There are no new tariff applications and tariff amendments this week other than those that appeared in last week’s column. In light of the fact that the World Customs Organisation (WCO) will be hosting a workshop on Customs Valuation and Transfer Pricing in Brussels from November 24-25, I thought it worthwhile to remind you of arguably one of the most important topics in international trade today. It is, of course, Customs Valuation and Transfer Pricing, and specifically what I believe is critical – its possible harmonisation and coherence. On my return I will share some insights into the thinking in respect of these two issues. Customs Valuation and Transfer Pricing – Its Harmonisation and Coherence The preferred method of valuing goods for customs purposes in South Africa is the “transaction value”, taking as its starting point the “actual price paid or payable” for the goods for export to the country of exportation. The value for customs purposes should equate to the total payment, excluding international freight, insurance and other non-dutiable costs that the buyer makes to the seller. It is important to recognise that, when the customs value is determined by the transaction value method, consideration should be given in respect of the “addition elements”, that is, costs that need to be included in the transaction value, and the “deductible elements”, that is costs that need to be excluded from the transaction value. Transfer pricing in transactions between members of multinational companies (MNCs) has long been a matter of great relevance to the taxation of corporate profits and has been the subject of a number of studies and reports, but its significance in relation to the valuation of goods for customs purposes is perhaps less obvious. However, the customs value of goods consigned between members of MNCs located in different countries can be determined on the basis of the transfer price, provided that the price is not influenced by the relationship between them. In other words, the transfer price can be accepted, provided it is constructed as would be the price between parties that are unrelated, that is, the basis is somewhat similar prices. It is also the case that in respect of royalties and licence fees and other payments for intangible property, situations may arise in which payments deductible for corporate tax purposes can, nevertheless, be included for customs value purposes. It is important for companies to consider the implications of pricing methodologies based on the “actual price paid or payable” in the instance of customs valuation and the “arm’s length price” in the instance of transfer pricing. It is evident that the methods of valuation can differ and, in certain instances, be in contradiction to each other. What is of critical importance is that a company must not consider the methods of valuation in isolation, but consider their impact on each other. Having said this, it is not always advisable for companies to structure their business activities or methodologies around the valuation methods. It is of more critical importance to ensure compliance with the valuation methods. Registration: Wool Importers & Exporters The Department of Agriculture has published notices in respect of the (i) Continuation of statutory measure – Registration of producers and persons dealing with wool in the course of trade, and (ii) Continuation of statutory measure – Records and returns by brokers, traders or wool buyers, processors, importers and exporters of wool.
