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Acceptability of Transaction for Related Parties as it Pertains to the Customs Act - What This Means for Your Imports

May 10, 2019

 

Relation in any sense of the word can elicit confusion with impending grey areas obstructing and bending certain legalities. This simply cannot be the case when considering Related Party transactions in international trade through Customs and various other regulatory agencies.

As it is written under CFR Title 19, and more specifically §152.102(g), “Related persons means:

 

  1. Members of the same family, including brothers and sisters (whether by whole or half-blood), spouse, ancestors, and lineal descendants.

  2. Any officer or director of an organization, and that organization,

  3. An officer or director of an organization and an officer 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 any organization, and that organization.

  7. Two or more persons directly or indirectly controlling, controlled by, or under common control with, any person.”

[Cornell Law School]

 

 

While familial relations can weave a tangled web, governing entities issuing regulations tend to keep things straight forward and as factual as possible. As one can deduce from the aforementioned CFR Title, proving business relations in international trade can be a much simpler feat.

 

It is seemingly obvious when multiple companies are involved in a joint venture requiring the importation of goods as it relates to the specific industry / business in question, and in this case, declaring this relationship to Customs immediately is vital to the integrity and fluidity of the upcoming transaction.

 

 The initial rush to disclose a related party transaction is to negate any bias to influence the value declared to Customs when being imported. In some instances, U.S. Customs will request additional appraisement information to better determine the value of the goods in question. If a discrepancy in valuation is revealed, the burden of proof to corroborate the cost and prove that it was not wrongly influenced by either party falls on the importer.

 

Are you looking for more information?

 

If you would like to discuss the legitimacy of your current related party transactions, or you have any other Customs / Import related questions, please send them to us HERE.

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