First Sale Rule Import Valuation

The recently passed Food, Energy, and Conservation Act of 2008 contains a provision that requires U.S. Customs and Border Protection (CBP) to gather information for one year on the method of valuation used for import clearances. CBP will be gathering information on use of the “First Sale Rule”, under which an importer can declare a lower value from a sale prior to the value of the final sale to the U.S. importer. As a result, the importer may realize savings of duty, taxes, and other potential adjustments to value. CBP is authorized to collect this data for one year, beginning on Aug. 20, 2008.

The “First Sale Rule” details are contained in the CBP regulations at 19 CFR 152.103(b), which allow for declaration of value “when sold for exportation to the U.S.” To date, this phrase has been interpreted to conclude sales prior to the transaction between the final foreign exporter and the U.S. importer, when it can be documented that the sale was intended for export to the U.S. CBP issued a proposal in January 2008 to redefine this phrase, and a provision of the Farm Bill specified actions that CBP must take before any such changes can be made. CBP is barred from making any changes before 2011.

Importers are advised to become familiar with this requirement, and to ensure that shipment documentation contains sufficient information to determine if valuation should be declared based on “first sale” provisions. Importers may want to consider providing their broker a specific statement that import documents reflect “first sale” valuation, and that entered value on the CBP clearance entry should be so declared. CBP has stated that documentation must be sufficient to establish a “complete paper trail” for the shipment, to show the structure of a “multi-tiered transaction.”

For more information on the CBP Interim Rule: First Sale Declaration Requirements (August 25, 2008), visit the GPO Access Web site. To view the CBP Informed Compliance Publication: Sales for Export to the United States, visit the CBP Web site.