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The secret sauce

Intercompany Agreements

16 May 2022

I'd like to tell you about a case study that featured in a workshop at TP Minds Americas in April. The session, hosted by Yvonne Golby and Damon V. Pike, was entitled ‘The Secret Sauce – Blending Customs Valuation and Transfer Pricing Into A Winning Formula’.

Yvonne and Damon very generously allowed me to participate, to explain the role of intercompany agreements as a central reference point for both TP and customs issues.

The situation is pictured below.

In the scenario shown here, entity C may be paying licence fees (or management fees) to entity A. Are those fees part of the import customs value as regards goods purchased from entity B? The analysis may well depend in part on the precise wording of the relevant intercompany agreements.

It was great example of how intercompany transaction flows need to be deconstructed into their component parts. Then reassembled in a way which meets the needs of all stakeholders: TP, customs, VAT / GST, HR / performance bonuses, asset protection and, of course, legal. And then documented accordingly.

The case study also gave Damon an excuse to tell his eye-opening story about Ken and Barbie. But I'll save that for another day.

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Article by
Paul Sutton
LCN Legal Co-Founder

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