Related parties

Definition and principle

Related parties in the context of customs valuation are a buyer and seller with ties that may influence the transaction price. The related parties question is crucial because transaction value can only be accepted if the relationship has not influenced the price.

Legal framework

Related parties are defined by article 127 of Implementing Regulation (EU) 2015/2447 and by article 15, paragraph 4 of the WTO Customs Valuation Agreement. Two persons are considered related if:

• One is a member of the management or board of directors of the other's business
• They are legally recognised partners
• One is the employer of the other
• A third person directly or indirectly owns, controls, or holds 5% or more of the outstanding shares of both
• One directly or indirectly controls the other
• They are members of the same family
• They are both directly or indirectly controlled by the same third person

Transaction value test

When parties are related, customs authorities examine the circumstances of the sale. Transaction value is accepted if:

• The relationship did not influence the price (price is comparable to that between independent parties), or
• The importer demonstrates the value closely approximates a test value: transaction value of identical/similar goods sold between independent parties, deductive value, or computed value

Practical implications

• Intra-group transactions represent a significant share of world trade (over 60%) — the related parties question is therefore ubiquitous
• The interface between transfer pricing (taxation) and customs value is a major issue: a low transfer price reduces customs value but increases the tax base, and vice versa
• Companies are encouraged to request an advance ruling on customs value (article 22 of the UCC) to secure their intra-group transactions