On May 30, 2012, U.S. Customs and Border Protection (CBP)
announced the revocation of an administrative ruling (Headquarters
Ruling Letter (HRL) 547654, dated November 8, 2001) that sought to
prohibit an importer from using the transaction value method of
appraisement for related party sales involving a retroactive
transfer pricing adjustment.
Based on CBP's amended policy, effective July 30, 2012,
companies who import merchandise from related parties pursuant to a
written transfer pricing formula may utilize a transaction value
method of appraisement where appropriate, and report any
post-importation transfer price adjustments to CBP, preferably
through participation in CBP's Reconciliation Prototype
In HRL 547654, CBP held that transaction value did not apply to
the transaction at issue because the price was not fixed or
determinable pursuant to an objective formula prior to importation
since the import price remained within the control of the buyer
and/ or seller. However, it is now CBP's position, as outlined
in HRL W548314 (May 16, 2012), that importers can utilize a
transaction value method of appraisement for related party
transactions, even if the transfer price is adjusted
post-importation pursuant to a formal transfer pricing policy
related (directly or indirectly) to the declared value of the
The revised list of factors provided by CBP as guidance for
determining whether an objective formula was in place prior to
importation for purposes of determining the transaction value
within the meaning of 19 CFR § 152.103(a)(1) include the
A written Transfer Pricing Policy is in place between the
parties prior to importation and has been prepared taking IRS Code
Section 482 into account;
The U.S. taxpayer uses its transfer pricing policy when filing
its income tax return, and reports any adjustments resulting from
the policy when filing its return;
The company's transfer pricing policy specifies how the
transfer price and any adjustments are determined with respect to
all products covered by the policy for which the value will be
The company maintains and provides accounting details from its
books and/or financial statements to support the claimed
adjustments in the U.S.; and
No other conditions exist that may affect the acceptance of the
transfer price by CBP.
CBP also stated in HRL W548314 that in order to apply a
transaction value appraisement method under the this proposed new
policy, no other factors can exist that would otherwise affect the
acceptance of the transfer price under the customs laws, and all
required statutory additions must still be captured and reported to
CBP. In effect, importers should continue to follow the related
party transaction guidelines contained in 19 CFR §
152.103(l)(1)(i)-(iii) in order to confirm that their transfer
prices are acceptable upon examination of the circumstances of the
sale or test values related party tests.
CBP strongly recommends that importers participate in CBP's
Reconciliation Prototype program as the mechanism to report
post-importation transfer pricing adjustments that are unknown or
unknowable at the time of entry. Reconciliation allows importers
to, using reasonable care, file entry summaries with CBP using the
best available information with the mutual understanding that
certain elements, such as the declared value, remain outstanding.
Entries can be flagged for subsequent adjustment on an
entry-by-entry or blanket basis. Any adjustments to the declared
values must be reported to CBP within a Reconciliation entry no
more than 21 months from the entry date, providing any requisite
adjustments to the declared value.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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