Industry News

Customs Seeks to Eliminate “First Sale” Pricing
Jan. 24, 2008

In a Notice published in the Federal Register on January 24, 2008, Customs has requested comments on its proposal to reconsider the definition of “sold for exportation to the United States” in light of an interpretation recently made by the Technical Committee on Customs Valuation from the WTO.  This proposal, if adopted, will effectively eliminate valuation based on the first sale rule.

First sale appraisement presents an opportunity for duty savings where an importer purchases from a middleman and the sale from the middleman’s source (typically an overseas factory) to the middleman qualifies as a sale for exportation to the United States.   If the overseas factory knows the goods are destined for the United States and the sale to the middleman is conducted at arm’s length, that first sale qualifies as a sale for exportation to the United States.  Appraisement based on that lower price, rather than on the higher middleman’s resale price to the importer, is possible, thereby generating duty savings. 

A long line of court decisions dating back to the prior valuation statute approved first sale appraisement.   More recently, the Court of Appeals for the Federal Circuit recognized that first sale appraisement applies equally as well under the current transaction value statute.  See, Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992). 

Customs proposes that in transactions involving a series of sales prior to the importation of the merchandise, for example, those that include a middle man or trading company, the transaction value, or price actually paid or payable, for the imported merchandise when sold for exportation to the United States is “the price paid to the last sale occurring prior to the introduction of the goods into the United States, instead of the first (or earlier) sale.”

If your company has used first sale appraisement in the past or is contemplating implementing this duty saving method in the future and would like to submit comments to CBP, or if you have any questions regarding this CBP proposal, please contact your nearest BR&C office.  Comments are due by March 24, 2008.