First Sale

For the purposes of collecting customs, the values of imported goods have historically been determined by the price paid for the good at its “First Sale” for export.  That is, the price at which the good is sold by the factory.  This is based on statute, which looks to the value of the good when it is exported to the .  By valuing imports in this way, businesses pay smaller duties on imported merchandise, are therefore able to charge their customers lower prices.

On January 27, 2008, U.S. Customs and Border Patrol (Customs) announced a proposal to change the way imported goods are appraised and do away with First Sale.  The proposal calls for duties to be assessed on the price paid by the final importer, which is usually far greater because of markups added by middlemen.  The main result of Customs’ proposal would be to substantially increase tariffs on many goods imported to and sold in the US.  This would increase costs to companies and effectively impose a tax on many consumers.

AAFA on the Issue:

The AAFA strongly opposes Customs’ proposed rule change, and is spearheading a coalition of businesses and associations to defeat it.  The “First Sale” rule was established by the courts twenty years ago, and has been repeatedly upheld in court (and by Customs) since this time.  If Customs’ proposal moves forward, it will overturn decades of legal precedents and change the rules by which American businesses have long operated.  AAFA further believes that Customs does not have the authority to overturn a judicial decision that is grounded in law.

What’s more, such a substantial increase in duties would force businesses to raise their prices, thereby harming American consumers and the economy as a whole.  In effect, Customs wants to impose a hidden tax on consumers, and is proposing to do so at a time when the economy can least afford it.

The Latest News:
3.17.08
A controversial effort to repeal the popular First Sale rule came under attack in the Senate Finance Committee last Thursday during a hearing on Customs reauthorization. Senate Finance Committee Chair Max Baucus (D-MT) and ranking Minority Member Chuck Grassley (R-IA) both criticized a Customs plan to reinterpret First Sale to do away with this valuation methodology. They argued that the proposal overturns more than 20 years of precedent, and that it would subject companies and consumers to increased duties and taxes. Meanwhile, House members have begun to circulate a letter urging Customs to withdraw the proposal.

02.25.08

As a broad-based business/industry coalition led by AAFA continues to lobby Congress and the Bush administration to immediately revoke a proposal by the Bureau of Customs and Border Protection (Customs) to overturn the so-called "first sale" rule, US Department of Homeland Security Secretary Michael Chertoff sent a letter February 20 to AAFA saying that AAFA's comments "will be considered before further action is taken." The letter was sent in response to a February 11 letter sent by almost 100 companies and organizations opposing Customs' proposal. Customs requests comments on its proposal by April 23.