Transaction value stays available for related-party sales, but the price has to pass one of two tests: the circumstances of sale test, which asks whether the price was set the way the industry or the seller sets prices for unrelated buyers, or the test value approach, which asks whether the price closely approximates a value already accepted for identical or similar goods. A transfer pricing study built for tax purposes is not a customs valuation opinion, and the two can point in opposite directions.
Transaction value is the default, and related parties do not lose it automatically
The preferred method of appraising imported merchandise is transaction value: the price actually paid or payable when sold for exportation to the United States, plus the statutory additions. That is 19 U.S.C. 1401a(b). When buyer and seller are related, the statute still allows transaction value, but only when the relationship did not influence the price. CBP may not disregard a transaction value solely because the parties are related. It has to ask, and you have to answer with evidence.
Related is a defined term, not a feeling. The statute at 19 U.S.C. 1401a(g)(1) covers officers and directors sitting on both sides, partners, employer and employee, family members, and companies where one controls the other directly or indirectly. If any of those links exist between your supplier and your importer, assume CBP will ask the question, and build the file before the entry is filed, not after the Form 28 arrives.
Related reading on this site: LandedWatch and LandedWatch cover the neighbouring problems in more depth.
The circumstances of sale test, in plain terms
The regulation at 19 CFR 152.103(l) sets out the circumstances of sale test. CBP looks at how the price was derived. Three showings carry the argument: the price was settled in a manner consistent with normal pricing practices in the industry, for example tied to a quoted public market price for a traded commodity; the price covered the seller's costs plus a profit representative of the industry; or the seller settles prices with unrelated buyers the same way, at the same level of trade, using the same formulas.
Documentation is the whole test in practice. A comparative analysis of related and unrelated prices converted into a common currency, the exporter's sales invoices showing those prices, and the pricing policy that produced them are what CBP wants to see. CBP prefers comparisons to unrelated buyers in the United States, but will accept comparisons to unrelated buyers elsewhere when no US sales exist and the importer explains why. A price with no paper behind it is a price CBP will replace.
The test value route, when you have a comparable
If the circumstances of sale do not settle it, the test value approach can. CBP will accept the related-party price when it closely approximates the transaction value of identical or similar goods sold to unrelated buyers, or the customs value of identical or similar goods already determined under the deductive or computed value methods. The comparison has to be to goods sold around the same time, from the same country, under the same valuation method.
One limit matters: you cannot use a previously imported good as a test value when it was valued under a different method. And passing one test is enough in law, but practitioners recommend building both, because a port that doubts one will ask for the other. If neither test passes, CBP moves down the valuation hierarchy to computed or deductive value, and the duty bill usually goes up from there.
What to file before CBP asks
Start with the pricing policy in writing: how the factory sets prices, who approves them, and whether the same policy governs unrelated buyers. Add the profit picture: the seller's costs and a margin that looks like the industry's, not a number chosen to minimize duty. Then the comparables: invoices to unrelated buyers, market price references, and any earlier CBP ruling that accepted the price, such as a binding ruling on the same structure.
Keep the tax file and the customs file separate in your head. A transfer pricing study built for the IRS answers whether the price is arm's length for income tax. CBP asks a different question, under a different statute, and the two answers can disagree without either being wrong. An importer who hands CBP a tax study and calls it a valuation opinion has answered a question nobody asked, and the real question is still open.
Frequently asked questions
Can I use transaction value when my supplier is a related party?
Yes, when the relationship did not influence the price. The importer must show that through the circumstances of sale test or the test value approach under 19 U.S.C. 1401a(b)(2)(B). CBP cannot reject the value only because the parties are related.
What is the circumstances of sale test?
It is the test in 19 CFR 152.103(l) that asks whether the price was settled in a manner consistent with normal industry pricing practices, covered the seller's costs plus a representative profit, or matched how the seller prices unrelated buyers. Passing it keeps transaction value available.
What counts as a test value?
A previously accepted customs value for identical or similar goods, such as the transaction value of identical goods sold to unrelated buyers, or a value determined under the deductive or computed value methods. The comparison goods must be from around the same time and the same country.
Does my transfer pricing study satisfy CBP?
No, not by itself. A transfer pricing study is built for tax purposes under a different statute. CBP needs a customs valuation analysis: the circumstances of sale, the test values, and the documents that support them.