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Case Study: Cummins Westport Inc.

Decent Essays

This is with reference to our earlier letter dated January 24, 2017. Please see below the information requested by you. 1) Business Structure Cummins Westport Inc. (“CWI”) is a resident in and incorporated under the laws of the State of Delaware, USA. CWI was formed to develop, support and market a comprehensive product line of low-emission, high performance engines and ancillary products using gaseous hydrocarbon fuels which incorporate spark ignition and other proprietary intellectual property developed by Cummins Inc. (“Cummins USA”) and Westport Fuel Systems Inc. (“Westport Canada”). CWI maintains a branch in Canada, CWI Canada, with its head office located in Vancouver, BC. In particular, CWI Canada’s sole function is to perform certain …show more content…

3) Transfer Pricing Policy Applied By virtue of the functions performed by CWI Canada (i.e., marketing and related administrative support services), it is appropriate to characterize CWI Canada as a limited-risk service provider to CWI. CWI Canada assessed the applicability of the various transfer pricing methodologies (“TPMs”) described by the OECD Guidelines and endorsed by IC 87-2R. In light of various factors, including the availability of sufficiently comparable uncontrolled transactional data, CWI Canada determined the Transactional Net Margin Method (“TNMM”) to be the most appropriate TPM in the circumstances. CWI Canada applies the TNMM as follows: • Step 1 – CWI Canada determines its total cost of providing services to CWI; • Step 2 – CWI Canada segregates its costs of providing services between those activities which can be considered value-added in nature and those third-party costs which are more appropriately considered to be “pass-through” costs incurred by CWI Canada on behalf of

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