Arm’s Length Transaction

Arm’s Length Transaction

A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self-interest and are not subject to any pressure or duress from the other party.

In general, CBP will consider a sale between unrelated parties to have been conducted at “arm’s length.”

If the parties are related, a sale will be considered to have been conducted at “arm’s length” only

if an examination of the circumstances of the sale of the imported merchandise indicates that the relationship between the buyer and seller did not influence the price actually paid or payable or

If the transaction value closely approximates a test value such as transaction value of identical or similar merchandise in sales to unrelated buyers in the U.S. or the deductive or computed value for identical or similar merchandise.

If the parties buy and sell from one another as if they were unrelated, transaction value will be considered acceptable. Thus, if the price is determined in a manner consistent with normal industry pricing practice or with the way the seller deals with unrelated buyers, the price actually paid or payable will be deemed not to have been influenced by the relationship. Furthermore, the price will be acceptable if it is shown that the price is adequate to ensure recovery of all costs plus a profit that is equivalent to the firm’s overall profit realized over a representative period of time in sales of merchandise of the same class or kind.

By |2021-03-12T13:40:42-06:00July 29th, 2016|Comments Off on Arm’s Length Transaction

Share This Story, Choose Your Platform!

About the Author:

Go to Top