New WCO Guide to Customs Valuation and Transfer Pricing

The WCO is launching a major new guide on the topic of Customs valuation and transfer pricing. The interaction between these two regimes has been an important issue both for Customs administrations and the trade over recent years.

The issue concerns international transactions within a multi-national group. Customs aim is to ensure that the price for transactions of imported goods is not influenced by the relationship between buyer and seller (based on the methodology for Customs valuation contained in the WTO Valuation Agreement). Tax administrations, on the other hand, are examining the same transactions to ensure the conditions are consistent with the ‘arm’s length principle’ for profit tax purposes. Generally, the methodology used for this purpose is based on the OECD Transfer Pricing Guidelines.

The Technical Committee on Customs Valuation (TCCV) has confirmed that the examination of transfer pricing studies, prepared primarily for direct taxation purposes, may be of use to Customs when examining related party transactions for Customs valuation purposes. Further work is being conducted by the TCCV in order to provide examples of situations where transfer pricing data has proven useful to Customs in this regard.

The new Guide, designed to be accessible to both experts and non-experts in both fields, sets out the relevant methodology for both regimes and explores the linkages and the possibilities for Customs to use transfer pricing information to examine related party transactions.

A key message is that Customs and tax authorities are encouraged to work together and exchange information and knowledge in this area. Similarly, businesses are encouraged to take into account Customs’ needs when preparing documentation such as transfer pricing studies and Advance Pricing Agreements.

The WCO would like to thank the Organisation for Economic Cooperation and Development, the World Bank Group and the International Chamber of Commerce for their helpful assistance in preparing this Guide.