The OECD launched a public consultation on a new transfer pricing framework for minerals, beginning with copper. The initiative titled "Determining the Price of Minerals: A Transfer Pricing Framework for Copper" is specifically designed to help resource-rich developing nations protect their tax base from a well-documented phenomenon: the systematic underpricing of mineral exports by multinational mining companies to related-party trading hubs in low-tax jurisdictions.
Copper represents the OECD's starting point, but the framework is intended to be extendable to other hard-to-value commodities including gold, cobalt, lithium, and rare earth elements making it relevant across virtually all major mining jurisdictions from the Democratic Republic of Congo to Chile and Australia.
Why Minerals Are a Transfer Pricing Flashpoint
Unlike manufactured goods or services, commodity pricing in related-party transactions is notoriously difficult to benchmark. Copper, for example, trades on global exchanges like the London Metal Exchange (LME), but the price actually received by a related-party trading hub depends on grade, form, delivery terms, hedging arrangements, and market timing. MNEs have historically exploited these variables to shift value from mine-level entities in high-tax African or Latin American jurisdictions to Swiss or Singapore-based commodity trading affiliates.
The Framework's Approach
The OECD's proposed framework establishes a commodity-specific comparable uncontrolled price (CUP) methodology, anchored to quoted market prices but adjusted for processing, transport, insurance, and quality differentials. For copper, this means establishing clear rules around which LME pricing benchmark applies, how provisional pricing arrangements are treated, and how marketing commissions charged by related trading hubs are scrutinised under the arm's length standard.
Low-Capacity Jurisdictions in Focus
A central motivation for the minerals framework is capacity building. Many developing nations that host major mining operations lack the tax authority expertise to challenge sophisticated transfer pricing structures used by global mining companies. The OECD's framework provides a standardised analytical template that even under-resourced tax administrations can apply potentially unlocking billions in additional tax revenue for jurisdictions that have long been on the losing side of TP disputes with the mining sector.
