As a part of U.S. Customs and Border Protection’s (CBP) commitment to educate the Trade Community, Informed Compliance Publications (ICP’s) provide guidance around complex import regulations. On July 9th 2014, CBP issued a draft revision to the ICP entitled “Bona Fide Sales & Sales for Exportation to the United States”. This ICP is key in outlining the requirements to appraise imported merchandise using the First Sale for Export value. In this early draft, CBP is proposing significant changes to this 2005 publication.
It is important to understand how these changes may influence an importer’s First Sale for Export program structure and is a great opportunity to evaluate its risks and rewards. Please remember that the ICP update is draft of the proposed language at this date. Some of those proposed changes highlight and reiterate the following:
- The determination of whether First Sale for Export is appropriate must be determined on a case by case basis. This is due to the unique circumstances of each transaction including the roles and responsibilities of the parties to the transaction as well as the accounting structures and methodologies employed. In each of these cases, different levels of support documentation may be needed to demonstrate that the transaction should be appraised using the First Sale for Export value. For example, a transaction between a middleman and seller who are related requires additional support documentation compared to a transaction between a middleman and seller who are not related.
- Changes to the ICP include an appendix of documents that might be required to keep and help substantiate a transaction involving First Sale for Export. This list includes some documents that are considered extremely sensitive, for instance “accounting and financial records, including the audited financial statements (including any notes and supporting schedules), trial balance, general ledger, cash disbursements and purchase journals (showing transactions level detail) for the applicable period, support price actually paid or payable and information related to the statutory additions.”
- It is important to keep in mind the regulatory recordkeeping requirements of the Code of Federal Regulations (CFR), Title 19, Part 163. This defines records as “any information made or normally kept in the ordinary course of business that pertains to any importation, declaration or entry.” By electing to declare First Sale for Export, importers must be aware that the transaction of the vendor and factory become subject to the recordkeeping requirements.
- The ICP with its proposed changes, is one of a number of publications and rulings that have an impact on First Sale, all of which are important to understanding the totality of a First Sale program and the importance of compliance. With this in mind, as the Importer of Record, it is vital to ensure the necessary documentation to substantiate the First Sale value is available before you begin filing First Sale for Export claims.
The information contained in the draft of the revised ICP should not be alarming news to those importer’s with well-established, compliant First Sale for Export programs. However, if you are updating your current program or introducing a new program, we recommend that you consider the below best practices:
- Exercise due diligence by conducting full Case Studies on each trade partner combination to ensure that the First Sale for Export Value can be substantiated
- Provide Vendor Training to your First Sale for Export partners
- Participate in Retroactive Recovery Filing programs like Reconciliation when the complete and accurate First Sale for Export value is not known at time of entry
- Provide your Brokers and Trade partners with detailed SOPs (Standard Operating Procedures)
- Either retain all documents necessary to support the First Sale for Export value claims or establish agreements with your First Sale for Export trading partners that ensures the availability of these records when needed.
- Regularly review your data retention, data analysis and reporting policies.
- Monitor/Audit your First Sale for Export transactions.
Tradewin’s professional suite of First Sale Valuation Services, from Case Study analysis to full Program Management, is grounded in these best practices and can ensure that your program is focused on compliance while maximizing the savings of a fully developed First Sale for Export program. Our systems and people make the difference, offering flexible programs that provide value and peace of mind to your First Sale for Export Program.