An opportunity to support US customs valuations

After many years of severely limiting the use of tax transfer pricing documentation and advance pricing agreements (APA) to support valuations declared for customs duty purposes, recent ruling letters and notices by US Customs and Border Protection (CBP) demonstrate an increased willingness to consider these documents when determining dutiable value. This change in attitude presents an opportunity for taxpayers to structure transfer pricing studies and APAs to satisfy both their income tax and customs obligations.

When a foreign entity sells goods to a related party in the US, CBP and the Internal Revenue Service (IRS) share, at least in theory, the same goal: determining the correct price that the US importer should pay to the related foreign entity for the goods. The CBP and IRS, however, have different concerns. CBP will generally be concerned that the price might be artificially low so as to minimise the duty due on the...