**P**ACIFIC **C**OAST **C**OUNCIL OF CUSTOMS BROKERS & FREIGHT
FORWARDERS ASSN., INC.

> *\
> ♦ Customs Brokers & International Freight Forwarders Assn. of
> Washington State*

*♦ Columbia River Customs Brokers and Forwarders Assn.*

*♦ Custom Brokers & Forwarders Assn. of Northern California*

*♦ Los Angeles Customs & Freight Brokers Assn*

*♦ San Diego District Customs Brokers Assn.*

April 22, 2008

Trade and Commercial Regulations Branch

Customs and Border Protection

1300 Pennsylvania Avenue, NW (Mint Annex)

Washington, DC 20229

Ref: Notice of Proposed Rule Making

Proposed Interpretation of the Expression "Sold for Exporting to the
United States" for Purposes of Applying the Transaction Value Method of
Valuation in a Series of Sales

Docket Number USCBP 2007-0083

U.S. Customs and Border Protection (CBP) issued this notice of proposed
rulemaking on a proposed reinterpretation of certain statutory language
related to the valuation of imported merchandise. This new
interpretation would result in the elimination of a long and
well-established Customs valuation practice commonly known as the "First
Sale" rule. CBP cites as the basis for this proposal a commentary on the
meaning of transaction value under the World Trade Organization (WTO)
Customs Valuation Agreement issued by the Technical Committee on Customs
Valuation. The Pacific Coast Council of Customs Brokers and Freight
Forwarders has reviewed this proposal closely and cannot support it.

The technical committee's commentary is advisory only, and is not
legally binding on WTO or WCO member countries. Other countries have not
adopted this advisory comment on first sale rule, including the entire
European Community. The technical committee's commentary does not
provide any legal basis for CBP to revoke or overturn U.S. case law
interpreting statutory language, even if that interpretation is not
consistent with the technical committee's views on the meaning of that
language.

The question of which price should be used in valuing imported
merchandise when there are multiple sales transactions has been
litigated three times in federal court. In each instance, the courts
rejected Customs' assertion that transaction value is the price paid in
the last sale occurring prior to the introduction of the goods into the
United States. Instead, the courts affirmed that importers may use the
price of the first arms-length sale of merchandise destined for export
to the United States. This "first-sale rule," based on judicial
interpretation of U.S. statute, has been settled law as a permissible
appraisal tool that importers have relied on for 20 years. Based on
these decisions, the administrative practice of CBP has been to
recognize the first-sale rule and allow importers to use it as a
valuation methodology.

CBP does have the authority to limit the applicability of judicial
decisions. However, it has been the long-standing practice of CBP to
announce its intention to limit judicial decisions within six months of
a court's decision. In this instance, CPB proposes to employ its power
to "limit" judicial decisions that were rendered as long as 20 years
ago. What CBP proposes is not to just limit judicial decisions, but to
actually to overturn them. CBP does not have the legal authority to do
this. We are also concerned that if CBP is permitted to limit final
court decisions decades after they are rendered, such action would harm
the integrity of the judicial system

This decision would have adverse effects on many of our importer
customers. Many U.S. companies have organized their business
relationships in their supply chains and their sourcing operations,
partly in reliance on judicial decisions and Customs' practice that
endorsed the use of the first sale rule as a legitimate valuation
methodology. Moreover, the rapid growth of international trade and the
global economy has resulted in American companies creating more
flexible, multi-tiered supply-chain systems and international sourcing
transactions, including the more frequent use of buying agents,
sub-contractors, and other intermediaries. Revocation of the first sale
rule would require restructuring or elimination of business operations
and relationships with suppliers and vendors supporting these supply
chain and sourcing systems. These changes would come at significant cost
to many U.S. companies.

CBP has no legal authority to use the administrative rulemaking process
to overrule judicial precedent and cannot use this process to adopt a
statutory interpretation of the term "sale for export" contrary to the
judiciary. To do so is simply an arbitrary and capricious abuse of
administrative rulemaking power. If CBP disagrees with judicial
interpretation of the valuation statute, then the proper recourse is to
ask the courts to reverse those decisions or go to Congress to change
the law.

The Pacific Coast Council believes that this proposed rule to eliminate
the first cost sale rule is faulty. We respectfully urge that this
notice of proposed rulemaking be withdrawn.

Respectfully submitted,

Pacific Coast Council of Customs Brokers and Freight Forwarders

Jack Hubbard, President jackh@shiptlr.com

Daniel Meylor, Import Chair danielm@carmnet.com

Peter Friedmann, Of Counsel ourmanindc@federalrelations.com