A draft revised internal compliance publication (ICP) circulated by CBP July 9 appears to include additional requirements to substantiate the use of first sale despite reassurances from senior agency officials the previous day that there would be no policy changes.
Among the more onerous proposed requirements is that CBP when conducting a first sale review will likely request access to exhaustive financial detail (including charts of account, general ledgers and tax returns) for all parties to the transaction, including the manufacturer, middleman and parent companies.
The draft ICP also includes, for the first time, a lengthy checklist of other documents that CBP may request to prove eligibility for first sale benefits. The draft offers little further guidance to CBP auditors and other officials on how, when and to what extent to use the checklist. This raises concerns that they will interpret this list as mandatory and require all the specified documents for first sale claims regardless of their relevance to validating the transaction under scrutiny. As a result, the mere issuance of this list could have a chilling effect on apparel and footwear manufacturers and importers who incorporate the First Sale Rule into their business models, the vast majority of which do so in a legitimate and legal way.
The First Sale Rule was established in litigation by Sandler, Travis & Rosenberg more than 25 years ago. Its legality and importance to the U.S. economy and trade community was reaffirmed by legislation first proposed by ST&R and enacted in 2008. The firm continues to provide vigorous first sale qualification, implementation and maintenance programs that assist U.S. importers to fully comply with all relevant laws and regulations.
ST&R will be submitting comments to CBP challenging any attempts to limit the legitimate use of the First Sale Rule.
For more information, please contact Tom Travis at (305) 894-1001, David Cohen at (202) 730-4955 or Sally Peng (Hong Kong) at 852 9535 6034.