On Dec. 29, 2008, the International Trade Commission (ITC) issued an institution of investigation (Investigation No. 332-505) in response to Section 15422(c)(1) of the Food, Conservation, and Energy Act of 2008 (Farm Bill), which requires the ITC to submit a report to the House Committee on Ways and Means and the Senate Committee on Finance that contains certain customs transaction valuation information with respect to the First Sale Rule. A copy of the investigation notice can be found at http://www.usitc.gov/secretary/fed_reg_notices/332/332-505..1230576235.pdf.

As background, in January 2008, U.S. Customs and Border Protection (CBP) published a Notice of Proposed Interpretation in the Federal Register to require that the price paid by the buyer in the U.S. to the foreign distributor forms the basis for valuation in a series-of-sales importation scenario. This interpretation would have been a departure from the current application of the valuation statute, which allows importers to use the price paid by an intermediary to a foreign manufacturer (the first or earlier sale) as the basis for determining the transaction value of merchandise involved in a series of sales.

This action by CBP drew strong objections from the trade community and members of Congress. As a result, in June 2008, in written testimony before the Senate Finance Committee, CBP Commissioner W. Ralph Basham announced that CBP had shelved its proposal to eliminate the use of the First Sale principle for valuing transactions.

Subsequently, Congress included an additional provision in the Farm Bill that stated CBP should not implement a change to the agency’s interpretation of the term “sold for exportation to the U.S.” for purposes of applying the transaction value of the imported merchandise in a series of sales before Jan. 1, 2011. Congress instructed CBP to require, for a one-year period, that each importer of merchandise declare at the time of importation whether the transaction value of its imported merchandise has been determined on the basis of a first or earlier sale. CBP is required to submit a report containing this information to the ITC, so that the ITC can then report to Congress as required.

ITC’s review of the First Sale Rule for U.S. imports will be conducted for a 12-month period. The ITC anticipates delivering its report to the House Committee on Ways and Means and the Senate Committee on Finance in February 2010, depending upon receipt of data from CBP (the report must be submitted within 90 days after receipt of the final monthly report from CBP).

Section 15422(c)(2) of the Farm Bill requires that CBP provide monthly reports to the ITC, covering the period Aug 20, 2008, to Aug. 19, 2009, that include the following:

  • The number of importers that declare the transaction value of the imported merchandise is determined on the basis of first or earlier sale:
  • The tariff classification of such imported merchandise under the Harmonized Tariff Schedule of the United States (HTSUS); and
  • The transaction value of such imported merchandise. As required by legislation, the ITC will use the information provided by CBP to develop its report, which must contain the following:
  • The aggregate number of importers that declare the transaction value of the merchandise is determined on the basis of the First Sale Rule, including a description of the frequency of the use of this method;
  • The tariff classification of the imported merchandise under the HTSUS on an aggregate basis, including an analysis of the tariff classification of such imported merchandise on a sectoral basis;
  • The aggregate transaction value of the imported merchandise, including an analysis of the transaction value of such imported merchandise on a sectoral basis; and
  • The aggregate transaction value of all merchandise imported into the United States during the one-year period specified.

The resulting report will convey the ITC’s objective findings and independent analyses on the subject of the investigation. The report will not include recommendations on policy or other matters, as it is simply a fact-finding report.

The ITC has also instituted this investigation to facilitate docketing of submissions and public access to its records through the CITC’s EDIS electronic records system.

While the ITC does not plan to hold a public hearing during the course of this investigation, all interested parties are invited to submit written statements containing information and their views on the matter. All statements should be received not later than 5:15 p.m. EDT, April 30, 2009.

Written submissions (signed original and 14 copies) should be addressed to the Secretary to the Commission, 500 E Street SW, Washington, DC 20436. In the event that confidential treatment of the document is requested, at least four additional copies must be filed, in which confidential information must be deleted (see 19 CFR § 201.6 for the specific rules regarding confidential treatment of documents). The ITC anticipates that the report it sends to the committees concerning this investigation will be made available to the public in its entirety. Consequently, the report will not contain any confidential business information that is designated as such under the rules identified above.

Importers using, or considering the use of the First Sale Rule, are encouraged to submit written statements stating their views on the matter. Drinker Biddle would be pleased to assist with drafting of written submissions for any interested parties.