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UPDATED: 5/7/05
 

Related Parties

When filing, a customs entry it is the importer of records responsibility to notify customs if this entry is for a related party transaction. Customs uses this information to determine that the declared transaction value is not artificially lower simply because the buyer and seller are related parties.

A related party is as describe in 19 CFR. 1 part 152.102 of US Customs Regulations is any of the following situations:
  1. Members of the same family, including brothers, sisters, spouse, ancestors, and lineal descendants.
  2. Any officer or director of an organization, and that organization.
  3. An officer of director of an organization and or director of another organization, if each individual also is an officer or director in the other organization.
  4. Partners
  5. Employer and employee.
  6. Any person directly or indirectly owning, controlling, or holding with power to vote, five percent or more of the outstanding voting stock or shares of an y organization, and that organization.
  7. Two or more persons directly or indirectly controlling, controlled by, or under common control, with any person.
At the time of entry, please be certain to notify your broker, of a related party transaction.  It is the importers responsibility to prove upon request of Customs, that the value of the transaction was negotiated as if the two parties are not related. There are several methods for establishing this proof.
  1. The sale price is consistent with industry pricing, between non-related parties for the same or similar products.
  2. The sale price is one that the manufacturer can recover costs, and make a profit proportionate to the firms' normal profits.
If you have further question regarding related party transactions, please contact our office, or your customs attorney. In addition you may wish to consult a transfer pricing specialist to help determine the valuation of your shipment.

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