Issued: September 16, 2008
On May 22, 2008, Congress passed the Food, Conservation, and Energy Act of 2008 (more commonly known as the "Farm Bill"; 19 U.S.C. 1484 note). The Farm Bill requires U.S. Customs and Border Protection (CBP) to collect, for a one-year period, a declaration as to whether the transaction value of imported merchandise is determined on the basis of the price paid in the first or earlier sale occurring prior to the introduction of the merchandise into the United States.
On August 25, 2008, CBP published an interim rule entitled "First Sale Declaration Requirement" (73 FR 49939), to implement the Farm Bill. The rule states that, effective for a one-year period beginning August 20, 2008, all importers are required to provide a declaration to CBP at the time of filing a consumption entry when, in a series of sequential sales, the transaction value of the imported merchandise is determined on the basis of the "first or earlier" sale of goods. In such case, importers are required to provide CBP with an "F" indicator next to the declared value at the line level on CBP Form 7501, or its electronic equivalent.
CBP has received numerous inquiries from interested parties in response to the "first sale" reporting requirement. We seek to clarify the most frequently asked questions below.
| Q: | What is a "series of sequential sales"? |
| A: | A series of sequential sales, common in import transactions, consists of two or more successive contracts for sales of goods. One example is where the import transaction involves a sale between the manufacturer and a foreign intermediary and another between a foreign intermediary and a U.S. buyer. |
| Q: | Which is the "first or earlier" sale? |
| A: | In a series of sequential sales, as defined above, any sale occurring earlier than the last sale prior to the introduction of the merchandise into the United States would be considered a "first or earlier" sale. In the above example, the sale between the foreign intermediary and the U.S. buyer is considered the last sale prior to the introduction of the merchandise into the United States. The sale between the manufacturer and the foreign intermediary is the "first or earlier" sale. |
| Q: | Should I place an "F" indicator when there is only one sale involved? |
| A: | No, when the import transaction involves only one sale the reporting requirement is inapplicable. In that instance, there is only one buyer, located in the United States, and one seller, located in another country. |
| Q: | Is a sale between a manufacturer (or other foreign seller) and a non-resident importer considered a "first or earlier" sale? |
| A: | Where the import transaction involves a series of sales between a foreign seller and a non-resident importer and another sale between the non-resident importer and a buyer in the U.S., the sale between the foreign seller and the non-resident importer is considered the "first or earlier" sale for purposes of the reporting requirement as it is not the last sale prior to the introduction of the merchandise into the United States. The sale between the non-resident importer and the buyer in the U.S. is the last sale prior to the introduction of the merchandise into the United States. |
| Q: | Do I have to place an "F" indicator for each entry summary item? |
| A: | Yes, this element must be submitted for each line on the entry summary, CBP Form 7501, in which the declared transaction value is determined on the basis of the "first or earlier" sale. |
| Q: | Should I place an "F" indicator when another method (other than transaction value) was used to determine the customs value declared? |
| A: | No. The Farm Bill requires reporting only in those instances where transaction value is used as a basis of appraisement. |
For additional information on the First Sale Declaration Requirement, please refer to Grace Period Set for Implementation of First Sale Declaration Requirement.