Protective "First Sale" Language Included in Farm Bill

On May 22, 2008, the U.S. Senate voted 82-13 and joined the U.S. House of Representatives that voted 306-110 to overturn the President's veto of the Food, Conservation, and Energy Act of 2008 (also known as "the farm bill"). Of importance to the international trade community is protective first sale language that was added to the farm bill by Sen. Max Baucus (D. - Mont.), Rep. Charles Rangel (D.-NY) and other key lawmakers. This language was not subject to any hearings and was not considered in committee.

On January 24, 2008, U.S. Customs and Border Protection (CBP) published a notice in the Federal Register setting forth its proposed interpretation of the phrase "sold for exportation to the United States," which would effectively eliminate the use of "first sale" valuation. 

CBP's proposed interpretation has drawn bipartisan opposition in the House, where 51 members wrote Department of Homeland Security Secretary Michael Chertoff in an April 18 letter to ask that the CBP proposal be "immediately withdrawn."

The Senate summarizes the protective first sale language as follows:


First Sale. The longstanding practice of "first sale" allows an importer to assess the value of imported goods based on the first sale of goods destined for the United States, regardless of when that sale occurred. Without consulting Congress or the importing industry, U.S. Customs and Border Protection (CBP) has proposed regulatory changes to assess duties on the "last sale" rather than the "first sale" value of goods. Such a change could increase significantly the duties paid by American importers. The farm bill (1) requires CBP to collect information on the number of importers that value imports using the "first sale" methodology; (2) requires the United States International Trade Commission to provide Congress with a report on the number of importers using "first sale" methodology, and the value of those imports; and (3) expresses a sense of Congress that CBP should not implement its change in interpretation until at least January 1, 2011.

Thus, while the language in the farm bill does not prevent CBP from eliminating first sale, it does require CBP to study the change to determine how much more revenue it would collect and companies would be affected. It also includes non-binding "sense of Congress" language that the change should not be implemented until 2011.