According to Attorney Mr. Bruce Shulman and Mr. Xinyu Lee in SSSPO (Stein Shostak Shostak Pollack&O’Hara, LLP) Shanghai branch that are specialized in U.S. Customs laws, in the January 24, 2008, Federal Register, U.S. Customs and Border Protection proposes to prohibit use of the “ First Sale” rule in determining the transaction value of imported merchandise. This proposed change represents a dramatic alteration of current Customs valuation law and could result in massively increased duties for U.S. importers that currently utilize the rule.
The “First Sale” rule was established as a viable appraisement tool used by U.S. Customs. It applies in instances where merchandise is imported into the United States as a result of “back-to-back”sales. Typically, the first sale is from a foreign manufacturer to a foreign middleman and the second sale is from the foreign middleman to the U.S. importer. Under the “First Sale” rule, and importer can base the transaction value ( or the appraise value) of the imported goods on the lower price that the middleman paid to the foreign manufacturer rather than on the higher price that the importer paid to the middleman. Also, the lower price can be the basic duty-paid for Customs. The “First Sale” rule was confirmed by two famous cases: Maigefei Inc. Case and Nissho Iwai case and the use of this rule has become increasingly popular.
Customs’proposed change was triggered by an April 2007 decision issued by the Technical Committee on Customs Valuation, which is based on the last sales for exportation. Elimination of first sale rule means the price for declaration of imported goods is change to the price that the importer paid to the middleman.
Pointed by Mr. Shulman and MR. Lee, U.S. have many importers special like big companies that always based on the “first sale ” rule building the trade pattern. Elimination of first sale rule will significantly increase 15% duties for companies currently relying on this rule, and prevent companies from taking advantage of this rule in future.
There are some legal obstacles in U.S. Customs proposal. First, Customs officers might not have the power unilaterally to reinterpret and circumvent the principles set forth in case law. Second, many senior lawyers criticized the Customs Act that the interpretation about valuation to the WTO. Many States trade organizations with the help of lawyers’ began to exert pressure on the Customs to stop elimination of “First Sale” rule.
So many Chinese export enterprises are indirect beneficiaries of the“first sale” rule . The way of U.S. Customs prohibit use of the “First Sale” rule increase the trade cost, and this part could paid by Chinese exporters. Moreover, U.S. importer will directly trade business with “buying agents” to help buying in future, which is good idea to reduce duties. March 24 this year is the deadline of the Customs soliciting public comment, and Chinese exporters should pay attention to the affection by this new condition. Chinese companies have the strength even to consider write comments submitted to the U.S. Customs point out that this method of valuation can be damage to international trade business.
