Tariffs! Customs, transfer pricing and supply chain implications

Session Co-Chairs

Ailish Finnerty, Arthur Cox, Dublin
Elizabeth Stevens, Caplin & Drysdale, Washington, DC

Speakers

Giuseppe Abatista, Abatista Business Advisory, Florence
Nils Harbeke, PrimeTax, Zurich
Robert J Leo, Meeks, Sheppard, Leo & Pillsbury, New York
Elissa Romanin, MinterEllison, Melbourne
Richard Slowinski, Alston & Bird, Washington, DC

Reporter

Ivan Alexander Manev
Dimitrov, Petrov & Co, Sofia
ivan.manev@dpc.bg  

Introduction

The panel examined recent developments in US tariff policy and their interaction with transfer pricing and supply chain structuring. The discussion covered the legal basis of tariffs, recent court judgments, taxpayer responses and practical issues relating to tariff refunds.

Panel discussion

Elizabeth Stevens opened the session by outlining the agenda, which included an overview of recent tariff developments, their impact on transfer pricing and the issue of tariff refunds.

Robert J Leo presented the development of United States tariff policy. He explained that, on 1 February 2025, tariffs were introduced on imports from certain countries under the International Emergency Economic Powers Act (IEEPA), followed in April 2025 by broader tariffs applying globally, including a general ad valorem rate.

Leo described the subsequent legal challenges before the US Court of International Trade, the Court of Appeals for the Federal Circuit and a federal district court, all of which found that the statutory requirements for the application of the IEEPA were not met. The US Supreme Court confirmed this position in a judgment issued on 20 February 2026, holding that the IEEPA does not authorise the imposition of tariffs.

Leo further explained that, following the ruling, the administration introduced new tariffs under section 122 of the Trade Act of 1974, which are currently subject to additional legal challenges. He noted that further litigation is expected and that the application of tariffs is likely to continue.

Ailish Finnerty then addressed how taxpayers are responding to tariffs. She noted that companies are undertaking supply chain mapping exercises, reviewing available customs regimes and considering diversification of supply chains.

The panel discussed the US first-sale doctrine. Leo explained that this approach allows importers to base customs value on an earlier transaction in a supply chain. He noted that US Customs authorities closely scrutinise such arrangements, including whether there are multiple qualifying sales and whether the goods are clearly destined for the US.

Ailish Finnerty and Giuseppe Abatista discussed structural approaches, including separating manufacturing and intellectual property functions. It was noted that such structures may raise questions as to whether certain elements, including intellectual property-related payments, may be treated as dutiable depending on their nature.

Nils Harbeke addressed the practical implications of tariff costs, noting that similar tariff pressures may apply across businesses, but the appropriate response depends on the specific structure and product flows. He emphasised that customs valuation and transfer pricing may operate on different bases.

Richard Slowinski discussed the interaction between customs valuation and transfer pricing, focusing on section 1059A of the US Internal Revenue Code. He explained that this provision may limit the tax basis of imported goods to the amount taken into account for customs purposes in order to prevent mismatches.

Slowinski referred to a recent Internal Revenue Service (IRS) private letter ruling involving the use of the deductive value method for customs purposes and a profit split method for transfer pricing. He explained that the ruling concluded that the customs value determined under the deductive value method does not represent a ‘cost’ for purposes of section 1059A, allowing for differences between customs and tax values in such cases.

Slowinski also provided a high-level overview of how tax authorities are approaching tariffs in the transfer pricing context, including whether certain transfer pricing methods may be better positioned to account for tariff impacts. 

Elissa Romanin discussed the implications for non-US businesses, including examples involving pricing adjustments in response to tariffs. She noted that such adjustments must be supported as arm’s length and may require revisions to intercompany agreements and documentation.

Harbeke addressed the allocation of tariff costs within multinational groups, noting that the impact may be reflected at different levels depending on the structure. He also raised questions regarding the selection of comparable companies where tariff exposure differs.

Abatista noted that, in practice, increased costs are often shared between parties in business-to-business transactions. He also stated that any tariff refunds should be allocated consistently with the allocation of the original costs.

Leo discussed the issue of tariff refunds. He explained that the Court of International Trade ordered the refund of IEEPA-based tariffs for certain entries, including interest. He described the administrative process being implemented by US Customs and Border Protection, including the phased processing of claims starting from April 2026.

He noted that claims must be submitted by importers or their licensed customs brokers and that the authorities retain the right to review the information submitted. He also explained that certain categories of entries, including those subject to other procedures, are excluded from the initial phase.

The panel further discussed deadlines for filing claims and potential litigation, including the possibility of filing claims until 2027 in order to preserve rights in certain cases.

In closing remarks, Slowinski noted that taxpayers should consider how to address tariff refunds for transfer pricing purposes. Abatista stated that the current environment provides an opportunity to review transfer pricing policies. Leo concluded by noting that while some Importers were nervous about political pressure or bad publicity if they sought refunds, the IEEPA tariffs were illegal, and the importers are entitled to the refunds.