Treas. Reg. 1.482-9: Other Cost-Based Methods

Treas. Reg. Section 1.482-9 is the other cost-based methods section of the section 482 regulations — the cost of goods sold (COGS) methods. The section carries the methods that price the controlled goods by reference to the uncontrolled cost data: the COGS method (the arm’s length price computed from the uncontrolled cost of goods sold of comparable goods) and the uncontrolled margin method (the arm’s length price as the controlled cost base plus the uncontrolled margin over that cost).

Section purpose

In plain English, Section 1.482-9 says: where the controlled goods are comparable to the uncontrolled goods and the uncontrolled cost data is reliable, the arm’s length price can be built from the cost side of the uncontrolled market — from what the comparable goods cost to the uncontrolled sellers and the margin they earn over that cost. The section is the cost-side reference of the section 482 set: the route for the facts where the cost structure is the clean observable and the direct price is not — the commodity and manufactured-goods facts where the COGS data is the market data.

The operative standard

• The COGS method: the uncontrolled cost as the reference. The arm’s length price of the controlled goods is computed by reference to the uncontrolled cost of goods sold of the comparable goods — the cost the uncontrolled sellers carry for the comparable goods, with the price built from that cost reference. The method’s reliability is the reliability of the COGS data: the comparable goods, the comparable cost structure, the cost base that is the same cost base in the accounts.
• The uncontrolled margin method: the cost base plus the uncontrolled margin. The arm’s length price is the controlled party’s cost of goods sold plus the margin over cost that the uncontrolled sales of the same goods earn — the uncontrolled margin as the mark-up on the controlled cost base. The method is the cost-plus logic pointed at the uncontrolled margin of the same goods, rather than at the comparable supplier’s mark-up.
• The comparability runs on the cost structure. Both methods run on the goods’ comparability and the cost structure’s comparability — the comparable goods, the comparable production, the comparable cost base — with the differences that would materially affect the cost or the margin adjusted for, or the reference discarded. The cost base is the arithmetic’s spine: the COGS in the accounts, the allocations behind it shown, the same base in the file and in the return.

Key elements

Element	The content
The COGS method	The arm’s length price computed by reference to the uncontrolled cost of goods sold of the comparable goods — the uncontrolled cost as the price reference
The uncontrolled margin method	The arm’s length price = the controlled party’s cost of goods sold + the uncontrolled margin over cost earned by the uncontrolled sales of the same goods
The cost base	The COGS in the accounts — the cost structure the methods run on, the base the allocations behind it must support
The comparability	The comparable goods, the comparable production, the comparable cost structure — the differences that materially affect the cost or the margin adjusted for
The order of preference	The COGS method third in the US order — after the CUP and the RPM — the Section 1.482-1 ranking that puts the cost reference behind the direct price methods
The documentation	The uncontrolled COGS data, the cost base, the margin analysis — the Section 1.6662-6 content for the method

How it maps to the OECD method set

• The OECD set has no direct COGS method. The OECD’s five methods reach the cost-side result through other routes: the cost plus method (the cost base plus the comparable mark-up) is the closest relative of the uncontrolled margin logic, and the CPM / TNMM family carries the cost-based PLIs (the cost-based mark-up, the operating margin on cost) that measure the same economics. The methods overview keeps the mapping in one table.
• The cost data is the shared discipline. The COGS data the methods run on is the cost data the OECD analysis reads through the comparability adjustments — the cost base, the allocations, the cost structure — the comparability adjustments glossary running on the cost side instead of the price side.
• The dialect difference is the reference, not the logic. The US regulation names the uncontrolled-COGS reference as a method in the order of preference; the OECD presentation reaches the same price through the cost plus and the PLI analysis. The file that carries the cost data in both presentations answers both dialects with the same numbers.

Practice notes for the Indian group with a US affiliate

• The route is the support, not usually the primary. The COGS methods are the routes the examination reaches for where the cost structure is the clean observable — the commodity and the standardized-manufacture facts. The file that prices on the TNMM or the CPM carries the cost data anyway (the cost-based PLIs need it), and the Section 1.482-9 content is the cost base documented to the COGS standard.
• The cost base is the number both examinations audit. The COGS in the accounts, the allocations behind it, the same base in the Indian Local File and the US Section 1.6662-6 documentation — the US transfer pricing guide carries the cross-border map, and the cost plus vs TNMM comparison the selection boundary.
• The method decision is documented on the order. The COGS method third in the order: the file that selects it over the direct price methods documents the fact pattern that puts the cost reference in the order — the how to choose a method framework, on the cost-data facts.

Related docs

• US transfer pricing — the Section 482 overview
• Treas. Reg. 1.482-1 — the order of preference
• Treas. Reg. 1.482-7 — the cost plus and the UNSP routes
• Cost plus method — the closest OECD relative