Cross-border trade between Canada and the U.S. has become increasingly complex due to evolving tariffs and trade regulations. For companies with subsidiaries on both sides of the border, managing compliance while maintaining profitability is a growing challenge.
By leveraging NetSuite and implementing an efficient transfer pricing strategy, businesses can significantly reduce tariff costs, streamline operations, and ensure accurate financial reporting. One company, a home goods distributor based in Canada and a client of GURUS Solutions, faced this exact challenge and found a solution through smart systems integration and the power of NetSuite.
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Using NetSuite and Transfer Pricing to Simplify Cross-Border Compliance
The core of this solution centers around transfer pricing — the pricing of goods or services sold between subsidiaries of the same parent company. By having the U.S. subsidiary purchase the goods from the Canadian counterpart and import them before selling to the end customer, tariffs would be applied to the intercompany transfer price rather than the final customer sale price.
This strategy brings with it a complex web of intercompany transactions, documentation, and compliance requirements. So, to manage this in a scalable and automated fashion, the client turned to NetSuite and the GURUS team for help.
Transfer Pricing: Choosing the Right Method for Your Business
In this case, the client uses the cost-plus method with average costing to calculate transfer prices between subsidiaries. However, it's important to recognize that transfer pricing isn’t a one-size-fits-all approach.
The most suitable method for your business will depend on various factors, including your industry, corporate structure, and compliance requirements. Before implementing any strategy, you should consult with your audit or accounting firm to determine the appropriate transfer pricing methodology and ensure it aligns with local and international tax regulations.
Once you’ve identified the right approach — whether it's cost-plus, resale-minus, or another method — GURUS can help you configure and apply that strategy in NetSuite, building a solution that fits your operational and compliance needs.
Leveraging NetSuite’s Special Order Process
After a detailed review of the client’s business needs, GURUS designed a streamlined, end-to-end solution using NetSuite’s native special order process, enhanced with targeted customizations to automate and reduce manual work. Here's how it all comes together:
1. Transfer Pricing Calculation
Transfer prices for goods are established between all relevant subsidiaries based on the average cost of the items. This ensures consistency and compliance across intercompany transactions.
2. Sales Order Placement
All U.S. customer orders are placed through the U.S.-based subsidiary, even if the inventory resides in Canada.
3. Special Order Handling
When the order includes items currently held by the Canadian subsidiary, the order lines are flagged as special orders.
These lines trigger the creation of an intercompany purchase order (PO) from the U.S. subsidiary to the Canadian intercompany vendor, using the previously calculated transfer price.
4. Matching Sales Orders
An intercompany sales order (SO) is automatically generated in the Canadian subsidiary to match the PO, ensuring synchronized intercompany documentation.
5. Multi-Subsidiary Flexibility
If another subsidiary holds the actual inventory, the process repeats with another layer of special order between subsidiaries, ensuring proper routing and billing.
6. Cross-Dock Fulfillment
Once the Canadian subsidiary fulfills the intercompany SO, the goods are automatically received by the U.S. subsidiary, enabling a cross-dock fulfillment to the final U.S. customer.
This minimizes handling time and streamlines logistics.
7. Applying Tariffs and Billing
Tariffs are applied as a landed cost on the item receipt within the U.S. subsidiary. All related POs and SOs are billed automatically when the original U.S. customer invoice is generated.
Our solution seamlessly links related invoices and vendor bills within NetSuite, enabling accurate intercompany eliminations and streamlined financial reporting.
Streamlining Cross-Border Trade with NetSuite
While this solution was designed for a specific client, the underlying strategy is widely applicable to many businesses engaged in Canada–U.S. cross-border trade. Leveraging transfer pricing between subsidiaries isn't a new concept, but the operational complexity has historically made it difficult to manage without significant manual effort.
By taking full advantage of NetSuite’s special order process, paired with smart custom automations, companies can transform a compliance headache into a competitive advantage. Not only does it help avoid unnecessary tariff costs, but it also lays the foundation for clean, auditable intercompany financials and improved supply chain agility.
Turning Trade Challenges Into Opportunities with NetSuite
Cross-border trade will always be subject to economic shifts, regulatory changes, and geopolitical tensions. For businesses operating across Canada and the U.S., the ability to adapt quickly and maintain compliance without sacrificing efficiency is key.
GURUS’ work with this Canadian distributor showcases how the right ERP strategy — supported by NetSuite’s powerful capabilities — can help businesses future-proof their operations, stay compliant, and continue growing in even the most unpredictable market environments.
If your business is feeling the strain of cross-border tariffs, or if you're looking for ways to optimize intercompany operations, now is the time to explore how a solution like this could work for you.
Contact GURUS Solutions today to see how NetSuite can be tailored to your business needs.
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