The first Sale has been a very common way out for the people to reduce the customs duty liability on the goods which are being imported to the United States. U.S. Court of International Trade, therefore, issued a decision with important ramifications for any such trade raised by the dispute between Meyer Corp vs the United States.
What is the purpose of such ramifications?
As per the report, ramifications have successfully altered the risk profile which is related to the first sale transactions held in China and Vietnam. All the companies which are relying on the first sale are advised to take a deep look into the programs with the new rules and take adequate precautions.
What are the basic first sale rules?
The first sale rule requires importers to report a lower customs value if the customs value is reduced by the duty liability imposed by a specific form of qualifying importation. To become eligible to access LCV, the importation taking place must involve a multi-tiered transaction. The transactions will only come under LCV when the goods are clearly destined to specifically the United States during the sale.
How can we define the First Sale?
The first Sale can be very commonly described under Three to Four elements:
- Bona Fide Sale
- The goods are clearly destined for the US during the time of the transaction
- The value is up to an arm’s length price.
- Absence of any distortive non-market influence
What caused Meyer Corp into losing the case?
The CTI has been frequently referring to a 30-year-old case that also had established the first sale for a viable basis. This old case has been closed taken look to gain clear meaning to the current case. The First sale is usually defined as per the three top pointers defined above and is taken as legitimate reasons while the fourth one is usually neglected. The person who filed a case failed to put up enough evidence to satisfy both: well-established arm’s length and distortive non-market influence requirement that could prove the legitimacy of the First Sale traded by Meyer Corp.
CIT also expressed doubt over the First rule that was created with an intent to be applied for the transactions that involve non-market economy participants. To make a clear decision they also invited the US court for appealing to the Federal Circuit for making further statements.
Conclusion
Meyer Corp is not the only corporation that is not using the First Sale legitimately and the common opinion raised increases the risk associated with using the same with the suppliers in non-market economies (Eg. China and Vietnam). As per the common reports, it remains uncertain if Meyer Corp would appeal the final decision declared by CIT but the decision taken would definitely make a clear path for customs and border protection, to begin with dismantling a use of Fist Sale during the transactions which involve non-market economies.
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