ITC Begins Investigation of the “First Sale” Valuation Rule for US Imports

December 31, 2008

ITC Begins Investigation of the “First Sale” Valuation Rule for US Imports

Earlier this week, the United States International Trade Commission (“ITC”) announced its investigation into the use of the first sale valuation rule for imports into the United States.  The first sale rule allows importers to declare the price paid by a foreign middleman to the foreign manufacturer as the US import value of the merchandise.  Typically, this price is lower than the price paid by the US importer to that middleman.  Declaring this lower price often means lower duties at importation than would otherwise apply without the first sale rule.  To use this rule, the importer must have the documents to show that the sale from the manufacturer to the middleman was made at arm's length and that the merchandise was clearly and irrevocably destined for the United States when sold by the manufacturer. 

Earlier this year, the US Congress postponed a US Customs and Border Protection (“CBP”) proposal to eliminate the first sale rule.  For Steptoe’s analysis of those issues surrounding the first sale rule, please go to:  http://www.steptoe.com/publications-5493.html.

One new requirement is that importers must instruct their customs brokers to include a code on the entry documents to indicate when the first sale valuation option is being used.

As part of the 2008 first sale changes, ITC was directed to prepare a report to Congress regarding the rule and how it is used.  The ITC has announced the beginning of its investigation necessary to prepare the report.  Comments may be filed by April 30, 2009.  Any importers that do or may use the first sale valuation option should consider filing comments, or at a minimum, should monitor the progress of this ITC investigation.

For the ITC’s press release and notice regarding its investigation into the first sale rule, please go to: http://www.usitc.gov/ext_relations/news_release/2008/er1229ff1.htm and http://www.usitc.gov/secretary/fed_reg_notices/332/332-505..1230576235.pdf.

ITC Provides Online Tariff Classification Tool

In November, the ITC established a Harmonized Tariff Schedule Online Reference Tool.  The tool is likely to be useful to any importer or exporter researching and confirming the correct harmonized tariff numbers to be declared as required by US law.  The new tool is available at:  http://hts.usitc.gov/.   

The initial announcements state that the new tool is meant to (among other features):

  • allow users to jump from an item to any related chapter 99 item showing temporary and seasonal duty rates; 
  • link to the CBP rulings database (CROSS system) at the 10-digit level;
  • allow users to call up trade data for the item; and
  • provide a thesaurus feature which allows searches by modern terms for products.

The ITC also has expressed interest in receiving comments regarding this new tool. Comments should be directed to David.lundy@usitc.gov.

U.S. Customs and CPSC Establish Importer Self-Assessment Product Safety Pilot

In October, CBP and the U.S. Consumer Product Safety Commission (“CPSC”) announced a voluntary program for product safety compliance.  The new program is an expansion of CBP’s existing Importer Self-Assessment Program (“ISA”) to include a Product Safety Pilot (“ISA-PS”), which will be administered jointly by CBP and CPSC.  This pilot program is open to all importers that already are and will continue to participate in ISA.  Under the existing ISA program, importing companies voluntarily agree to adopt internal compliance controls, reviews by CBP and submission of annual updates, in exchange for removal from the CBP audit pool, less CBP oversight, faster cargo release and expanded prior disclosure benefits.

The ISA-PS application process includes site visits by CBP and CPSC to determine whether the applicant is ready to assume the responsibilities of self-assessment and to provide the agencies with information on the importer’s internal control procedures.  CBP states that approved ISA-PS participants will have access to benefits including (1) a reduction in CPSC’s product safety tests on goods imported by the ISA–PS participant, (2) priority “front of the line testing” granted by CPSC laboratories to ISA–PS participants when product safety testing is conducted, (3) acknowledgement of the importer’s participation in ISA–PS in CPSC’s “Fast-Track Product Recall Program,” (4) a contact at CPSC to provide National Electronic Injury Surveillance System (NEISS) Product Codes, (5) special CPSC training on product safety compliance, internal controls, and CPSC audit trails.  In addition, CBP states that “the ISA–PS participant will enjoy greater business certainty because a reliable system of internal controls ensures compliant product safety transactions.”

CBP’s notice announcing the ISA-PS program (and how to apply) is available at: http://edocket.access.gpo.gov/2008/pdf/E8-25551.pdf

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If you have any questions on US Customs or import procedures, please contact: Greg McCue (gmccue@steptoe.com and 202.429.6421) or Cecily Rose (crose@steptoe.com and 202.429.6496).