Page 414 - Invited Paper Session (IPS) - Volume 1

IPS173 Tatiana Mosquera Yon et al.

The affiliates are operating in different countries inside or outside the
European Union. At least, one affiliate is established in France and in Germany.
The affiliates exchange goods (semi-finished products) and services (use of
intellectual property) and invoice each other at transfer prices (that can be
agreed in an Advanced Price Agreement with the tax authorities of the
countries). Thus, flows can occur between different countries or domestically.
It was recognized by the compilers that the (factoryless) headquarters
don’t usually manage the whole supply chain. Instead, the affiliates are
responsible for certain stages of the chain, usually the production of a semi-
finished good or the assembling of the final good. The affiliates invoice their
headquarters to cover their operating costs at transfer prices. At the end of
the production process, the final goods are owned by the headquarters which
is in charge of marketing and customer services.
For the MNE-Group members the correct reporting of these complex
arrangements for customs, FTS and BoP is challenging, depending on
economic ownership and the movement of the goods. For example, if the
headquarters buys semi-finished products from a foreign affiliate and send
them for final assembly to another affiliate abroad (without selling them to its
affiliate), the headquarter has no obligation to report this to customs/FTS (no
movement of goods in its country) but to BoP (as an import, due to the change
of ownership) and a subsequent import of manufacturing services (final
assembling abroad). If the assembling takes place in the country where the
headquarters reside, only a report for customs/FTS is necessary because the
movement of the goods coincides with the change of economic ownership.

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