Joint audits and advance pricing agreements are ways that customs and tax officials could address the “divergence” of compliance obligations that multinationals can have for the same cross-border transactions, an international customs official said.

Multinationals have for at least a decade expressed concerns about competing obligations they face for the same cross-border transactions on goods made by related parties or associated enterprises when dealing with customs administrations and transfer pricing officials, said Liu Ping, director of the World Customs Organization's Tariff and Trade Affairs Directorate.

For a given transaction, customs agents aim to ensure all appropriate elements are included in the customs value of a good, while tax authorities want to make sure the transfer pricing doesn't include any inappropriate elements. While a lower customs value, and hence levy, is a preferable trade outcome for companies, a higher transfer pricing value is desirable to keep taxable profit down, he noted.

A February 2015 policy statement by the International Chamber of Commerce, a Paris-based business lobby, said a “dichotomy” of customs and transfer pricing rules set independently for the same transaction creates uncertainty, complexity, an increase in compliance costs and significant risk of penalties for business, both in developing and developed countries.

Commenting March 14 during the Bloomberg BNA-Baker & McKenzie Paris conference, Ping said that although there has been some “modest, limited progress” in recent years, there is still a need to “bridge the gap” between customs valuation and transfer pricing rules and procedures.

During a panel at the 2015 edition of the same conference, transfer pricing practitioners cited a trend among customs officials in emerging countries, particularly China, to apply their own interpretation of transfer pricing rules to goods entering at the border. These interpretations often conflict with those of corporate tax authorities in the same countries and could become a bigger risk in the context of two-sided transfer pricing methods.

The Organization for Economic Cooperation and Development's report on aligning transfer pricing outcomes with value creation, released in October 2015 as part of the international action plan against base erosion and profit shifting, said “customs valuation may be useful to tax administrations in evaluating the arms length character of a controlled transaction and vice versa.”

The report said greater cooperation between a country's tax and customs administration officials in evaluating transfer prices is becoming more common and should help reduce the number of cases in which customs valuations are found unacceptable for tax purposes, and vice versa.

Introducing Ping for his keynote address, Caroline Silberztein, a partner in Baker & McKenzie's Paris office, said she worked with him on the issue of customs valuations and transfer pricing while she was head of the OECD's transfer pricing unit. The OECD and the WCO have held several conferences on that topic in the past decade, including three regional workshops in 2013 and 2014.

The WCO published a guide to customs valuation and transfer pricing valuation in 2015.

One problem cited in that report is inconsistency in customs treatment of transfer pricing documentation, especially for post-importation adjustments. Ping said Australia, Canada, the U.S. and the U.K. recently issued guidance on price adjustment. “That's good news to business, in that those guidelines would advocate acceptance of both upward and downward adjustments for customs valuation purposes,” he said.

Because a large part of the problem is lack of communication between tax and customs authorities, a recommendation is to boost information exchange, Ping said. Some developing countries, such as Fiji, have merged their tax and customs authorities, and have seen some benefits from doing so. In Chile, meanwhile, tax officials consult customs authorities before they issue an advance pricing agreement.

With some authorities complaining of a “lack of reciprocity” from their colleagues in other agencies, more needs to be done to improve cooperation, said Ping, noting that customs and tax departments within companies themselves sometimes don't communicate. “Lack of cooperation hurts business,” he said.

Silberztein said “the prospect of including some of the BEPS concepts in customs valuations can be a bit scary for the business community. But on the other hand, the possibility to obtain a downward customs adjustment when we have a transfer pricing adjustment, for instance, on an important price or the possibility of a joint customs-transfer pricing APA is probably a very welcome development.”