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