On September 29, 2010, CBP announced its decision to withdraw notice of its proposal to eliminate the “First Sale Rule.” CBP published notice of its proposal in the Federal Register on January 24, 2008, specifically proposing to reinterpret the expression “sold for exportation to the United States” for the purposes of applying transaction value as the basis of appraisement in a series-of-sales importation scenario.
Under CBP valuation regulations, transaction value is the preferred method of valuation, and is defined as the price actually paid or payable for the merchandise “when sold for exportation to the United States.” To date, the phrase “sold for exportation to the United States” has been interpreted to include sales prior to the transaction between the final foreign exporter and the US importer, if it could be documented that the sale was intended for export to the United States. Under the proposed interpretation, “sold for exportation to the United States” would have been interpreted to mean that the price of goods in a transaction that involved a series of sales was the price paid for the goods in the last sale occurring immediately prior to importation of the goods into the United States. Consequently, the transaction value usually would have been determined based on the price the buyer in the United States paid for the goods.
CBP’s decision to withdraw its 2008 proposed interpretation maintains the status quo, the First Sale Rule, with regard to determining transaction value in a series-of-sales situation. Thus, CBP will continue to base transaction value on the price paid by the buyer in the first or earlier sale, provided the importer can present sufficient evidence to show that the sale was an arm’slength sale and that the goods were clearly destined for exportation to the United States.