Transfer Pricing and the WTO

Abstract

Transfer pricing is the phenomenon by which related corporate entities in different jurisdictions determine the price at which a transfer of goods or services between those two entities should be deemed to have occurred. This phenomenon is an inherent and endemic part of the international trading system. Given this, and given the significant governing role which the WTO plays in that system, the question stands: to what extent do, or could, the WTO institutions and WTO Agreements regulate transfer pricing and, more particularly, transfer mispricing? This article considers that question. Section I introduces the topic. Section II explains the concept of transfer pricing (and mispricing). Section III identifies the institutions of the WTO (and WCO) which are relevant to the phenomenon of transfer pricing and mispricing. Section IV identifies those provisions of the WTO Agreements the operation of which could have consequences for the phenomenon of transfer pricing and mispricing, in particular Article VII of the GATT and the WTO Customs Valuation Agreement. Section V considers whether, pursuant to the terms of the CVA and GATT, transfer mispricing could be raised in the WTO dispute settlement mechanism. Finally, section VI offers a brief conclusion about the likely future treatment of transfer pricing and mispricing in the WTO.