Patricia Lewis Talks to Law360: Tariffs Could Throw Advance Pricing Agreements Into Doubt

Tariffs imposed on U.S. imports by the Trump administration beginning in 2018 are raising questions about the validity of transfer pricing agreements that predetermine the tax treatment of those materials and products for future years.

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Little exists in the way of U.S. guidance on tariffs and transfer pricing. But Patricia Lewis of Caplin & Drysdale in Washington, D.C., pointed to some “semi-guidance” in the form of an IRS field service advice memorandum, or FSA, from 1999 that may offer a clue about the agency’s approach to transfer pricing when tariffs are imposed.

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While adjusting the comparables may be appropriate for both the company in the FSA and the one in the tariff situation [NYU law professor Steven] Wrappe described, he and Lewis both drew a distinction between the two situations, noting that anti-dumping duties and tariffs have different objectives.

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Lewis said that while companies can be expected to know they are at risk of incurring anti-dumping duties, they can’t realistically anticipate tariffs, which “are sprung without much advance notice.”

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Excerpt taken from the article “Tariffs Could Throw Advance Pricing Agreements Into Doubt” by Molly Moses for Law360.