On February 20, 2026, the U.S. Supreme Court ruled, in the consolidated cases Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc., that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs.
The decision applied to tariffs established under this legislation, including so-called retaliatory tariffs and those related to drug trafficking. However, other tariffs based on different legal authorities, such as certain measures adopted under Sections 232 and 301, were not within the scope of the decision.
Furthermore, the ruling did not result in the immediate removal of tariff pressures on U.S. imports. On February 20, 2026, the Administration announced a temporary 10% surcharge on certain imports under Section 122 of the Trade Act of 1974, subject to the applicable conditions and exceptions.
For multinational groups with distribution subsidiaries in the United States, this new scenario raises a relevant issue for Transfer Pricing: how changes in the effective cost of imports can affect distributors’ profitability and compliance with the arm’s-length principle.
The Link Between Tariffs and Transfer Pricing
U.S. distributors that purchase goods from related companies must simultaneously consider the tax and customs rules applicable to their transactions.
From a Transfer Pricing perspective, Section 482 of the Internal Revenue Code requires that transactions between related parties produce results consistent with those that independent companies would have obtained under comparable circumstances. Consequently, the purchase price of the goods can directly affect the operating margin earned by the U.S. distributor.
From a customs perspective, the declared value of an import between related parties must also comply with applicable rules for determining whether the relationship between the companies influenced the price used for valuation purposes.
U.S. Customs and Border Protection (CBP) has noted that the existence of a Local File is not, by itself, sufficient to demonstrate that a price between related parties is acceptable for customs purposes. However, the methodology, facts, and information used in such an analysis may be relevant in evaluating the circumstances under which the price was determined.
Therefore, the same intercompany policy may require a coordinated analysis from both perspectives, without assuming that the treatment accepted for Transfer Pricing will automatically be valid for customs purposes.
Tariff changes can affect profit margins
Tariff charges are one of the economic factors that can directly affect a distributor’s profitability.
When these increase, decrease, are replaced by other measures, or cease to apply, the entity’s operating margin may deviate from the result projected in its Transfer Pricing policy, even if its functions, assets, and risks remain substantially the same.
In this context, the invalidation of certain tariffs under the IEEPA should not be analyzed in isolation. For Transfer Pricing purposes, what matters is determining how the effective import cost evolves after taking into account the tariffs that are no longer applied, any new measures that may replace them, and other costs associated with the transaction.
An extraordinary decrease or increase in these costs may temporarily alter the distributor’s profitability without necessarily implying that its intercompany policy is incorrect.
For this reason, before making an adjustment, it is necessary to assess whether a variation in profitability stems from ordinary business conditions, extraordinary changes in import costs, changes in market conditions, or a deviation that truly requires a review of prices between related parties.
True-ups require coordination with tax and customs authorities
Many multinational groups use year-end adjustments or true-ups to align their distributors’ final profitability with a result consistent with the arm’s-length principle.
From a Transfer Pricing perspective, these mechanisms can be used to adjust the results of controlled transactions. However, their customs treatment is not automatic.
When a true-up directly or indirectly modifies the price of previously imported goods, it must also be evaluated under the applicable customs valuation rules.
Among other considerations, it may be necessary to analyze whether the Transfer Pricing policy was previously established, whether the adjustment mechanism is objective, whether the adjustments can be linked to the corresponding imported goods, and what procedures must be followed with the CBP.
For this reason, it is advisable to supplement year-end adjustments with periodic monitoring of profitability throughout the fiscal year.
A monthly or quarterly review can help identify in advance deviations caused by tariffs, logistics costs, exchange rate fluctuations, or other economic factors and, where appropriate, implement prospective adjustments before the close of the fiscal year.
If a true-up ultimately proves necessary, the group should jointly analyze its impact on the distributor’s profitability, its consistency with the arm’s-length principle, and its potential effects on the customs value of imports.
An Environment Requiring Greater Monitoring
The Supreme Court’s decision does not directly modify U.S. Transfer Pricing rules. However, it does affect a variable that may prove decisive for distributors: the effective cost of imports.
Furthermore, the substitution or coexistence of different tariff measures demonstrates that the analysis cannot be limited to determining whether a particular tariff remains in effect. The true economic effect will depend on the combination of tariffs, surcharges, logistics costs, and other conditions affecting each transaction.
In this context, multinational groups should review whether their Transfer Pricing policies allow them to promptly identify significant variations in margins and to distinguish the effects of extraordinary changes in costs from those deviations that actually require adjustments to intercompany prices.
It is also advisable to review the coordination between Transfer Pricing documentation, year-end adjustment policies, and the procedures used to determine the value of imported goods.
At TPC Group, we assist multinational groups in evaluating and documenting their related-party distribution operations, taking into account the impact that economic, tax, and regulatory changes may have on their Transfer Pricing policies.
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