As the European Union and Japan have taken steps to eliminate their “first sale” rules for imports int0 their jurisdictions, US Customs is proposing changes that may make it more difficult for US importers to avail themselves of the rule.
The first sale rule has been popular among importers since it allows them to value their imported goods — and calculate duties owed — at the price paid at the “first sale” of those goods in the transaction chain, rather than the actual price paid to the exporting entity, if certain conditions are satisfied.
To determine whether the requirements for first sale are satisfied, CBP has proposed, in a draft Informed Compliance Publication, a checklist of documents that Customs may request in an audit. As pointed out by Drinker Biddle & Reath LLP, the checklist now “includes many financial-related documents that in the past have not been consistently requested by CBP.” These documents would allow CBP to request “exhaustive financial detail for all parties to the transaction, which would likely prove to be a laborious and intrusive process for related-party first sale scenarios.”
This is the second time in recent years that CBP has attempted to tighten the first sale rules.