On November 24 and 25, the World Customs Organisation (WCO), in Brussels, hosted a workshop on ‘Customs valuation and transfer pricing’. Essentially, the workshop’s focus was on exploring the possible convergence and harmonisation of customs valuation and transfer pricing.

There were a number of session over the two days, and the topics of discussion included ‘Administration of the World Trade Organisation agreement”, ‘Convergence of transfer  pricing and customs valuation, ‘Key Concepts of transfer pricing –Organisation for Economic CoOrdination and Development Guidelines’, ‘Key concepts of transaction value method and other methods of valuation under the WTO Aagreement’, and ‘Comparison on transfer  pricing and customs valuation methods’.

One might question the reason for such a workshop. Quite simply, more than 60% of world trade is conducted by multinational enterprises; in other words, international trade that takes place between related parties. As a consequence, the tax authorities are interested in knowing whether the prices the parties charge each other are influenced by their relationship. If they are,  then adjustments have to be made, which will impact on tax burden of the parties.

In the Western world today, transfer pricing is the top priority of tax authorities. But why the interest in customs valuation?

Tax (customs) authorities have an interest in knowing whether the relationship between two related parties has an influence on the price of the imported product, since the rate of customs duty is applied to the customs value. If at a lower value it results in a lower customs duty liability.

The increasing interest in customs valuation and transfer pricing by tax authorities is that it is quite possible for a company’s customs valuation policy and transfer pricing policy to be in conflict. For instance, a company might want to have the lowest possible export price for customs valuation purposes, while, for transfer pricing purposes, the opposite is true.

What is interesting to note from a South African perspective is that, although the South African Revenue Service (Sars) requires a company to have a transfer pricing policy, it does not require the same company to have a customs valuation policy. Why is that so? Could it be that, one of these days, Sars might well call on a company to present it with its customs valuation policy, only to find that there are conflicts between the two policies?

Dealing with the possible convergence and harmonisation of customs valuation and transfer pricing will extend the size of the column, and as a consequence I will be dealing with the respective elements, separately, in future columns.

For the moment, if one is importing products from a related company, one might well have one’s transfer pricing policy in place, but if one also does not have a customs valuation policy then one might want to seriously consider having one in place.

Mercusor-Sacu Tariff Offers
The final tariff offers in respect of the Southern African Customs Union (Sacu) and Mercosur have been published. The tariff offers cover a substantial part of the Sacu and Mercosur Harmonised Customs and Excise Tariff. If one has not reviewed the tariff offers, then one should do so.

Study on South Africa Quotas for China
The Trade Law Centre has published its 'South African Quotas on Chinese Clothing and Textiles: 18-Month Economic Review'. The 33-page documents will, no doubt, be of value to anyone involved in the industry.

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