First Sale Declaration to Take Effect August 18, 2008

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Issue 40, August 15, 2008

As a follow-up to Spotlight issue 25, dating from June 19, 2008-

The recent Farm Bill H.R. 6124 requires Importers to declare whether the transaction value of the importation is based on the “first sale” method effective August 18, 2008.

This requirement was due to a proposal by U.S. Customs and Border Protection (CBP) to modify it’s interpretation of the phrase “sold for exportation to the United States” in order to eliminate the “first sale” valuation and instead use the valuation of the “last sale”. Congress voted to require CBP to conduct a one-year study during which CBP will compile statistics and report them to the International Trade Commission (ITC) on the importations that use “first sale” valuation.

What is “First Sale”?
“First Sale” is when a series of sales are involved – from the foreign factory to a middleman and then to the U.S. buyer. Under “first sale” the duty is based on the value of the first sale in the series where the goods are destined for the United States, which is typically lower than any subsequent sale. If the “first sale” was a “sale for exportation to the United States” then the first sale (plus certain additions) can be declared as the transaction value of the imported merchandise. U.S. CBP accepted first sale appraisement where (a) the transaction between the factory and the middleman is a “sale” of merchandise; (2) this sale is an arm’s length transaction, and (3) the goods are clearly destined for export to the United States as a result of this sale.

Do you use “First Sale” valuation?
If you are currently using “first sale” valuation as your transaction value on imported merchandise, you must report this to CBP on your entries beginning August 18, 2008.

How will you report “First Sale” valuation?
“First Sale” valuation will be reported to CBP as part of the entry summary filing. The importer must indicate on the commercial invoice that “first sale” valuation was used in determining the transaction value of the importation. If the commercial invoice does not indicate “first sale” and “first sale” is applicable, then you must communicate this information to DGF either by email, fax, or letter. DGF only needs to know if “first sale” applies, importations not using “first sale” are not required to be reported to CBP.

After the one-year study period, the ITC will be required to report to the House Ways and Means and the Senate Finance Committee the (1) aggregate number of importers that used the “first sale” rule to determine the transaction value; (2) the tariff classification of the imports; (3) the aggregate transaction value of the imports and; (4) the aggregate transaction value of all imported merchandise that used the “first sale” rule. On January 1, 2011 CBP is allowed to change from the current “first sale” rule to the “last sale” rule provided they comply with various provisions of the Farm Bill.

For More information regarding the First Sale Declaration please contact Karl Krueger at karl.krueger@dhl.com.