Executive Briefings

Trade Lawyers Protest Customs' Attempt to Eliminate "First-Sale" Standard for Duty Assessment

A proposal by U.S. Customs and Border Protection (CBP) to eliminate the "first-sale" method of determining the value of import transactions has come under fire from a New York City-based law firm specializing in trade law. In a recent letter to CBP, attorneys Alan G. Lebowitz and Ned H. Marshak say the agency's proposed interpretation "will significantly increase our clients' already substantial duty obligations, impact their profitability and result in higher prices to consumers." The first-sale rule has been in effect for at least 16 years. It relates to multi-tiered transactions, where a reseller stands between a foreign manufacturer and the U.S. purchaser of imported goods. CBP traditionally has based the value of an import transaction upon the sale between the manufacturer and the middleman. The latter has long been considered the importer of record. The practice has allowed the ultimate importer to utilize the lower of the two values in the transaction--customarily the first one--for purposes of determining the amount of duty owed. Now CBP wants to eliminate that interpretation, citing problems of obtaining proof that the goods in question are really destined for the U.S., and whether the first sale is a bona-fide "arm's length" transaction, separate from the U.S. importer. The agency wants to base duty calculations on the price paid "in the last sale occurring prior to the introduction of the goods into the United States." Lebowitz and Marshak argue that the change will reverse hundreds of CBP ruling letters, as well as three key judicial decisions, issued over the past two decades. The action, they say, amounts to a unilateral change in U.S. valuation law, going far beyond a mere "interpretation" of the language in existing trade statutes. "Customs is proposing to change a well-settled U.S. law that it dislikes," the lawyers say in their filing. They urged the agency to withdraw its proposal, and continue the practice of basing duty assessments in multi-tier transactions upon first-sale values. Lebowitz and Marshak are members of the law firm of Grunfield, Desiderio, Lebowitz, Silverman & Klestadt LLP.
http://www.gdlsk.com

A proposal by U.S. Customs and Border Protection (CBP) to eliminate the "first-sale" method of determining the value of import transactions has come under fire from a New York City-based law firm specializing in trade law. In a recent letter to CBP, attorneys Alan G. Lebowitz and Ned H. Marshak say the agency's proposed interpretation "will significantly increase our clients' already substantial duty obligations, impact their profitability and result in higher prices to consumers." The first-sale rule has been in effect for at least 16 years. It relates to multi-tiered transactions, where a reseller stands between a foreign manufacturer and the U.S. purchaser of imported goods. CBP traditionally has based the value of an import transaction upon the sale between the manufacturer and the middleman. The latter has long been considered the importer of record. The practice has allowed the ultimate importer to utilize the lower of the two values in the transaction--customarily the first one--for purposes of determining the amount of duty owed. Now CBP wants to eliminate that interpretation, citing problems of obtaining proof that the goods in question are really destined for the U.S., and whether the first sale is a bona-fide "arm's length" transaction, separate from the U.S. importer. The agency wants to base duty calculations on the price paid "in the last sale occurring prior to the introduction of the goods into the United States." Lebowitz and Marshak argue that the change will reverse hundreds of CBP ruling letters, as well as three key judicial decisions, issued over the past two decades. The action, they say, amounts to a unilateral change in U.S. valuation law, going far beyond a mere "interpretation" of the language in existing trade statutes. "Customs is proposing to change a well-settled U.S. law that it dislikes," the lawyers say in their filing. They urged the agency to withdraw its proposal, and continue the practice of basing duty assessments in multi-tier transactions upon first-sale values. Lebowitz and Marshak are members of the law firm of Grunfield, Desiderio, Lebowitz, Silverman & Klestadt LLP.
http://www.gdlsk.com