- Post-importation transfer pricing adjustments can change the customs value of goods imported into the United States. The decisive customs question is not whether the adjustment is acceptable for transfer pricing purposes, but whether it changes the “price actually paid or payable” for the imported merchandise. The outcome depends on the nature of the adjustment, its connection with the goods and the customs valuation method used.
- Upward adjustments may create additional reporting and payment obligations, while downward adjustments do not automatically generate a refund. In PwC’s example, a USD 1 million upward adjustment on goods subject to a 5% duty rate produces USD 50,000 of additional customs duty, excluding other tariffs, fees and interest. Failure to report an adjustment may result in underpaid duties, interest and potential penalties.
- Importers should address customs consequences before implementing or booking transfer pricing adjustments. PwC highlights the importance of a written pre-importation transfer pricing policy, an objective pricing methodology, consistent application and alignment between transfer pricing, accounting, tax and customs records. CBP reconciliation is identified as CBP’s preferred mechanism for reporting post-importation value adjustments, but the relevant entries generally must have been flagged when filed.
Source PwC
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