US Customs Rulings Highlight Importance of Arm’s Length Valuation Requirement

Companies that import merchandise into the United States must exercise reasonable care when determining the dutiable value of the merchandise they are entering, calculating duties owed on the shipment based on that dutiable value and applicable duty rates, and submitting payment for total duties owed to US Customs. In doing so, importers must properly apply the valuation statute and associated guidance to the circumstances of their transaction to minimize tariff liability and avoid penalties for providing inaccurate information to US Customs. In multi-tiered transactions that involve related parties, there are multiple transactions that can potentially serve as a basis for valuation of a given entry. Furthermore, the arm’s length requirement must be satisfied to render transactions between related parties usable for valuation purposes. The two recent US Customs rulings discussed in this article show that in the context of multi-tiered transactions, importers have the opportunity to limit tariff liability on imports of commercial merchandise so long as they properly apply the valuation statute. The discussion underscores the practical importance of satisfying the arm’s length requirement for transactions between related parties and clearly presenting the associated legal reasoning and documentation to US Customs.