Update on CBP's Proposal to Value Certain Imported Merchandise Based on Last Sale

(A series of sales consists of two or more successive contracts for sales of goods. An example would be when a U.S. retailer contracts with a foreign distributor to buy certain articles, the foreign distributor contracts with a foreign manufacturer for these articles, and the foreign manufacturer ships them directly to the U.S. retailer.)

(See ITT's Online Archives or 01/24/08 news, 08012405 for initial BP summary of CBP's proposed interpretation.)

Transaction Value Would be Set by Last Sale Prior to Introducing Goods into U.S.

CBP is proposing that in a transaction involving a series of sales, the price actually paid or payable for the imported goods when sold for exportation to the U.S. is the price paid in the last sale occurring prior to the introduction of the goods into the United States, instead of the first (or earlier) sale.

Under its proposal, the transaction value will normally be determined on the basis of the price paid by the buyer in the United States. CBP states that this proposed interpretation reflects the April 2007 conclusions of the World Trade Organization's Technical Committee on Customs Valuation¹ as set forth in Commentary 22.1, entitled ''Meaning of the Expression 'Sold for Export to the Country of Importation' in a Series of Sales."

CBP's current interpretation is to base transaction value on the price paid by the buyer in the first or earlier sale (e.g., the sale between the manufacturer and the intermediary) provided the importer can establish by sufficient evidence that (1) this was an arm's length sale and (2) at the time of such sale, the merchandise was clearly destined for exportation to the United States.

Application of this 'first-sale' principal often results in the transaction value being determined on the basis of the price paid by a foreign buyer to a foreign seller.

Last Sale Rule Would Allow Additional Costs to be Added to Transaction Value

CBP also states it has encountered many situations where the application of the first sale principle has prevented the addition of certain otherwise required statutory additions to the transaction value of imported merchandise.

These additions are provided for in 19 USC 1401a(b)(1)(A)-(E) as follows:

Packing costs. Packing costs incurred by the buyer with respect to the imported merchandise

Selling commissions. Any selling commission incurred by the buyer with respect to the imported merchandise

Assists. The value, apportioned as appropriate, of any assist (e.g. specified items supplied directly or indirectly at a free or reduced cost, by the buyer of imported merchandise for use in connection with the production or sale for export to the U.S. of the merchandise)

Royalties, licenses. Any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the U.S.

Proceeds of subsequent resale. The proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.

CBP's proposed interpretation to base transaction value on the last sale could make it more likely that these statutory additions would be captured for duty purposes.

CBP Lists Certain Actions it Would Take if it Adopts Last Sale Principle

CBP states that if this proposed interpretation is adopted, it will result in the revocation of T.D. 96-87 (1997), the modification or revocation of administrative rulings that have analyzed the series of sales issue using the first-sale criteria, and the revocation of any treatment previously accorded by CBP to substantially identical transactions.

In addition, the application of the E.C. McAfee Co. v. U.S. (1988), Nissho Iwai American Corp. v. U.S. (1992) and Synergy Sport International, Ltd. v. U.S. (1993) court decisions would be limited to the specific entries at issue in those cases.

Public Participation During the Comment Period

According to CBP, interested persons are invited to timely submit written comments, which may be in the form of written data, views, or arguments, on all aspects of CBP's proposed interpretation. If appropriate to a specific comment, the commenter should reference the specific portion of the proposed interpretation, explain the reason for any recommended change, and include data, information, or authority that support such recommended change. CBP will consider all such comments that are timely submitted in accordance with the instructions provided (see CBP notice for such instructions).

¹ This Technical Committee is authorized by the WTO and meets at the World Customs Organization (WCO).

(See CBP notice for background information on the WTO valuation agreement, relevant U.S. value law, etc.; CBP's legal justification for its proposed interpretation, including court decisions; an attachment containing the Technical Committee's April 2007 conclusions; etc.)

Written comments on this proposed interpretation are due by March 24, 2008

CBP contact: Lorrie Rodbart (202) 572-8740

CBP proposed interpretation (USCBP-2007-0083, FR Pub 01/24/08) available at http://a257.g.akamaitech.net/7/257/2422/01jan20081800/edocket.access.gpo.gov/2008/pdf/E8-1140.pdf