U.S. Customs Shares Information with the Internal Revenue Service

By Margaret M. Gatti, Esq.
All Rights Reserved.

U.S. Customs provides information to the Internal Revenue Service (IRS) on the importation of goods into the United States. This data, which is provided through a sophisticated data collection system, is used to enforce IRS compliance in the transfer pricing area and to identify intercompany pricing practices that appear to lie outside a predetermined arm's length range.

The information, which Customs provides the IRS, includes the following information related to transfer pricing:

• description of the goods imported
• amount and value of imported items
• origin of imported items, including country of export and manufacturer of goods
• amount of duty paid on imports

The data is used in the IRS' review of transactions that merit further investigation as to whether arm's-length pricing methods were met. It also serves as a standard for measuring conformance of related-party transactions to a range of acceptable arm's-length prices.

The fact that the import data is shared is an interesting fact and one that importers should keep in mind. Importers, after all, tend to favor low values for import purposes and high values for income tax purposes. The values, however, should be the same - if they aren't the information-sharing program between Customs and IRS is likely to highlight any differences.