Customs Valuation & Transfer Pricing: Insights from WCO Case Study 14.3 (Cost Plus Method)

Intersection of Customs Valuation and Transfer Pricing: The WCO/TCCV Case Study 14.3 explores how transfer pricing documentation, particularly using the Cost Plus Method (CPM), aids Customs authorities in assessing related-party transactions, exemplified in the automotive industry.
Key Insights on Valuation Methods: The study emphasizes the importance of transactional transfer pricing methods like CPM over profit-based methods, highlighting the critical role of functional analysis in determining whether prices allow exporters to recover costs and achieve normal profits, in line with WTO customs valuation principles.
Implications for Customs and Tax Compliance: The case illustrates that transfer pricing documentation serves dual purposes—facilitating compliance with both tax and customs regulations—by ensuring that declared values align with industry norms and supporting Customs in preventing undervaluation while ensuring arm’s length pricing practices are maintained.