Related Party Transactions are sales between buyer and seller who share certain qualifying relationships defined in 19 U.S.C. § 1401a(g). CBP can still accept transaction value in a related-party sale, but only if the importer demonstrates the relationship did not influence the price.
Parties are related if they are:
- Members of the same family (spouse, brother, sister, ancestor, lineal descendant)
- Officer or director of one entity and officer or director of the other
- Legally recognized partners
- Employer and employee
- Persons owning, controlling, or holding 5% or more of the outstanding voting stock or shares of both
- One party directly or indirectly controls the other
- Both parties are directly or indirectly controlled by a third person
Two tests determine whether the relationship influenced the price:
- Circumstances of Sale Test — Was the price settled in a manner consistent with normal pricing practices of the industry? Did the price recover all costs plus a profit equivalent to the firm's overall profit on sales of the same class or kind?
- Test Values — Does the price closely approximate (a) the transaction value of identical or similar merchandise in sales to unrelated buyers, (b) deductive value of identical or similar merchandise, or (c) computed value of identical or similar merchandise — all in sales to the U.S. at or about the same time?
If neither test is satisfied, transaction value is rejected and CBP moves to the fallback methods.
Related-party importers commonly use transfer pricing studies (OECD-compliant, prepared under § 482) as evidence the price was set at arm's length — see CBP's Statement on Use of Transfer Pricing Studies (T.D. 96-87 and subsequent guidance, including HQ 547654 and H037375).