CBP Releases Q3 Trade Newsletter, Discusses Ruling on Transaction Value for "Related Party" Sales
CBP released its Trade Newsletter for the 2012 third quarter. The newsletter provides an update on its recent ruling on the treatment of post-import adjustments, the Simplified Entry pilot, progress on ACE, the Centers for Excellence and Expertise, collaboration between CBP and Homeland Security Investigations (HSI), and the update to 19 CFR Part 111 broker regulations.
Broadened Transfer Pricing Ruling
The newsletter discussed a recent CBP ruling on related party transactions that may involve adjustments to initial transfer prices after import. The transfer pricing policies are used to examine whether a price between parties is at arm’s length for tax purposes and to evaluate tax consequences among the parties. CBP had allowed the adjustments, but not under the transaction value basis of appraisement. Sometimes, these adjustments were allowed under the “fallback” method of appraisement. In other instances, CBP disallowed the adjustments completely because they were considered to be a post-importation rebate or decrease under 19 U.S.C. §1401a(b)(4)(B).
CBP reviewed the matter and then issued a broader interpretation of what is permitted under transaction value to allow a transfer pricing policy to be considered a “formula” in the transfer pricing context provided certain criteria are met. CBP said the transfer pricing policy would still need to be adjusted for Customs purposes since the arm’s length test is different [(1) circumstances of the sale, or (2) test values] from the IRS analysis. CBP said it urges importers to use the reconciliation program to make the final declaration of value to claim upward and downward post-importation adjustments under the transaction value basis of appraisement. The ruling is effective July 30.
(See ITT's Online Archives 12060427 for summary of the ruling).
HSI Collaboration
CBP provided an update on its collaborative work with HSI, Immigration and Customs Enforcement's investigative component, to beat back commercial fraud. HSI and CBP began working together in a working group to analyze joint commercial trade fraud priority strategies, which resulted in a joint fraud enforcement program. HSI agents meet monthly with CBP as part of information and data-sharing.
CBP Now Sharing Info with Trademark Holders
Ports now have authority to share unredacted samples and photos of suspected counterfeit merchandise under a recent Interim Final Rule implementing part of the National Defense Authorization Act of 2012. The interim rule allows CBP to disclose to an intellectual property right holder information appearing on merchandise or its retail packaging that may comprise information otherwise protected by the Trade Secrets Act, for the purpose of assisting CBP in determining whether the merchandise bears a counterfeit mark.
(See ITT's Online Archives 12042320 for summary of the interim rule. See 12062605 and 12062726 for summaries of recent public comments on the interim rule.)
Upcoming Events
On July 25, CBP will meet with Businesses for a Better Border and Canada Border Services Agency in Washington, D.C., to discuss harmonization of trusted trader programs.
CBP’s next Commercial Operators Advisory Committee (COAC) meeting, the third of the year, is set for August 15 in Seattle, Washington.
Interagency Partnerships
CBP and the Consumer Product Safety Commission (CPSC) developed a voluntary importer certification program, the Importer Self-Assessment Product Safety Pilot (ISA-PS), which extends CBP’s Importer Self-Assessment program to require compliance of regulations administered by CPSC. The ISA-PS pilot is open to ISA participants that have already demonstrated compliance with trade laws, are interested in developing a partnership with CPSC, and are committed to ensuring adequate quality controls are in place to meet CPSC’s requirements. In exchange, ISA-PS members receive benefits such as “front of the line testing” and a reduction in the number of product safety tests, among others. Recently, CPSC indicated it will consider an importer’s participation in the ISA-PS program as a mitigating factor in the event civil penalties or liquidated damages are assessed. CBP is reaching out to other federal agencies and the Trade to analyze agency operations, policy, and regulatory authorities to identify areas for potential trade and government partnerships.