Companies, Trade Groups Warn of New Efforts to Eliminate First Sale Rule

(World Trade Interactive)

More than 100 companies and trade groups sent a letter to leaders of the House Ways and Means and Senate Finance committees March 24 urging them to ensure that U.S. Customs and Border Protection does not again attempt to eliminate the First Sale Rule. CBP withdrew an earlier proposal, which opponents claimed would have resulted in an 8%-15% increase in duty liability for all imports, in 2008 after an outpouring of opposition from the trade community. Congress then directed CBP to postpone any action on the First Sale Rule until at least Jan. 1, 2011.

The First Sale Rule was judicially established more than 20 years ago and is used by many U.S. importers to legally lower import duties. Simply stated, the FSR allows the entered value of a qualifying transaction to be based on the purchase price between the vendor and the factory rather than the importer and the vendor. The FSR may apply even if the vendor is related to the importer and/or the factory or there are multiple levels of vendors.

Expressing concern that CBP may once again contemplate the revocation of the FSR, the 75 companies and 36 associations that signed the March 24 letter highlighted a December 2009 International Trade Commission report documenting the “widespread use” of this methodology. Read more here.