I received a call recently asking me if there would be any issues where a fake invoice was issued to support the declaration made on a US Customs entry. Any guesses as to what my answer was?
Essentially this was a case involving an importer interested in benefitting from what is commonly referred to as the "First Sale" or "First Sale for Export" price which is a sale involving an
1) importer 2) middleman (at least one), and 3) manufacturer
wherein an importer may declare the value of an imported shipment as that of the sale from the manufacturer to the middleman (the first sale), rather than that of the sale from the middleman to the importer (the last sale).
One issue that arises in such cases however, in particular when the parties are not related, is that such arrangement requires the disclosure to the importer of the middleman's cost to the manufacturer along with the identity of the manufacturer itself, which are two bits of information a middleman, i.e., a reseller who has a markup on its own costs, doesn't typically want an importer to know about for fear of losing that customer to the manufacturer itself.
What about when the parties are related?
Where the parties are related, the cost concerns are not usually an issue. US Customs however, raises the standard of proof for establishing that there was an arm’s length sale where the parties are related, which can raise its own complications where the structure of the transaction has not been planned out appropriately to support the documentation US Customs would require in order to validate a first sale pricing claim. [NOTE – this issue often arises during a customs audit wherein the assessment of potential penalties hangs over an importer’s head…]
Needless to say, in the instant case (my phone call) involving unrelated parties where the middleman was interested in preparing a fake invoice to an importer on a proposed transaction so as to conceal the price it paid to the manufacturer, an un-emphatic “fake invoices are not legal” was stated.
That being said, it is not in every instance that a middleman is simply a reseller, but may serve as an agent of either the buyer or seller, or it may provide other such services which could be considered non-dutiable. If you’re searching for ways to save on the amount being paid in customs duties, with some exploration, there may be available solutions to existing or new ventures.
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