, confirmed this principle.
The new case study provides an example of Customs making use of transfer pricing information based on the transactional net margin method. On the basis of this information, Customs accepted that the sale price in question had not been influenced by the relationship.
The case study (Case Study 14.1) will be made available in the WCO Valuation Compendium, subject to approval by the WCO council in July 2016.