On May 31, 2012, U.S. Customs & Border Protection (“CBP”) published a final “1625 Notice” in which it announced the agency’s new policy concerning transfer pricing and post-importation adjustments. This new policy is widely regarded as the most significant development in U.S. Customs valuation law since the enactment of the Trade Agreements Act of 1979.

CBP announced its new policy by revoking a HQ ruling and “replacing” it with a new one that articulated a new standard for importers: when purchases from related party sellers are based on inter-company transfer prices, post-importation price adjustments may form part of the customs values – and should be reported to CBP if the adjustments meet the new requirements of the “5-factor” test for formula pricing. In addition, importers must continue to demonstrate that the “circumstances of sale” test is met showing that the related party status does not influence the price declared as the customs value.

These requirements should now form part of every importer’s compliance program – and be documented with the records and information articulated in the 1625 Notice. The new policy is the result of many years of hard work by the trade and CBP – and represents a “textbook example” of how good policy results when the government and the private sector work together to achieve mutually beneficial results.

Source: The Pike Law Firm