Pursuant to the Customs Modernization Act, the importer of record (IOR) must use “reasonable care” when providing the value of the goods to Customs and Border Protection (CBP). All merchandise imported into the United States is subject to valuation or appraisement. The Trade Agreements Act of 1979, codified at 19 U.S.C. § 1401a, sets forth a hierarchy of methods for the appraisement of imported merchandise. Under the Trade Agreements Act of 1979, the transaction value of imported merchandise is the primary or preferred method for determining the value of imported merchandise. Generally, transaction value is the price actually paid or payable for merchandise when sold for exportation to the United States, plus certain statutorily enumerated additions.
What is First Sale?
First Sale is a system that decreases the dutiable value of imported goods by authorizing importers to use the price paid in the first sale. It allows an earlier sale to be used in declaring customs value as long as that sale can be documented as a sale for exportation to the United States and the importer meets all other Customs requirements. Consequently, that equivalent value is assigned according the transaction between the manufacturer and the middleman not between the middleman and the new buyer.What Do I have to do to Qualify to Use the First Sale Valuation?
CBP’s Informed Compliance publication entitled, “BONA FIDE SALES & SALES FOR EXPORTATION TO THE UNITED STATES” discusses the two elements required to qualify for the first sale program.
Typically, when considering the value of the merchandise that is being exported to the United States, the importer must establish 1) Bona Fide Sale and 2) a Sale for Exportation of merchandise to the United States that has occurred; if these two elements are present, the transaction value requirement is satisfied.
Further, case law provides that importers must meet certain factors to avail themselves of the benefit of First Sale Valuation. In Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992), the Court addressed the question of how to determine transaction value in a multi-tiered transaction. The Court held that the transaction value of the imported goods can be based on the first sale price between the manufacturer and the middleman (as opposed to the price the importer paid to the middleman). To determine whether the first sale value can represent the transaction value of the merchandise, the following must apply:
- The first sale must be a bona fide sale from the manufacturer/seller to the middleman;
- Merchandise must be clearly destined for the United States at the time of the first sale;
- The first sale price must be an arm’s length price; and
- Statutory additions to the price actually paid or payable must be included in the first sale price.
Who Uses First Sale?
The First Sale benefit is available to all importers that meet the above criteria. We are currently seeing importers subject to China tariffs avail themselves to this duty savings opportunity. Importers subject to high duty rates or high middleman markup and have a cooperative relationship with the middleman would greatly benefit from the First Sale valuation option.
What Do I Do Next?
Contact DTL TODAY to find out if you can avail yourself of First Sale. Join us in our upcoming Seminar on April 17, 2019 discussing CBP Compliance & Enforcement. Our Customs and International Trade Attorneys are available at 305-456-3830 or info@diaztradelaw.com.
1 comment:
interesting articles and this is my first first reading a very interesting article thanks for this article that fits with the theme news.
click here
Post a Comment