On January 24, 2008, the Bureau of Customs and Border Protection (CBP) proposed a change to its longstanding “first sale” valuation policy that currently allows importers to enter goods purchased in multi-tiered sales arrangements by declaring the first price paid or payable by the middleman to the manufacturer in an arm’s length export transaction. Such a first sale typically represents the lowest price paid for goods in a series of transactions, and importers have used the first sale method to declare their goods’ value at the time of entry in accordance with the first sale rule since 1992, when the Court of Appeals for the Federal Circuit decision of Nissho Iwai American Corp. v. United States approved of the practice.
CBP now claims that a new interpretation of the World Trade Organization’s Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade calls for a different approach that would reject the first sale rule and base valuation upon the “price paid or payable for the imported goods when sold for export to the country of importation.” Should the new rule take effect, importers currently valuing their goods under the first sale rule will be required to ascertain a new, updated dutiable value for imported goods. Ultimately, by seeking to replace the longstanding first sale rule with a “last sale rule” CBP threatens to raise duty rates for many importers.
CBP is soliciting written comments regarding its proposed interpretation, which are due April 23, 2008.