United States

China Customs' New Related Party Import Reporting Requirements

Oct 21, 2016

Todd Smith, Principal in KPMG LLP’s Trade and Customs practice discusses China Customs related party pricing and royalty reporting requirements that may increase China Customs import delays, detentions, and audit risk.


Todd Smith:  In another[1] recent webinar that I moderated on China Customs, we also had a big turnout because China Customs very recently came out with a new process whereby when the customs broker in China is inputting entry information into the China Customs system, a new screen appears and that screen asks three questions. 

The first question is, "Is the import transaction from a related party," and the importer needs to report yes or no.

The next question is, "Is the import price impacted by the relationship of the parties (i.e., the exporter and importer), yes or no."  And so China Customs is really asking the importer at the time of importation whether or not they have performed an analysis to determine whether or not the price will be considered arm's length for customs purposes, not necessarily for tax purposes.  This is something that no other customs administration has done. 

The third thing the China Customs computer system asks is whether or not there is a royalty or a license fee associated with the import transaction. 

Therefore, it is very important that importers into China, and a lot of our US clients have subsidiaries and operations in China, must really do their own analysis before the import transaction and know whether or not the related party price will be acceptable to China Customs under the WCO and China Customs valuation guidelines and if, in fact, there is a royalty, whether or not that royalty should be included in the customs value based on China Customs and the WCO customs valuation rules.

For more information on China Customs import requirements and Trade and Customs services, contact Todd Smith at trsmith@kpmg.com.


[1] See Webinar on BEPS from a Customs Perspective


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