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CBP Pledges To Cease Action On First Sale Proposal Until 2011
Web site Will Continue To Monitor First Sale-Related Issues
What Happened
U.S. law states that import duties are generally based on the value of the transaction; i.e.,
the price actually paid or payable for goods when sold for exportation to the U.S.
If there is a series of sales involved – from the foreign factory to a middleman and then to the U.S. buyer,
for example – the duty is based on the value of the first sale in the series, which is typically lower than any subsequent sale.
This methodology, known as the First Sale Rule, saves U.S. consumers and companies millions of dollars every year.
On Jan. 24, 2008, U.S. Customs and Border Protection, the federal agency charged with collecting import duties,
unilaterally proposed to change its interpretation of this law and revoke the First Sale Rule.
This would have allowed CBP to assess duties on the higher price associated with the last sale in a series.
Congress Steps In
Both the import community and Congress responded with virtual unanimity in opposition to CBP’s proposal.
In submitted comments, 18 senators and 51 members of the House of Representatives declared that the proposal
was an affront to the efforts of Congress and the Bush administration to bolster the domestic economy and asked
that it be withdrawn immediately.
In addition, Congress moved swiftly to forestall further action by CBP by including certain provisions in the Farm Bill.
Most importantly, this legislation includes a “sense of Congress” provision that advises CBP to drop the issue until at least
Jan. 1, 2011. If CBP still wants to proceed after that date, it will have to clear a number of hurdles to do so, as the provision
urges the agency to consult with Congress and the trade community and receive the explicit approval of the Treasury Secretary.
In testimony before the Senate Finance Committee June 24, CBP Commissioner Basham pledged to comply with the Farm Bill provisions,
stating in written comments that:
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“CBP does not intend to proceed further on the proposal on first sale before January 1, 2011.
Nor will we change the current interpretation with respect to first sale without consulting with the Congress
and the private sector, or without explicit approval of the Secretary of Treasury.”
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Is There Anything I Should Do Now?
Led by Sandler, Travis & Rosenberg, P.A., a coalition of U.S. trade, business, industry and other organizations engaged in a
full-scale effort to defeat this proposal using every legislative, regulatory and other means possible.
ST&R is well-positioned to direct this effort: we successfully argued the court case establishing the First Sale Rule in 1988,
we’ve helped hundreds of companies take advantage of it since then, and as a full-service international trade firm we’ve got a
top-notch staff of customs, government relations and litigation experts that know how to get results.
ST&R intends to continue monitoring all actions relating to First Sale, including the implementation of the Farm Bill
reporting requirements and CBP’s enforcement of entries filed using First Sale valuation, and updates will be provided on this Web site.
Contact David Cohen at DCohen@strtrade.com or
Larry Ordet at LOrdet@strtrade.com
for more information on how you can get involved and what you can do to ensure that you are in compliance with current First Sale requirements.
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