Advice to the Trade: First Sale For Export

Where there are multiple sales of goods prior to their importation into the United States, the First Sale rule allows importers, in certain circumstances, to use the price paid in the "first or earlier sale" as the basis for the customs value of the goods rather than the price the importer ultimately paid for the goods. Under U.S. law, the preferred method of valuing imported merchandise for customs purposes is transaction value of the goods sold. When such transaction value is required and the goods are sold more than once before they are actually imported (e.g., in sales involving middlemen), the First Sale rule allows an earlier sale to be used in declaring customs value as long as that sale can be documented as a sale for exportation to the United States and the importer meets all other Customs requirements.

There is a presumption that transaction value is based on the price actually paid or payable by the importer for the imported merchandise under consideration. The burden is on an importer to rebut this presumption. Therefore, in situations where more than one sale has occurred involving the imported merchandise and the importer wants to base transaction value on the price actually paid or payable in a sale to which it is not the buyer (e.g., the price paid for the merchandise in a sale between the foreign manufacturer and a foreign middleman), the importer must be able to establish by documentary evidence that such a sale is a sale for exportation to the United States. This documentary evidence must satisfy the requirements set forth in Nissho Iwai American Corporation v. United States, 16 CIT 86, 786 F. Supp. 1002 (1992) rev'd 982 F.2d 505 (Fed. Cir. 1992) and in General Notice (T.D. 96-87), Determining Transaction Value in Multi-Tiered Transactions, Vol. 30/31, Customs Bulletin No. 52/1 (January 2, 1997). (See copy below.) Without such evidence, the importer has not overcome its burden to rebut the presumption discussed above, and CBP will base the transaction value for the imported merchandise on the price actually paid or payable for the merchandise by the U.S. importer (rather than on the manufacturer's price to the middleman or the first-sale price).

In Treasury Decision (T.D.) 96-87, dated January 2, 1997, the Customs Service (now Customs and Border Protection (CBP)) advised that the importer must provide a description of the roles of the parties involved and must supply relevant documentation addressing each transaction that was involved in the exportation of the merchandise to the United States. The documents may include, but are not limited to purchase orders, invoices, proof of payments, contracts, and any additional documents (e.g. correspon- dence) that establishes how the parties deal with one another. The objective is to provide CBP with “a complete paper trail of the imported merchandise showing the structure of the entire transaction.” T.D. 96-87 further provides that the importer must also inform CBP of any statutory additions and their amounts. If unable to do so, the sale between the middleman and the manufacturer cannot form the basis of transaction value.

TABLE Top ten First Sale HTS chapters, by First Sale value and share (excluding chapters suppressed due to confidentiality)

HTS	Brief description \a\	Value (Thousand $)	Share of C.V. \b\ (Percent)
Total		38,526,912	2.36
Top ten chapters by First Sale value
84	Machinery and computers	5,974,658	2.89
85	Electrical machinery	5,322,086	2.45
62	Woven apparel	1,964,764	6.07
61	Knitted apparel	1,896,745	5.48
27	Mineral fuels	1,588,250	0.54
22	Beverages	1,265,971	8.23
64	Footwear	1,072,720	5.92
30	Pharmaceutical products	1,026,425	1.96
73	Iron and steel products	925,683	2.93
42	Leather	853,792	9.66
Top ten chapters by First Sale share of total chapter imports
08	Fruits and nuts	821,855	10.66
42	Leather	853,792	9.66
22	Beverages	1,265,971	8.23
12	Oil seeds	138,300	7.98
06	Trees and flowers	100,852	7.39
03	Fish	639,192	6.13
62	Woven apparel	1,964,764	6.07
64	Footwear	1,072,720	5.92
67	Feathers	69,378	5.50
61	Knitted apparel	1,896,745	5.48

Sources: CBP (September 2008–August 2009 First Sale data) and U.S. Department of Commerce.

\a\ For descriptive purposes only. Official tariff descriptions available at http://www.usitc.gov/tata/hts/bychapter/index.htm.

\b\ C.V. refers to customs value of general imports.

Agathon Associates can assist importers interested in potential savings using "First Sale."