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April 23, 2008

**[Submitted at http://www.regulations.gov via Docket Number
USCBP-2007-0083]{.underline}**

Trade and Commercial Regulations Branch

Office of International Trade

Customs and Border Protection

1300 Pennsylvania Ave., N.W., (Mint Annex)

Washington, DC 20229

> **Re: Solicitation of Comments concerning Proposed Interpretation of
> the Expression "Sold for Exportation to the United States" for
> Purposes of Applying the Transaction Value Method of Valuation in a
> Series of Sales**
>
> **\[Department of Homeland Security, Bureau of Customs and Border
> Protection, USCBP-2007-0083\]**

Dear Trade and Commercial Regulations Branch,

These comments are submitted in response to the Bureau of Customs and
Border Protection's ("CBP's") request for comments on its proposed
interpretation of the expression "sold for exportation to the United
States" for purposes of applying the transaction value method of
valuation in a series of sales.[^1]

We are in favor of the proposed interpretation set forth in the CBP's
solicitation of comments.

Section I of these comments describes how the interpretation currently
used by the CBP is inconsistent with the longstanding use of tariffs to
support U.S. policy objectives, creates practical problems for CBP and
importers, places domestic producers at a disadvantage, and creates
incentives for the underpayment of duties. Section II argues that the
proposed interpretation, in contrast, is consistent with the United
States' government's use of tariffs to raise revenue and support U.S.
policy objectives favorable for domestic industry, reduces practical
problems for the CBP and importers, increases domestic producers'
ability to evaluate the impact of import duties, and results in a more
uniform application of the law. Section III describes how the proposed
interpretation is consistent with longstanding United States' efforts to
lead in the harmonization and standardization of customs procedures,
through its participation in the World Trade Organization ("WTO") and
the World Customs Organization ("WCO"). Section IV outlines how the
proposed interpretation is consistent with the practice of many trading
partners.

Section V concludes by arguing that the recent adoption of Commentary
22.1 by the Technical Committee on Customs Valuation of the WCO
("Technical Committee") provides an excellent opportunity for the United
States to replace the current interpretation with the proposed
interpretation, thereby simplifying and streamlining valuation
procedures, and aligning U.S. customs valuation practice with the
practice of many of its trading partners.

**[I. CBP's Current Interpretation of the Expression "Sold for
Exportation to the United States" is Inconsistent with Numerous United
States Policy Objectives, Creates Practical Problems for CBP and
Importers, Places Domestic Producers at a Disadvantage, and Creates
Incentives for the Underpayment of Duties]{.underline}**

The interpretation of the expression "sold for exportation to the United
States" in 19 U.S.C. § 1401a that is currently used by CBP, when
applying the transaction value method of valuation in a series of sales,
bases "transaction value on the price paid by the buyer in the first or
earlier sale (*e.g.*, the sale between the manufacturer and the
intermediary) provided the importer can establish by sufficient evidence
that this was an arm's length sale and that, at the time of such sale,
the merchandise was clearly destined for exportation to the United
States."[^2] This interpretation is inconsistent with effective
administration of the U.S tariff structure and leads to the undermining
of a number of critical, national policy objectives.

For example, tariffs help to offset various advantages held by offshore
producers and exporters, such as pennies per-hour labor rates, lax
environmental, and workplace safety standards and non-actionable state
sponsored subsidies. Tariffs help to prevent the disruption of the U.S
market and displacement of U.S. producers and workers who are forced to
compete with foreign manufacturers who benefit from production cost
reductions associated with each of these advantages.

Secondly, tariffs are reflective of the fact that U.S. producers and
exporters often face substantial tariff and non-tariff barriers when
attempting to access important overseas markets. In fact, in a 2005
hearing the Senate Finance committee documented that the average tariff
on industrial products held by our global trading partners is ten times
higher than the average U.S. industrial tariff. Often, the very
countries that allow producers to operate under the aforementioned
substandard labor, environmental and safety practices also make access
to their domestic markets virtually impenetrable through exorbitant
tariff structures. The effective enforcement of the U.S. tariff code
helps to ensure that foreign competitors who enjoy a highly protected
home market do not have completely unimpeded access to the U.S market.

Third, the U.S. tariff code is essential to the integrity of U.S. free
trade agreements and other preferential trading arrangements. The basis
for these arrangements is the fact that free trade partners are
guaranteed duty-free access to the U.S. market. The value of this
preference is measured by the differential between normal tariff rates
applicable to most imports and the existence of a zero-duty system for
U.S. preference partners. Since U.S. tariff rates are administered in a
fashion where the effective duty rate is significantly lowered through a
first sale valuation mechanism, the value of the benefit to our
preferential trading partners is substantially diluted. These free trade
agreements and preferential arrangements are intended to stimulate
commerce among the various parties and investment in these preferential
trading regions. In some cases, such as the Caribbean Basin Trade
Partnership Act (CBTPA), duty-free access to the U.S. market is
predicated upon the use of U.S components. First sale application
clearly is detrimental to the various objectives associated with the
nearly three decade focus of U.S. policymakers to establish an elaborate
preferential trading system.

Finally, the first sale system deprives the U.S. Treasury of much needed
revenue. In that the United States runs chronic and excessive federal
budget deficits, it would seem wise to ensure that duties are collected
on the full rather than a partial value of imports as they enter the
customs territory of the United States.

Moreover, it should be noted that the current U.S. tariff structure is
the result of numerous, painstaking multilateral negotiations that have
taken place over the past fifty years. These negotiations include the
GATT/WTO Kennedy Round, Tokyo Round and the Uruguay Round. As part of
these talks, tariff rates were routinely negotiated on a line-by-line,
request offer basis. In addition, the right of the U.S. to maintain
certain tariff rates came at the expense of substantial concessions in
various non-tariff areas. For example, textile and apparel tariff
negotiations under the Uruguay Round were significantly impacted by an
agreement on the part of the U.S. to completely eliminate all of its
Multi-Fiber Arrangement (MFA) textile and apparel quotas. Beyond the
negotiation process, U.S. tariff rates are then reviewed and condoned by
Congress as part of the implementing legislation associated with each of
these agreements.

To apply duty rates on the partial value of imports through the first
sale process makes a mockery of the fifty year GATT/WTO negotiating
process. In essence, the first sale rule allows unilateral tariff
concessions through a flawed administrative process. It is critical that
U.S. producers competing for a fair share of the U.S market have the
full benefit of an effective and reasonable tariff system that has been
constructed through an elaborate negotiating process consistent with
past concessions, obligations and benefits.

The current interpretation also creates practical problems for the CBP
and importers. First, it is difficult for CBP to determine "whether
fungible goods are clearly destined to the U.S. when they are sold to
the intermediary."[^3] Second, considerable fact-finding is necessary in
order to determine whether a particular first sale transaction is a
"*bona fide* arm's length sale."[^4] Third, post-entry verification is
difficult because "the first sale usually involves a foreign sale and
CBP does not have easy access to the records, including accounting
records, which may be needed for verification purposes."[^5]

The current interpretation creates difficulties for the importer as
well. Currently, if an importer declares a transaction value based on
the first sale, the importer must meet certain obligations under 19
U.S.C. § 1484 "to use reasonable care to properly declare the value of
imported merchandise."[^6] The importer may not have access to all the
documents concerning the first sale, which can make it difficult for the
importer to make a declaration under oath concerning the value
declaration in accordance with 19 U.S.C. § 1485.[^7]

The current interpretation also places domestic producers and their
workers at a disadvantage since the level of tariffs on imports they
expect based on the U.S. tariff code is reduced in practice simply by
the action of the structuring of the transaction. Importers may also
receive disparate liability not based on the price they pay but simply
on the knowledge of parties to an earlier transaction.

**[II. The Proposed Interpretation is Consistent with the United States'
Government Longstanding Use of Tariffs to Raise Revenue and Support
Numerous U.S. Policy Objectives, Reduces Practical Problems for the CBP
and the Importer, Increases Domestic Producers' Ability to Evaluate the
Impact of Import Duties, and Results in a More Uniform Application of
the Law]{.underline}**

For years, the United States Government has used tariffs on imports as a
source of revenue[^8] and to help level the playing field for domestic
industry. American industries, with the help of tariffs, have produced
goods for the United States market as well as foreign markets, creating
lucrative employment for workers in the United States, and improving the
general welfare. Tariffs have promoted stability and diversity among
America's industries and helped the United States achieve its current
economic strength.

Although tariffs in the United States have been reduced significantly
over the last few decades, tariffs on imports remain an important source
of revenue. According to a recent GAO statement before the Committee on
Homeland Security of the U.S. House of Representatives, "CBP is the
second largest revenue generator for the U.S. government, collecting
nearly \$30 billion in customs revenue in fiscal year 2006."[^9]

Because the proposed interpretation bases transaction value on the last
sale occurring prior to the introduction of goods in to the United
States, the proposed interpretation is more closely aligned with the
legislative purpose of the tariff to raise revenue and support numerous
U.S. policy objectives. The proposed interpretation establishes "a
transparent standard for determining transaction value that is easily
applied and based on information available in the United States."[^10]

The proposed interpretation is easier for CBP to administer. If
transaction value "is based on the last sale, it is likely that at least
one of the parties to that sale would be subject to the recordkeeping
requirements."[^11] CBP is "better able to verify the accuracy of the
declared value when transaction value is based on the last sale." [^12]
Less fact-finding by CBP is required.[^13]

The proposed interpretation means that the U.S. tariff schedule sets the
rules instead of the valuation process, which currently allows the
structuring of transactions for duty avoidance.

**[III. The Proposed Interpretation is Consistent with the United
States' Leadership Role in International Customs
Cooperation]{.underline}**

For many years, the United States has participated in international
efforts to harmonize customs valuation. The United States played a
leading role in the negotiations that resulted in the 1947 General
Agreement on Tariffs and Trade ("GATT"). Article VII of the GATT sets
forth general principles concerning customs valuation.

In 1970, the United States became a member of the Customs Cooperation
Council,[^14] the organization that eventually became the World Customs
Organization ("WCO"). During the GATT Tokyo Round negotiations, the
Agreement on Implementation of Article VII of the GATT ("Customs
Valuation Agreement") was negotiated. The United States implemented the
Customs Valuation Agreement through the Trade Agreements Act of
1979[^15] and Proclamation 4768.[^16] By 1994, at the time of the
Uruguay Round Agreements Act, the Custom Valuation Agreement was in
force in 43 countries, including the United States.

As a result of the Uruguay Round negotiations, the Customs Valuation
Agreement was included as "part of the overall WTO Agreement, thus
making it applicable to all WTO members." This was a development of
"considerable advantage to U.S. exporters" who had been "subjected to
varying, often arbitrary customs valuation rules around the globe."[^17]
The Statement of Administrative Action of the Uruguay Round Agreements
Act listed the following advantages of the Customs Valuation Agreement
\-- that the agreement:

-   "serves as an internationally-agreed interpretation of the much more
    general rules set out in GATT Article VII;

-   bases valuation, to the greatest extent possible, on transaction
    value, similar to longstanding U.S. practice;

-   eliminates certain protectionist features in foreign customs
    valuation systems, including arbitrariness in valuation methods,
    overvaluation, and the use of fictitious values;

-   requires foreign customs services to observe minimum standards of
    procedural transparency and fairness;

-   increases the opportunity for exporters to appeal, both at the
    national and international level, improper customs valuation
    decisions; and

-   simplifies and streamlines valuation procedures."[^18]

Thus, through the GATT and the WTO, the United States has taken a
leadership role in international customs cooperation and has a
longstanding practice of promoting the harmonization of customs
procedures which continues today. Recently, the Senate ratified the
Revised Kyoto Convention on Harmonized Customs Procedures, which entered
into force in February 2006.[^19]

The proposed interpretation will make U.S. valuation methods consistent
with "the provisions and purpose of the {Customs} Valuation Agreement,
as clarified by the Technical Committee" in Commentary 22.1.[^20]

Article I of the Customs Valuation Agreement is entitled "Rules on
Customs Valuation" and states that

1.  The customs value of imported goods shall be the transaction value,
    that is the price actually paid or payable for the goods when sold
    for export to the country of importation adjusted in accordance with
    the provisions of Article 8...."[^21]

Article 18 of the Customs Valuation Agreement established a Technical
Committee on Customs Valuation ("Technical Committee") "composed of
representatives from each of the Members."[^22] The Technical Committee
operates "under the auspices of the Customs Co-operation Council," which
has now become the World Customs Organization ("WCO") and carries out
the responsibilities described in Annex II of the Customs Valuation
Agreement.[^23] According to Paragraph 2 of Annex II of the Customs
Valuation Agreement, the Technical Committee shall "examine specific
technical problems arising in the day-to-day administration of the
customs valuation system of Members" and "give advisory opinions on
appropriate solutions based upon the facts presented."[^24]

At its April 2007 24^th^ Session, the Technical Committee adopted
Commentary 22.1, which is entitled *"Meaning of the Expression 'Sold for
Exportation to the Country of Importation' in a Series of Sales*," and
is included as an attachment to the CBP's proposed interpretation.[^25]
According to Commentary 22.1,

> Pursuant to Article 1.1(a)(i) {of the Customs Valuation Agreement},
> the Customs value of imported goods shall be the transaction value
> provided that there are no restrictions as to the disposition or use
> of the goods by the buyer other than restrictions which are imposed or
> required by law or by the public authorities in the country of
> importation.[^26]

Commentary 22.1 states that

> the transaction value method is intended to take account of the
> substance of the entire commercial import transaction preceding import
> of the goods, including the economic inputs and related transactions
> which arise therefore.
>
> ... Therefore, as mandated by the General Introductory Commentary, it
> is essential to apply transaction value in a series of sales situation
> in a manner that takes into account the substance of the entire
> commercial import transaction and permits the proper application of
> Article 8."[^27]

According to Commentary 22.1, the Technical Committee

> is of the view that the underlying assumption of Article 1 is that
> normally the buyer would be located in the country of importation and
> that the price actually paid or payable would be based on the price
> paid by this buyer. The Technical Committee concludes that in a series
> of sales situation, the price actually paid or payable for the
> imported goods when sold for export to the country of importation is
> the price paid in the last sale occurring prior to the introduction of
> the goods into the country of importation, instead of the first (or
> earlier) sale. This is consistent with the purpose and overall text of
> the {Customs Valuation} Agreement.[^28]

According to CBP, its current interpretation of the expression "sold for
exportation to the United States" for the purposes of applying the
transaction value method of valuation in a series of sales situation,
that is "set forth in T.D. 96-87 and in CBP ruling letters, is not
correct" and is not in accord with Commentary 22.1 of the Technical
Committee.[^29]

The United States should continue to assert its leadership role in
international customs harmonization by adopting the proposed
interpretation and aligning itself with those countries whose laws and
regulations are already consistent with Commentary 22.1. This would
serve the interests of United States commerce because the implementation
of Commentary 22.1 by the United States and other WTO members will
result in greater international uniformity in customs valuation
practices, reduce the potential for disputes in customs valuation, and
benefit U.S. importers and exporters and domestic manufacturers and
agricultural producers.

**[IV. The Proposed Interpretation is Consistent with the Practice of
Many Trading Partners]{.underline}**

The proposed interpretation is consistent with the trading practice of
many trading partners who have applied the transaction value method of
valuation consistent with the Customs Valuation Agreement, an agreement
which "has been instrumental in ensuring fairness, transparency, and
uniformity in customs valuation decisions by participating
governments."[^30]

As of July 27, 2007, there were 151 members of the WTO.[^31] According
to the November 2007 Report of the WTO Committee on Customs Valuation to
the Council for Trade in Goods, 74 WTO Members "have notified their
national legislation on customs valuation," including "14 Members which
have submitted communications indicating that their legislation notified
under the Tokyo Round Customs Valuation Agreement remained valid under
the WTO Customs Valuation Agreement," and not including 27 individual EC
Members.[^32]

The Customs Valuation Agreement does not specifically address some of
the more complex aspects of transaction value, such as those addressed
by the proposed interpretation. However, in April 1999, the Republic of
Korea, in a communication to the WTO Committee on Customs Valuation,
stated that "the basis used for customs appraisal under the actual
transaction value when there is more than one sale for export to the
country of importation" had "been subject to different interpretations,
creating conflicts of interpretation and application of the Agreement by
some Members."[^33] The communication cited, in particular, differences
between interpretations in the United States, the European Union, and
Japan.

In its solicitation of comments, CBP does not specifically identify
which WTO members apply the interpretation set forth in Commentary 22.1.
Based on preliminary research, however, there appear to be two broad
categories of countries and groups of countries whose customs valuation
law and regulations are based on transaction value, and address the
meaning of the expression "sold for export to the country of
importation" in a series of sales. These two categories are:

-   countries or groups of countries whose laws and regulations are
    quite similar to Commentary 22.1 and are interpreted so that "in a
    series of sales situation, the price actually paid or payable for
    the imported goods when sold for export to the country of
    importation is the price paid in the last sale occurring prior to
    the introduction of the goods into the country of importation,
    instead of the first (or earlier sale)"[^34]; and

-   countries or groups of countries whose laws and regulations are
    similar to Commentary 22.1, but allow for some exceptions to a
    general rule that "in a series of sales situation, the price
    actually paid or payable for the imported goods when sold for export
    to the country of importation is the price paid in the last sale
    occurring prior to the introduction of the goods into the country of
    importation, instead of the first (or earlier sale)."[^35]

The next few paragraphs review some of the laws and regulations of
countries or groups of countries in these two categories.

> [A. Countries or Groups of Countries whose Laws and Regulations are
> quite similar to Commentary 22.1]{.underline}
>
> [1. Australia]{.underline}

Section 159(2) of the Customs Act 1901 states that "Where a Collector
can determine the transaction value of imported goods, their customs
value is their transaction value.[^36]

Section 161 of the Customs Act 1901 states:

> The transaction value of imported goods is an amount equal to the sum
> of their adjusted price in their import sales transaction and of their
> price related costs to the extent that those costs have not been taken
> into account in determining the price of the goods.[^37]

According to the definition of "import sales transaction" in *Australian
Customs Service Manual Volume 8A* (current as at 21/10/2005),

> When there are several contracts entered into in respect of the goods
> before they reach Australian Customs control, the criteria
>
> are: ...

-   If there are two or more contracts for importation into Australia,
    the last one entered into before the goods reached Customs control
    shall be used.[^38]

> [2. Brazil]{.underline}

According to Article 77 of Decree no. 4543 of 2002, if a product is
exported to Brazil from Country A with the importer buying from a
reseller where the seller (Company 1) knew at the time of the sale to
the reseller (Company 2) in Country A that the product was destined for
Brazil, the transaction value for customs purpose in Brazil is the price
from Company 2 to the importer plus CIF charges, as declared in the
invoice.[^39]

> [3. China]{.underline}

Article 5 of Order No. 148 of the General Administration of Customs,
Measures of the Customs of the People's Republic of China for the
Assessment and Determination of Duty-paid Value of Import and Export
Goods, states that

> The dutiable value of import goods shall be assessed and determined by
> the customs house on the basis of the transaction value of those
> goods, and shall include the freight and relevant expenses and the
> insurance premiums of the goods before the goods are transported to
> and unloaded at the entry spot within the territory of the People's
> Republic of China.[^40]

According to Article 7 of Order No. 148,

> The transaction value of import goods refers to the total amount of
> the paid-in or payable value that the buyer shall pay to the seller
> for the goods when the goods are sold within the territory of the
> People's Republic of China and that has been adjusted in accordance
> with the provisions in Section 3 of this Chapter, and includes the
> price that is directly and indirectly paid. [^41]

Thus, if a product is exported to China from Country A, with the
importer buying from a reseller where the seller (Company 1) knew at the
time of the sale to the reseller (Company 2) in Country A that the
product was destined for China, the transaction value for customs
purpose in China is the price from Company 2 to the importer with CIF
charges included.

> [4. Japan]{.underline}

In Japan, "The Law provides that the customs value of the imported goods
shall be the price actually paid or payable by the buyer to or for the
benefit of the seller for the imported goods in import transaction
relating to the imported goods..."[^42] Article 4 of the Customs Tariff
Law states that "The value for customs purposes of imported goods ...
shall ... be the price actually paid or payable by a buyer to or for the
benefit of a seller for the said imported goods in import transaction
relating to the said imported goods ..."[^43]

Thus, if a product is exported to Japan from Country A with the importer
buying from a reseller where the seller (Company 1) knew at the time of
the sale to the reseller (Company 2) in Country A that the product was
destined for Japan, the price actually paid or payable for the imported
goods when sold for export to Japan is the price from Company 2 to the
importer (with CIF charges if not included).

> [5. Korea]{.underline}

Korea levies import tariffs on the actual price that is paid by the
importer, regardless of how many transactions occurred in the exporting
country.

Article 15 of the Korea Customs Act states that "The customs value shall
be the value or quantity of imported goods."[^44] Article 30(1) states
that "The customs value of imported goods shall be the transaction
value, that is the price actually paid or payable by the buyer for the
goods sold for export to Korea, adjusted...."[^45]

Thus, if a product is exported to Korea from Country A with the importer
buying from a reseller where the seller (Company 1) knew at the time of
the sale to the reseller (Company 2) in Country A that the product was
destined for Korea, the transaction price for customs purposes, that is
the price actually paid or payable for the imported goods when sold for
export to Korea, is the price paid by the importer to Company 2.

[6. Mexico]{.underline}

Article 64 of the Customs Law of December 15, 1995 and December 31, 1996
states that

> The customs value of the goods shall be the transaction value of the
> goods, subject to the provisions of Article 71 of this Law.
>
> The transaction value of goods for import shall be understood to mean
> the price paid for the goods, provided that all the requirements of
> Article 67 of this Law are met and that the goods are sold for export
> to the national territory by way of purchase by the importer. The
> price shall be adjusted, where appropriate, according to the terms of
> Article 65 of the Law.
>
> The price paid shall be understood to mean the total payment made or
> to be made directly or indirectly by the importer to or for the
> benefit of the seller for the imported goods.[^46]

Thus, if a product is exported to Mexico from Country A with the
importer buying from a reseller where the seller (Company 1) knew at the
time of the sale to the reseller (Company 2) in Country A that the
product was destined for Mexico, the transaction value, or customs
value, is the price paid by the importer to Company 2, with CIF charges
if they cannot be distinguished from the paid price.

> [7. New Zealand]{.underline}

According to the New Zealand Ministry of Foreign Affairs and Trade
website, "The agreement on customs valuation is incorporated into New
Zealand law by the second schedule to the Customs and Excise Act
1996."[^47]  Clause 2 of the Second Schedule to the Customs and Excise
Act of 1996 states that "The Customs value of imported goods shall be
their transaction value, that is, the price paid or payable for the
goods when sold for export to New Zealand..."[^48] The New Zealand
Customs Service's website states that "The usual method for establishing
the Customs value is by using the transaction value (the price paid or
payable for the imported goods). Overseas freight and insurance charges
are deducted if these charges are included in the transaction
value."[^49]

[8. South Africa]{.underline}

Article 65 of the Customs and Excise Act (Act 91 of 1964) states that
"the value for customs duty purposes of any imported goods shall, at the
time of entry for home consumption, be the transaction value
thereof."[^50] Article 66 states that "the transaction value of any
imported goods shall be the price actually paid or payable for the goods
when sold for export to the Republic, adjusted ...."[^51]

Example 3 in Note 11 of the "Notes for the Guidance of Importers" in the
*Customs Valuation Guide* of South Africa states:

> Exporter B in country A sells goods to buyer C in country X, for
> shipment to that country. Whilst in transit to country X, the goods
> are resold by C to a buyer in South Africa. The resale will be
> accepted as a "sale for export to South Africa" and the resale price
> will form the basis for valuation under Article 1.[^52]

Similarly, Note 12 states "For purposes of valuation, a sale in transit
is treated in the same way as any other transaction. The last resale
price before entry of the goods forms the basis of valuation and the
same rules apply." [^53]

> [B. Countries or Groups of Countries whose Laws and Regulations are
> quite Similar to Commentary 22.1, But Allow for Some
> Exceptions]{.underline}

[1. European Union]{.underline}

At present, the EU does not appear to have formally discussed Commentary
22.1 of the Technical Committee. Article 29 of the Customs Code of the
European Communities states

> 1\. The customs value of imported goods shall be the transaction
> value, that is, the price actually paid or payable for the goods when
> sold for export to the customs territory of the Community, adjusted
> ... [^54]

However, Article 147 of the Implementing Provisions to the Customs Code
of the European Communities allows, in certain situations, for a price
to be used from a sale before the last sale. Article 147 states that:

> In the case of successive sales before valuation, only the last sale,
> which led to the introduction of the goods into the customs territory
> of the Community, or a sale taking place in the customs territory of
> the Community before entry for free circulation of the goods shall
> constitute such indication. Where a price is declared which relates to
> a sale taking place before the last sale on the basis of which the
> goods were introduced into the customs territory of the Community, it
> must be demonstrated to the satisfaction of the customs authorities
> that this sale of goods took place for export to the customs territory
> in question.[^55]

In December 1995, the European Communities notified the WTO Customs
Valuation Committee of this language in Article 147.[^56]

Commentary No. 7 of the Customs Code Committee (Customs Valuation
Section) on the application of Article 147 of Commission Regulation
states

> where an earlier sale (i.e. other than the last sale ...) has taken
> place involving the goods in question, the declarant can ask the
> customs authorities to accept that earlier sale as the basis for the
> customs value, but only if he can demonstrate that, in respect of the
> sale in question, there are specific and relevant circumstances which
> led to export of the goods to the customs territory of the
> Community.[^57]
>
> [2. Canada]{.underline}

Section 48(1) of the Customs Act of Canada states that "The value for
duty of goods is the transaction value of the goods if the goods are
sold for export to Canada to a purchaser in Canada and the price paid or
payable for the goods can be determined...."[^58] According to Section
48(4) of the Customs Act, "The transaction value of goods shall be
determined by ascertaining the price paid or payable for the goods when
the goods are sold for export to Canada and adjusting the price paid or
payable ..."[^59]

Thus, in general, if a product is exported to Canada from Country A with
the importer buying from a reseller where the seller (Company 1) knew at
the time of the sale to the reseller (Company 2) in Country A that the
product was destined for Canada, the customs value, is the price paid by
the importer to Company 2.

A May 2001 Memorandum entitled "Customs Valuation: Sold for Export to
Canada," which concerns Section 48 of the Customs Act, states, where
there is a purchaser in Canada, that

> Situations can arise where there is more than one sale or agreement to
> sell before the goods are imported into Canada. This usually happens
> when a foreign vendor and a Canadian purchaser negotiate terms for the
> delivery of goods to the purchaser in Canada (as in paragraph 6 of
> this Memorandum) and the vendor subsequently enters into an agreement
> with a third person who supplies the goods that are exported to
> Canada. The relevant sale for customs valuation purposes is the one
> that sets off this chain of events, i.e., the transaction in which the
> person in Canada is directly involved. Any sale after, or as a result
> of that sale, is generally irrelevant. Situations B, C, F, G (second
> importation), L, M, and N in the Appendix are examples of multiple
> sales before
>
> importation. [^60]

In Situation L, a buyer purchases goods to be sent to Canada, and then
sells them, as the goods are enroute to Canada. In this situation,
"there are two sales, and each one is a valid sale for export to
Canada." As long as the first seller is willing to provide full details
of the original sale for export to Canada," the second seller can
declare the first seller's purchase price "as the price for determining
the value for duty under section 48."[^61]

The above provide examples of the types of laws and regulations
concerning customs valuation of series of sales transactions that exist
in various countries. They also provide some examples of the types of
transactions that can be considered to be series of sales transactions
\-- transactions to which Commentary 22.1 of the Technical Committee
might apply. In contrast, Commentary 22.1 provides only one example of a
series of sales transaction \-- in which A is a retail store located in
the country of importation, "B is a pen distributor located in country
Z, and C is a pen manufacturer located in country X." In this example,
"the last sale is the one between A and B and the first sale is the one
between B and C."[^62]

Thus, the current practice of many trading partners is consistent with
Commentary 22.1.

**[V. Conclusion]{.underline}**

> The recent adoption of Commentary 22.1 by the Technical Committee
> provides an

opportunity for the United States, through the adoption of the proposed
interpretation, to reduce the adverse effects of the current
interpretation, simplify and streamline valuation procedures, and align
U.S. customs valuation practice with the practice of many of its trading
partners.

For all of the above reasons, we support the proposed interpretation set
forth in the CBP's solicitation of comments.

Sincerely,

![](media/image3.jpeg){width="1.4694444444444446in"
height="0.47638888888888886in"} ![](media/image4.png)

> Auggie Tantillo Karl Spilhaus\
> Executive Director President

American Manufacturing Trade National Textile Association (NTA)

Action Coalition (AMTAC)

[^1]: *See* Proposed Interpretation of the Exportation "Sold for
    Exportation to the United States" for Purposes of Applying the
    Transaction Value Method of Valuation in a Series of Sales, 73 Fed.
    Reg. 4254 (Dep't of Commerce, January 24, 2008) \[hereinafter
    Solicitation of Comments\]; Proposed Interpretation of the
    Expression "Sold for Exportation to the United States" for Purposes
    of Applying the Transaction Value Method of Valuation in a Series of
    Sales, 73 Fed. Reg. 7315 (Dep't of Commerce, February 7, 2008).

[^2]: Solicitation of Comments, *supra* note 1, at 4255.

[^3]: *Id.* at 4259-4260.

[^4]: *Id.* at 4260.

[^5]: *Id.*.

[^6]: *Id.*

[^7]: *Id.*.

[^8]: Article I, § 8, cl. 1 of the U.S. Constitution, which came into
    effect on March 4, 1789, gave Congress the "Power To lay and collect
    Taxes, Duties, Imposts and Excises...." Congress established the
    U.S. Customs Service in July 1789. (An act to regulate the
    Collection of the Duties imposed by law on the tonnage of ships or
    vessels, and on goods, wares and merchandises imported into the
    United States, 1 Stat. 29 (1789).) CBP's website states that "For
    nearly 125 years, Customs funded virtually the entire government,
    and paid for the nation's early growth and infrastructure." (U.S.
    Customs and Border Protection, U.S. Customs Service -- Over 200
    Years of History,
    http://www.customs.gov/xp/cgov/toolbox/about/history/history2.xml.)

[^9]: *Maritime Security, Observations on Selected Aspects of the SAFE
    Port Act: Hearing before the*

    Subcommittee on Border, Maritime, and Global Counterterrorism;
    Committee on Homeland Security; House of Representatives, Thursday,
    April 26, 2007 (Statement of Stephen L. Caldwell, Director, Homeland
    Security and Justice, General Accounting Office), at 32.

[^10]: Solicitation of Comments, *supra* note 1, at 4260.

[^11]: *Id.* at 4260 n. 17.

[^12]: *Id.* at 4260.

[^13]: In addition, the proposed interpretation has advantages for the
    importer, because the importer should have all the documents
    necessary to establish the transaction value. In addition, the
    importer will be able to predict with greater certainty the import
    duties that may be assessed.

[^14]: U.S. Department of State, International Information Programs, The
    Language of Trade,
    http://usinfo.state.gov/products/pubs/trade/glosssz.htm#worldcust.

[^15]: H.R. D[oc. No. 96-153,]{.smallcaps} pt. 2, 388, 441-464,
    Statements of Administrative Action, Trade Agreements Act of 1979,
    *reprinted in* 1979 U.S.C.C.A.N. 665, 704-725.

[^16]: *See* 19 U.S.C.A. § 2111, Proclamation No. 4768 (June 28, 1980).

[^17]: H.R. [Doc. No. 103-316,]{.smallcaps} Statement of Administrative
    Action, Uruguay Round Agreements Act, 656, 896, *reprinted in* 1994
    U.S.C.C.A.N. 4040, 4218.

[^18]: *Id.* at 656, 896-897, *reprinted in* 1994 U.S.C.C.A.N. 4040,
    4218-4219.

[^19]: World Customs Organization, Revised Kyoto Convention Continues to
    Grow (August 3, 2006),
    <http://www.wcoomd.org/press/?v=1&lid=1&cid=1&id=124>

    When sending the Revised Kyoto Convention on Harmonized Customs
    Procedure to the Senate, President Bush stated "accession by the
    United States would benefit the United States and U.S. businesses by
    facilitating greater economic growth, increasing foreign investment,
    and stimulating U.S. exports through more predictable, standard, and
    harmonized customs procedures governing cross-border trade
    transactions. Setting forth standardized and simplified methods for
    conducting customs business is important for U.S. trade interests in
    light of the demands of increased trade flows, as is the use of
    modernized technology and techniques for customs facilitation."
    President Bush argued that "through early accession, the United
    States can continue to take a leadership role in the areas of
    customs and international trade facilitation as the U.S. accession
    would encourage other nations, particularly developing nations, to
    accede as well." (President George W. Bush, Message to the Senate
    Transmitting the Protocol of Amendment to the International
    Convention on the Simplification and Harmonization of Customs
    Procedures (April 30, 2003),
    http://www.presidency.ucsb.edu/ws/index.php?pid=442&st=&st1=).

[^20]: Solicitation of Comments, *supra* note 1, at 4258.

[^21]: Customs Valuation Agreement, Apr. 15, 1994, art. 1, reprinted
    *in* 1 H.R. [Doc. No.]{.smallcaps} 103-316 (1994), at 1478-1505,
    1479.

[^22]: *Id*., art. 18, at 1487.

[^23]: *Id.*

[^24]: *Id.*, Annex II, at 1502.

[^25]: World Customs Organization, Technical Committee on Customs
    Valuation, Commentary 22.1, *reprinted in* Solicitation of Comments,
    *supra* note 1, at 4261-4264.

[^26]: *Id*., at 4262.

[^27]: *Id*., at 4263.

[^28]: *Id*., at 4264.

[^29]: Solicitation of Comments, *supra* note 1, at 4256.

[^30]: H.R. [Doc. No. 103-316,]{.smallcaps} Statement of Administrative
    Action, Uruguay Round Agreements Act, 656, 896, *reprinted in* 1994
    U.S.C.C.A.N. 4040, 4218.

[^31]: WTO, Members and Observers,
    http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm.

[^32]: WTO, Report (2007) of the Committee on Customs Valuation to the
    Council for Trade in Goods, G/L/833 (Nov. 6, 2007), at 2.

[^33]: WTO, Committee on Customs Valuation, Communication from the
    Republic of Korea regarding the Agreement on Customs Valuation,
    G/VAL/W/33 (April 14, 1999).

[^34]: WCO, Technical Committee on Customs Valuation, Commentary 22.1,
    *reprinted in* Solicitation of Comments, *supra* note 1, at
    4261-4264, 4264.

[^35]: *Id.*

[^36]: Customs Act 1901 (Act No. 6 of 1901 as amended; compilation
    prepared on 2 October 2007 taking into account amendments up to Act
    No. 147 of 2007).

[^37]: *Id*.

[^38]: Australian Customs Service Manual Volume 8A, (current as at
    21/10/2005), at 109.

[^39]: Decree No. 4543, de 26 de Dezembro de 2002, Diário Oficial de
    27.12.2002 (Brazil), <http://www.glin.gov/view.action?glinID=86106>,
    art. 77.

[^40]: Measures of the Customs of the People's Republic of China for the
    Assessment and Determination of Duty-paid Value of Import and Export
    Goods, Order No. 148 of the General Administration of Customs (March
    28, 2006),
    <http://www.lawinfochina.com/law/dispecontent.asp?db=1&id=5092>,
    art. 5.

[^41]: *Id*., art. 7.

[^42]: Principle for the customs value of imported goods,
    http://www.customs.go.jp/english/c-answer_e/imtsukan/hyoka/003hyoka1403_e.htm.

[^43]: Customs Tariff Law (Provisional Translation) (Law No. 54 of 1910)
    Final Amendment (Law No. 118 of 1994),
    http://www.wipo.int/clea/docs_new/en/jp/jp009en.html, art. 4.

[^44]: WTO, Committee on Customs Valuation, Notification under Article
    22.2 of the General Agreement on Implementation of Article VII of
    the GATT 1994, Korea -- The Customs Act, G/VAL/N/1/KOR/2 (April 27,
    2001), art. 15.

[^45]: *Id*., art. 30(1).

[^46]: WTO, Committee on Customs Valuation, Notification under Article
    22 of the General Agreement on Implementation of Article VII of the
    GATT 1994, Mexico -- Revision, G/VAL/N/1/MEX/1/Rev.1 (Aug. 19,
    2004), art. 64.

[^47]: New Zealand Ministry of Foreign Affairs & Trade, New Zealand and
    the World Trade Organisation, Customs Valuation,
    http://www.mfat.govt.nz/Trade-and-Economic-Relations/NZ-and-the-WTO/Rules-For-International-Trade/0-customsval.php.

[^48]: Customs and Excise Act 1996, Second Schedule, Valuation of Goods
    for the Purposes of the Tariff,
    <http://www.customs.govt.nz/library/Legislation/CE+Act+1996/Second+Schedule+-+Valuation+of+Goods+for+the+Purposes+of+the+Tariff.htm>,
    "2. Transaction value as primary basis of valuation."

[^49]: New Zealand Customs Service, Valuation of Imported Goods,
    http://www.mfat.govt.nz/Trade-and-Economic-Relations/NZ-and-the-WTO/Rules-For-International-Trade/0-customsval.php#indoubt.

[^50]: WTO, Committee on Customs Valuation, Notifications under Article
    22.2 of the Agreement on Implementation of Article VII of the
    General Agreement on Tariffs and Trade 1994, South Africa -- Customs
    and Excise Act (Act 91 of 1964), G/VAL/N/1/ZAF (August 30, 1996),
    art. 65.

[^51]: *Id*., art. 66.

[^52]: *SARS Customs & Excise, Customs Valuation Guide* (February 2002),
    http://www.sars.gov.za/, at 54-55.

[^53]: *Id*. at 55.

[^54]: Council Regulation (EEC) No 2913/92 of 12 October 1992
    establishing the Community Customs Code,
    <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1992R2913:20070101:EN:PDF>.

[^55]: Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down
    provisions for the implementation of Council Regulation (EEC) No.
    2913/92 establishing the Community Customs Code,
    <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1993R2454:20060701:EN:PDF>.

[^56]: WTO, Committee on Customs Valuation, Notifications under Article
    22.2 of the Agreement on Implementation of Article VII of the GATT
    1994, European Communities -- Revision, G/VAL/N/1/EEC/Rev.1
    (December 6, 1995), at 33.

[^57]: Compendium of Customs Valuation texts of the Customs Code
    Committee, Customs Valuation Section, European Commission
    Directorate-General Taxation and Customs Union, TAXUD/800/2002-EN
    Update (January 2007), at 39.

[^58]: Customs Act (1985, c.1 (2^nd^ Supp.)) (current to December 13,
    2007), art. 48(1).

[^59]: *Id*., art. 48(4).

[^60]: Customs Valuation: Sold for Export to Canada (*Customs Act*,
    Section 48), Memorandum D13-4-2 (May 14, 2001), at 3.

[^61]: *Id*., at 8.

[^62]: World Customs Organization, Technical Committee on Customs
    Valuation, Commentary 22.1, *reprinted in* Solicitation of Comments,
    *supra* note 1, at 4261-4264, 4262.