USCIT Raises Concerns About "First Sale" Rules

Steven W Baker, Law Offices of Steven W. Baker

A March 1, 2021 decision by the U. S. Court of International Trade, Meyer Corp. v. U. S., Slip Op. 21-26, has raised new concerns about the use of the procedure, at least in transactions involving sales from non-market economies (NMEs).  A local CBP office specifically approved, in two reviews, the use of “first sale” valuation by a company importing various kitchenware items from Thailand and China. The Thai products were made in part with the use of inputs from China. CBP later conducted an audit of the transactions, including some GSP claims for the Thai goods. CBP determined that the necessary information to support the first sale claims had not been provided, and denied its use.
              On review the Court specifically held that the parent company had failed to provide information necessary to CBP’s review. In doing so, however, it noted that one of the requirements to apply a first sale – the absence of any distortive non-market influences – could be difficult for importers to demonstrate for imports from NMEs due to both  government control issues and the availability of information from holding companies and/or other intermediaries. The Court noted that the Commerce Department in antidumping investigations distinguishes between companies that can demonstrate the absence of government control, which may be eligible for a separate dumping rate, and those considered to be under government control. These same factors may have relevance for Customs value purposes.
              The Court’s decision does not foreclose the use of first sale valuation in sales from NMEs, but does give CBP a new tool to review such transactions and increases the burden on importers to secure and provide full and complete supporting information on the applicability of the first sale. Importers using or seeking to establish first sales for Customs value purposes should ensure that the necessary documentation is available and review the independence of the sellers from government control. It may be more prudent to seek prior approval from CBP for transactions involving sales from NME companies.
Steven W. Baker
Law Offices of Steven W. Baker
                                                                                                                           swbaker@swbakerlaw.com