Response to IGF/OECD’s Determining the Price of Minerals Consultation
During May 2023 the Organisation for Economic Co-operation and Development (OECD) and Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) in partnership on Base Erosion and Profit Shifting (BEPS) mining programme released a public consultation – Determining the Price of Minerals: A Transfer Pricing Framework and accompanying Schedule A: bauxite.
The framework aims to provide practical and meaningful guidance for developing countries to accurately delineate the transaction and price of mineral sales on an arm’s length basis and to increase policy-makers' knowledge of the process of determining the price of exported minerals, particularly in developing countries.
ICMM provided comment on the Transfer Pricing Framework and accompanying Schedule which were released for public consultation by the IGF/OECD in May. Our response highlights areas where further consultation is required and was drafted to encourage ideas that create conditions for successful and responsible mining operations that can generate shared value for host communities, regions, and nations.
- We encourage ideas that create the conditions for successful and responsible mining operations that can generate shared value for host communities, regions and nations.
- The submission highlight that ESG initiatives and innovation together with other critical elements within the mining value chain (including logistics, marketing and trading, shipping, mine closure and remediation) should be re considered and taken into account in order for the complete value chain to be represented in the framework.
- The long-term cycle of mining projects and the need for stability in agreements for which upfront and sustained agreement on the transfer pricing treatment of related-party transactions is critical for future certainty for investment in mining projects and should be re considered in depth before the framework is finalized.
- Concern has been raised as to how the OECD Guidelines are interpreted in the framework and more fundamentally the perceived lack of consistency between the framework and certain key principles within the OECD guidelines.
- Disagreement has been noted to the framework that is based on a hypothetical mining company, which on one hand describes a requirement to be a fully independent entity, while on the other hand taking into account all the value and information of the MNE through passive association. It’s believed that this concept is inconsistent with the OECD guidelines and could create confusion.
- Detailed commentary outlining views and concerns regarding the use of a “Sixth Method” has been outlined in the consultation response.