A related party transaction in customs terms is a sale between a buyer and seller who are linked by ownership, control, shared officers or family ties, such as a parent selling to its subsidiary. Customs does not reject these prices for being related. It accepts the invoice price as the dutiable transaction value only if the relationship did not influence the price, and the importer may be asked to prove it. The trap for multinational groups is that the intercompany price is also set, and often adjusted at year end, for tax reasons, and a price that satisfies the tax authority is not automatically accepted by customs. This guide explains the test, the "test values" fallback, how year-end adjustments change duty, and what a forwarder or broker should ask a related-party importer. It builds on how the dutiable value is calculated. As of October 2026.
When are a buyer and seller "related" for customs?
The definition is set by the customs rules, not by company law or tax law, and it is broader than most people expect. Under Article 15.4 of the WTO Customs Valuation Agreement, the test is closed, not open-ended:
Persons are related only if they are officers or directors of one another's businesses, legally recognised business partners, employer and employee, or members of the same family; if one controls the other, or both are controlled by a third person, or together they control a third person; or if any person owns, controls or holds 5 per cent or more of the voting stock or shares of both.
The US statute (19 USC 1401a(g)) has a similar list, including a 5 per cent voting-stock threshold, officers or directors and the organisation they serve, and common control. The EU lists the same conditions in Article 127 of Implementing Regulation (EU) 2015/2447, and UK guidance on GOV.UK follows the same pattern. One point catches people out: a sole agent, sole distributor or sole concessionaire is not related to its principal merely because of that role. They count as related only if one of the listed conditions also applies. Whether a single shared director is enough depends on the exact wording of the local rule, so check it rather than assume.
Does a related-party sale mean customs rejects the price?
No, and this is the most common misconception. Article 1.2(a) of the WTO Agreement says the fact that buyer and seller are related "shall not in itself be grounds for regarding the transaction value as unacceptable". The circumstances surrounding the sale are examined, and the transaction value is accepted provided the relationship did not influence the price. The US implements this in 19 USC 1401a(b)(2)(B) and 19 CFR 152.103(l), where the regulation says CBP shall not disregard a transaction value solely because the buyer and seller are related. The EU applies it through Article 70(3)(d) of the Union Customs Code (the buyer and seller are not related, or the relationship did not influence the price) and Article 134 of Implementing Regulation 2015/2447.
In practice the burden moves to the importer. Customs may simply accept the price, but if it has doubts it will ask how the price was arrived at.
The circumstances of the sale test
This is a look at the commercial facts, not a formula. The US regulation lists examples of how an importer can show the price was not influenced:
- Conduct as if unrelated: the parties negotiate and deal with each other the way unrelated parties would.
- Industry pricing practice: the price was settled in a manner consistent with the normal pricing practice of the industry in question, or with how the seller prices to unrelated buyers.
- Cost plus profit: the price recovers all costs plus a profit equal to the firm's overall profit over a representative period, for goods of the same class or kind.
CBP says the profit test is the criterion it uses most often, and its guidance stresses that the test is applied product by product. GOV.UK gives similar examples for the UK: trading as if unrelated, paying the same price as unrelated buyers at the same level and volume, or a fully costed commercial sale. If the relationship is found to have influenced the price, transaction value cannot be used and customs moves down the other valuation methods, starting with identical and similar goods.
Test values: the second route to acceptance
Under Article 1.2(b) of the WTO Agreement, the importer can instead demonstrate that the declared value "closely approximates" one of three test values, each taken at or about the same time:
- the transaction value in sales to unrelated buyers of identical or similar goods for export to the same country;
- the customs value of identical or similar goods determined by the deductive method (Article 5); or
- the customs value of identical or similar goods determined by the computed method (Article 6).
The US test values in 19 CFR 152.103(l) follow the same shape. CBP does not set a percentage for "closely approximates". The regulation names factors such as the nature of the goods and industry, the season, whether the difference is commercially significant and internal transport costs. If a test value is found appropriate, customs does not need to examine whether the relationship influenced the price. In the EU, test values are used at the declarant's request and do not replace the declared transaction value.
Why a tax-approved transfer price is not automatically a customs value
Tax authorities test intercompany prices against the arm's length principle (in the US, under Internal Revenue Code section 482), usually on the OECD-style methods and often on a company-wide or product-family basis. Customs tests the price of the goods in each import. CBP's April 2007 informed compliance publication on related party transactions says that an advance pricing agreement (APA) or a transfer pricing study by itself is not sufficient to show a related party transaction value is acceptable for customs purposes. Its reasons are that customs must value every article entry by entry and product by product, while the tax rules allow aggregation and offsetting adjustments. The underlying facts in a tax study can still be useful evidence, but the importer must identify the relevant material and explain it.
HMRC takes the same line in its valuation manual: a transfer price accepted for direct tax "cannot be assumed to be acceptable" for customs valuation. Its Method 1 guidance adds that margin-based transfer pricing models usually cannot support a transaction value, because the real value cannot be assured at the time of sale for export, and that HMRC does not verify your transfer pricing, which is a corporation tax matter. It does accept recent independent transfer pricing studies as evidence. The WCO Guide to Customs Valuation and Transfer Pricing, published on 24 June 2015 with input from the OECD, the World Bank and the ICC, frames the same gap: customs asks whether the relationship distorted the price, tax asks whether the terms are arm's length. The guide encourages customs and tax authorities to share information, and encourages businesses to consider customs needs when preparing transfer pricing studies and APAs.
Year-end adjustments: the part that changes the duty
Many groups invoice at a standard intercompany price during the year and then true it up after the books close, so that the importing entity earns a target margin. That can mean a credit note or an extra invoice months after the goods cleared. Customs systems value the goods at the time of import, so each country has its own answer to what the adjustment does to duty already paid.
| Jurisdiction | Position on post-import price changes (as of October 2026) |
|---|---|
| United States | The general rule in 19 CFR 152.103 disregards a rebate or decrease in price made after importation. Since a CBP ruling of May 2012 (HRL W548314), transaction value is not precluded where the intercompany price is subject to post-importation adjustments made under a formal transfer pricing policy, and those adjustments, upward or downward, are taken into account. CBP lists conditions, including a written policy in place before importation prepared with section 482 in mind, use of the policy in the tax return, a policy covering the products concerned, and accounting details to support the adjustments. All must be met. CBP strongly encourages use of its Reconciliation program to report them, though it is not mandatory. |
| European Union | Implementing Regulation 2015/2447 Article 130 excludes discounts that result from contract amendments made after the declaration is accepted. In Hamamatsu (C-529/16, December 2017) the Court of Justice found no basis under the old Community Customs Code for customs values built on retroactive year-end transfer pricing adjustments. In Tauritus (C-782/23, May 2025) it accepted transaction value where the final price follows objective factors outside the parties' control, as reported by commentators. Treat the position as strict and take advice. |
| United Kingdom | HMRC says a price revised after goods enter free circulation is a retrospective adjustment. If contracts allow adjustment, the invoice price is provisional. Increases are treated as part of the payment and may lead to a demand for arrears. Decreases can be claimed as a duty refund, with contract details and credit notes, within 3 years of each entry. GOV.UK does not address year-end adjustments by name. |
Treat the table as a map of the issues, not a ruling. Rules and case law in this area move, and the right treatment depends on the contract, the policy and the entry type. For the mechanics of fixing a filed value, see customs post-entry amendments.
Worked example (illustrative only)
These figures are invented to show the arithmetic. They are not real rates, and duty, freight, insurance and import tax rules differ by country.
Assumptions: a subsidiary imports 10,000 units from its parent at an intercompany price of 100 per unit. The goods carry an assumed ad valorem duty rate of 5 per cent. Ignore freight, insurance and other additions, and assume the transaction value method applies and the first-pass price is accepted.
- At entry: declared value 1,000,000. Duty at 5 per cent is 50,000.
- Upward true-up: after year end, the group's transfer pricing policy calls for an extra payment of 60,000 to reach the target margin. If that extra amount relates to the imported goods and is taken into account, the value becomes 1,060,000 and duty becomes 53,000, so 3,000 more is owed, plus any interest or penalty exposure if it should have been declared earlier.
- Downward true-up instead: if the policy calls for a 40,000 credit, the value would be 960,000 and duty 48,000. That implies a 2,000 refund, but only where the local rules allow it. In the US general rule the decrease would be disregarded unless the formal-policy conditions are met. In the EU a later credit note may not qualify. In the UK a refund claim is possible with evidence, inside the time limit.
The point is the asymmetry. An upward adjustment that goes unreported can create an underpayment that surfaces in an audit, while a downward adjustment may or may not be recoverable. Import VAT or GST can move too. For penalty exposure on undeclared value, see customs penalties and prior disclosure under 19 USC 1592.
Advance rulings and APAs
Certainty before shipping beats argument afterwards. A tax APA settles the tax method, but as above it does not settle customs. Some customs administrations offer their own rulings: in the US, CBP issues binding rulings on request, and in the UK HMRC offers advance valuation rulings valid for up to 3 years, which confirm the correct valuation method for the goods concerned. The GOV.UK page does not say whether related-party or transfer pricing questions are covered, so ask HMRC before relying on one for that purpose. Our guide to customs binding rulings covers what rulings can and cannot fix.
What else can add to a related-party price?
Even if the base price is accepted, related groups often pay separately for things that belong in the value: royalties and licence fees for trademarks or technology, assists such as moulds or design work supplied to the manufacturer, and management or service fees charged on the same products. These can be dutiable additions, and a transfer pricing structure that moves value into a separate fee can understate customs value. See assists, royalties and first sale for the rules on additions.
What a forwarder or broker should ask a related-party importer
The importer is responsible for the declared value, but the forwarder or broker who lodges the entry sees the invoices and will be asked about them in a dispute. A short intake list helps:
- Is the seller related to the buyer under the local definition (ownership of 5 per cent or more, common control, shared officers, family)?
- How is the intercompany price set: a fixed price list, a cost-plus formula, a target margin for the importing entity?
- Are there year-end or quarterly true-ups, credit notes or debit notes, and who approves them?
- Is there a written transfer pricing policy, and does it cover the products in this shipment?
- Does the group hold an APA, a customs ruling or a valuation study, and does it say anything about customs?
- Are royalties, licence fees, assists or service charges paid to the seller or a group company outside the invoice?
- What happens to the entry if the price changes after clearance: who tells the broker and who files the correction?
- Do the commercial invoice, the customs declaration and the books show the same price, and are the Incoterms-based cost elements consistent?
Keep the answers with the file. They are also the records an auditor will ask for, as described in customs audit readiness.
What to do next
- Confirm in writing whether each supplier is a related party under the rules of the importing country, and flag it on the entry file.
- Obtain the intercompany pricing policy and ask whether year-end adjustments occur; agree who will notify the broker when one is booked.
- Decide the customs evidence for each related supplier: a circumstances-of-sale file, test values, or both, kept ready before the first query.
- Where the exposure is material, consider asking the customs authority for a ruling and take advice from a licensed customs adviser or tax professional familiar with both regimes.
If you need a customs broker or forwarder with experience in related-party importing, more than 29,300 logistics companies are searchable by country and service in the CargoLinked directory, and the public requests board lists freight that shippers have posted for forwarders to quote on directly.
This article is general information, not legal, tax, financial or customs advice. Valuation and transfer pricing rules differ by country, change over time and depend on the facts of each import. Confirm the current position with the relevant customs authority and a licensed customs or tax professional before relying on it.
