What Related Parties Means for Customs | Transportfolio
When talking about families, who you’re related to is pretty simple, right? Your mom, dad, aunts, uncles, even cousins are all clearly defined in your family tree. But what about your distant relations? Figuring out where the children of your second cousin or your great aunt’s great-grandchildren fit in gets a little more complicated. Defining related parties in a customs transaction can seem just as confusing.
What is a related party?
According to Title 19 Code of Federal Regulations (i.e., U.S. Customs Regulations), an importer of record must determine if and how the seller in an international transaction is related to it. Just like with your own family tree, there are many ways to be related in customs transactions. The U.S. Customs Regulations, specifically §152.102(g), outline what a “related party” is. Be sure to consider these six types of relationships when determining if a seller and importer of record are related:
Why must I declare related parties?
If you conclude that a seller is in fact a related party, you should be very careful to declare that relationship up front.
We’ve all heard of the “friends and family” discount. This is exactly what U.S. Customs and Border Protection (CBP) is worried about. CBP believes that a “related relationship” may influence the value declared to Customs at the time of importation.
It is not uncommon for CBP to request additional information from importers about the basis of appraisement used to determine the value of the related party transaction. When this happens, CBP is attempting to determine if the declared value was influenced by the relationship.
And remember, as part of reasonable care standards, the burden of proof to substantiate whether the value was/was not influenced is the importer’s responsibility.
Looking for more information?
CBP has published an excellent resource for importers with related party transactions. Determining the Acceptability of Transaction Value for Related Party Transactions can answer a lot more specific questions than I’ve covered here.
For further information on related party transactions, or if you would like to discuss the topic further, anyone from our trade policy team would be happy to help. Send us an email at email@example.com for assistance.