Transfer Pricing Insider

Quick Links

Request Information

Events

Trade Shows
- 12/1/2009
- TEI New York Symposium 09
More Trade Shows

White Papers

Newsletters

Ernst & Young Customs & International Trade Update

Source: WG&L Journal of International Taxation

This article covers recent developments in customs and trade including the “first sale for export” rule, the convergence of transfer pricing and customs valuation, and developments in the EU, Brazil, Canada, China, and Colombia. The authors are listed at the end of each section.

The Future of “First Sale” Customs Valuation

Companies that import merchandise subject to multiple sales prior to importation have benefited from “first-sale” customs valuation in certain jurisdictions, such as the U.S. and European Union.¹Suddenly the future of this popular duty savings strategy is uncertain.

First-sale customs valuation allows importers to declare the price paid in the earlier sale (i.e., first sale) for customs purposes, resulting in a lower dutiable value and thus lower customs duty liability. For example, there are many situations in which a contract manufacturer sells a product to a procurement company, which resells the product to a U.S. distributor, but the product is shipped directly from the manufacturer to the U.S. Under the first-sale rule, the manufacturer-to-procurement company sale is used for customs valuation.

Last summer, the World Customs Organization (WCO) Technical Committee on Customs Valuation surprised many with the release of Commentary 22.1, Meaning of the Expression “Sold for Export to the Country of Importation” in a Series of Sales, which expressed a preference for the use of the “last sale” when there are a series of transactions that cause the importation of merchandise. A WCO Technical Committee Commentary is only advisory, and would not by itself change current practice in jurisdictions with clear authority supporting first-sale customs valuation, such as the U.S. or EU. However, recent developments in the U.S. have many wondering if first-sale customs valuation has a future.

Read the full article

ONESOURCE Transfer Pricing thomsonreuters.com