Mayer Brown is a global legal services organisation comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership (regulated by the Solicitors Regulation Authority and registered in England and Wales number OC ); Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. WCO Revenue Conference Customs Valuation for Related Parties / Transfer Pricing: A Private Sector Perspective 30 June 2014 Astrid Pieron Partner

Agenda 1.Do Customs valuation and valuation for direct taxes (Transfer Pricing) actually differ? 2.What are we looking for? 3.Opportunities offered by the transfer pricing documentation 2

1. Do Customs valuation and valuation for direct taxes (Transfer Pricing) actually differ ? 3 Customs valuation 1. Focus on establishing the “right” price for each entry of merchandise imported 2. The “right” price is determined pursuant to WTO Valuation Agreement, as implemented 3. Hierarchy of methods (with preeminence of the transaction value) Transfer Pricing valuation 1. Focus on establishing the “right” income, on an aggregate basis 2. The “right” price is determined pursuant to various rules, much of which adhere to OECD standards 3. No (more) hierarchy of methods but make the most use of CPM and TNNM (capturing the profitability of the importing party, based on its “function”)

1. Do Customs valuation and valuation for direct taxes (Transfer Pricing) actually differ ? 4 Customs authorities 1. Authority over price of imported goods 2. Price reported to authority upon entry of imported goods 3. Duty linked to goods classification 4. No adjustment allowed by the importer, unless pursuant to an objective formula 5. Penalties, defenses and documentation Transfer Pricing authorities 1. Authority over item affecting taxable income 2. Annual income tax return filed, 3. Tax on income in the aggregate 4. Taxpayer initiated adjustment allowed (provided conditions are met) 5.Penalties, defenses and documentation

2. What are we looking for ? Increased AwarenessAvoiding the development of multiple standards (UN / OECD, WCO, etc.)Increased cooperation between the customs and tax authorities Promoting and rewarding the “enhanced relationship” and dialogue between taxpayers and customs / tax authorities (tax risk assessment and collaborative approach) 5

2. What are we looking for? Short-/Medium-term Customs authorities to develop guidance or safe harbor rules (such as 23.1 Commentary) Customs and tax authorities to define and promote communication channels and cooperation (focus on joints (pre-)audits, common dispute resolution, etc.) Tax authorities and Customs to create a common framework for “enhanced cooperation“ between taxpayers and authorities (UK, The Netherlands examples, EU JTPF Guidelines) Avoiding the development of multiple standards Long-term Customs and tax authorities to target joint APAs (left at the discretion of taxpayers) Work on the acceptability of transfer pricing adjustments in the customs area. 6

3. Opportunities offered by the transfer pricing documentation Transfer Pricing documentation provides valuable information around the “circumstances of the sale” that could be used by customs authorities to assess that the control does not have a material impact on the pricing of the intercompany transactions (“arm’s length standard”) Timing of production of the documentation (of relevant part of it) may follow customs constraints Economical analysis and benchmarking may provide transaction specific information relevant for the customs authorities. The customs dimension may be considered when selecting the testing methods As an alternative, corroborative tests such as product-by-product sampling may be introduced in the benchmarking 7

3. Opportunities offered by the transfer pricing documentation: the right time! The taxpayer is now facing increased transfer pricing documentation and reporting requirements (OECD BEPS project- Country- by-country reporting) Integrating the customs dimension in those new requirements would improve efficiency and costs- both sides 8

Thanks for your attention 9

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