What Every Member ofthe Trade Community Should Know About :
BONA FIDE SALES & SALES FOR EXPORTATION TO THE UNITED STATES
The Mod Act imposed an obligation on CBP to provide the public with improved information concerning the trade community’s rights and responsibilities under customs regulations and related laws. In addition, both the trade community and CBP share responsibility for carrying out these requirements. For example, under Section 484 of the Tariff Act, as amended (19 U.S.C. § 1484), the importer of record is responsible for using reasonable care to enter, classify and determine the value of imported merchandise and to provide any other information necessary to enable CBP to assess duties properly, collect accurate statistics, and determine whether other applicable legal requirements, if any, have been met. CBP is then responsible for fixing the final classification and value of the merchandise. The failure of an importer of record to exercise reasonable care could delay release of the merchandise and, in some cases, could result in the imposition of penalties. The material in this publication on “Bona Fide Sales and Sales for Exportation to the United States” will help the trade community to improve voluntary compliance with customs regulations and laws and to understand the relevant administrative processes. It is provided for general information purposes only. As many complicated factors can be involved in customs issues, an importer may wish to obtain an advance or pre-importation ruling under the CBP regulations (19 CFR Part 177) or to obtain advice from an expert who specializes in customs matters, for example, a licensed customs broker, attorney or consultant.
U.S. Customs and Border Protection (CBP) Proposes Changes to First Sale Program
CBP has issued a draft copy of a revised version of the Informed Compliance Publication on Bona Fide Sales & Sales for Exportation to the United States. This publication along with the noted reference materials should be on the ‘must read’ list for importers entering goods subject to a multi-tier transaction at the foreign manufacturer’s or so-called “first-sale” price. These revisions were largely prompted by a challenge raised by counsel during a CBP audit. The audit and ensuing discussions with counsel for the importer led to an exploration of what documentary evidence CBP could request and examine when attempting to determine the proper basis of appraisement and entered value for goods. The draft revised Informed Compliance Publication adds examples of CBP validations and possible evidentiary support, as well as an extensive but not exhaustive list of supporting documents that CBP may request when evaluating first sale. CBP does not see these revisions as a change to policy but rather as an opportunity to aid importers in understanding their compliance obligations. Importers may, however, see these revisions as requiring corporate policy changes evaluating their readiness for making and defending first-sale declarations. Notably in the publication, CBP reminds importers of their reasonable care obligation, specifically stating, “before an importer declares a transaction value based on a transaction to which it is not the buyer, the importer should be sure that such a transaction satisfies the criteria discussed above and be prepared to submit supporting evidence as described in T.D. 96-87, upon request by CBP. An importer who declares a value to CBP without the necessary supporting documentation would not be exercising reasonable care and may be subject to a penalty or other enforcement compliance action.” [Note: This language is in the original publication; the list of documents is an addition.] In the draft version CBP has added language regarding existing recordkeeping requirements. Importers are reminded of the recordkeeping regulations to support transaction value. Specifically, “Section 163.1 of 19 CFR defines records as among other things, any information made or normally kept in the ordinary course of business that pertains to any importation, declaration or entry.” The crux of the revisions focuses on what CBP may consider when testing the applicability of transaction value. Generally, transaction value is the price actually paid or payable for merchandise when sold for exportation to the United States, plus certain statutorily enumerated additions. In order for a value to be considered a viable transaction value, CBP must be able to verify the price paid or payable, including statutory additions. CBP holds that without sufficient evidence, the importer has not overcome the burden to rebut the presumption that the transaction value is based on the price actually paid or payable by the importer and therefore CBP will base the valuation on the price paid by the importer rather than the first-sale price. The publication states that, “In a multi-tiered transaction, all parties involved in the purchase and resale of goods destined for the United States are required to maintain and provide records upon request from CBP. For example, CBP may require the ultimate consignee, importer, middleman, agent and factory records to determine the proper valuation of the imported goods and if amounts related to statutory additions have been declared.” This is where the extensive list of documents comes into play. Bear in mind that inquires and demands for records may come from many CBP sources outside of Regulatory Audit and could come in the form of Requests for Information from Import Specialists. Download the
Draft copy of a revised version of the Informed Compliance Publication on Bona Fide Sales & Sales for Exportation to the United States by clicking here.
