"First Sale Rule" for Customs Valuation of US Imports - USITC

The use of the First Sale rule for products with low or free duty rates occurs throughout
the tariff schedule and is not restricted to food and agricultural goods. Appendix table D.2
shows that shippers in a number of U.S. territories and partners to U.S. free trade
agreements are prominent users of the First Sale rule. Suppliers in Canada, Mexico, and
the U.S. Virgin Islands accounted for 21 percent of reported First Sale use during the
period, despite paying almost no duties in the period. The use of the First Sale rule for
products that face very low U.S. duties, or for products from countries that face very low
duties, suggests that First Sale use may be unrelated to duty reduction in these instances.
In the absence of potential benefits from duty reduction, use of First Sale in these cases
may simply reflect direct importation, the importer’s ready access to supply chain
information, or other firm- or industry-specific attributes.
The Transaction Value of Imports
The 2008 Act requires that the Commission report the “aggregate transaction value of all
merchandise imported into the United States during the one-year period.” 23 As noted in
chapter 1, transaction value is one of a number of methods that can be used to measure
imports. This value is based on the actual price paid by a buyer for a good, plus
adjustments for certain fees such as commissions, packing, royalties, and licensing fees.
All First Sale imports use transaction value, because the First Sale rule is not permitted
under any other customs valuation method.
Since the CBP has not previously collected data on the use of transaction value, the CBP
added an additional question to its ESCM import compliance survey during the period
October 2008–July 2009 to estimate the share of U.S. imports that use transaction value. 24
The CBP reported that 86.4 percent of the surveyed imports for consumption, by value,
used the transaction value method of assigning value during that period. 25 Applying the
CBP’s estimated share to the $1.633 trillion in total imports for consumption in the oneyear
period from September 2008 to August 2009 implies that approximately $1.411
trillion of U.S. imports were valued using transaction value during that time. Thus, U.S.
importers use the transaction value method for a high share and value of U.S. imports.
23 Section 15422(c)(2)(D). See app. A for legislation.
24 See chap. 1 for a detailed discussion of the ESCM survey and sampling methodology.
25 The CBP reported statistical confidence that the survey result is a representative sample of all U.S.
imports, estimating that this share has a 1.5 percentage point margin of error in either direction, thus ranging
between 84.9–87.9 percent, at a 95 percent confidence level. CBP official, e-mail message to Commission
staff, July 17, 2009.
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