In global supply chains, related-party transactions are common.
A U.S. importer might buy goods from a foreign affiliate, parent company, or joint venture partner.
While these relationships make business sense, they also create one of the most scrutinized areas in customs compliance: transfer pricing and valuation.

When related parties trade goods, Customs wants to ensure that the declared value reflects a true arm’s-length price.
If the relationship influences the price, the transaction value may be rejected, leading to reassessment, penalties, or even criminal investigation in severe cases.

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Why Related-Party Transactions Raise Red Flags

Under 19 U.S.C. §1401a(b)(2)(B), the transaction value method applies only when the buyer and seller are not related, or when the relationship did not influence the price.
When parties are related, Customs does not assume the price is wrong, but it does require evidence that the value is acceptable.

Common examples of related-party situations include:

• Parent company selling to a U.S. subsidiary
• Sister companies under a common parent
• Joint ventures with shared ownership or management control

The burden is on the importer to prove that prices were negotiated under normal commercial conditions.

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How Customs Tests Related-Party Pricing

CBP uses two key methods to determine if related-party pricing is acceptable:

1. The Circumstances of Sale Test

Importers must demonstrate that the relationship did not influence the price.
Acceptable evidence includes:

• Prices set in the same way as sales to unrelated buyers
• Profit levels consistent with industry norms
• Detailed documentation of pricing policy, cost structure, and negotiation process

2. The Test Values Approach

If comparable transaction values exist, Customs may accept the related-party price if it closely approximates one of the following:

• The transaction value of identical or similar goods sold to unrelated buyers
• The customs value of identical or similar goods determined under deductive or computed value methods

In practice, many importers struggle to meet either test because they lack reliable comparables or clear documentation.

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When Transfer Pricing and Customs Valuation Diverge

Companies often believe that a transfer pricing study prepared for tax purposes satisfies Customs requirements.
It does not.
Tax transfer pricing focuses on profit allocation across entities, while Customs valuation focuses on the actual price paid for the imported goods.

Key differences include:

• Tax law allows for a range of acceptable prices; Customs expects a specific declared value.
• Transfer pricing adjustments made after the fiscal year may trigger retroactive duty corrections.
• Customs valuation is transactional, not aggregate, meaning each shipment must stand on its own.

Using the same data for both purposes is smart, but each system must be supported independently.

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Common Triggers for Valuation Challenges

CBP may question related-party pricing when it sees:

• Large fluctuations in declared values without corresponding market justification
• Consistently low margins compared to unrelated importers
• Post-importation price adjustments not declared to Customs
• Lack of documentation explaining how prices were established

If CBP rejects transaction value, it will move down the valuation hierarchy, often applying the computed value or deductive value method, which can significantly raise duty liability.

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The Bottom Line

Related-party sales are not automatically a problem, but they demand extra diligence.
When pricing is influenced by corporate relationships, Customs expects clear proof that the declared value represents a true arm’s-length transaction.

Proactive documentation, consistent valuation logic, and tools like Trade Insight AI can keep your import pricing both compliant and defensible.

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