Align Transfer Pricing & Customs Valuation

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Aligning transfer pricing (TP) with customs valuation is a high-stakes balancing act. The IRS and U.S. Customs and Border Protection (CBP) both care about intercompany pricing—but they often have conflicting goals: 

Agency                                         Goal                                                                     Preference

IRS (Tax)                          Prevent income shifting       Wants low prices to increase U.S. profit

CBP (Customs)                Maximize duty collection     Wants high prices to increase import value 

If you lower your intercompany price to reduce tax, CBP may think you’re undervaluing imports. If you raise it to satisfy CBP, the IRS may challenge your tax reporting. 

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Use the Same Arm’s-Length Standard 

Both the IRS and CBP accept the arm’s-length principle—so make sure your pricing:

• Is supported by comparables
   
• Uses standard methods (e.g., CUP, TNMM, cost-plus)
   
• Is applied consistently across all filings

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Support Related-Party Pricing for CBP 

If you're using transaction value for customs valuation (most common), and you’re buying from a related party, CBP needs proof the price is not influenced by the relationship.

Acceptable if: 

• You pass the “circumstances of sale” or “test values” analysis
• You reference a TP study that shows your pricing is in line with unrelated-party deals
• You maintain documentation showing commercial rationale for your pricing

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IRS allows year-end TP true-ups to reach target profit margins (e.g., under TNMM).

CBP does not allow post-import downward price adjustments unless:

• You declare the value as provisional
• You participate in the CBP Reconciliation Program

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Your transfer pricing policy should:

• Flag whether a transaction affects customs
• State how customs and tax positions will be reconciled
• Identify who is responsible for filing reconciliation

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If pricing is uncertain at import:

• Use CBP Reconciliation Program to declare provisional values
• Consider requesting a Binding Ruling from CBP for pricing, assists, or royalties

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Disclose Royalties and Assists Properly

If you pay royalties or provide product design inputs:

• Make sure they're disclosed to both CBP and IRS
• Clarify whether they are conditions of sale (CBP will include in customs value if they are)

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Your files should include:

• Transfer pricing study (IRS §482)
• Customs valuation memo (19 CFR §152.103 compliance)
• Intercompany agreements
• Reconciliation files and CBP Form 7501 entries
• Excel models showing true-up mechanics