U.S. Customs Regulations: Insight into the First Sale Rule

The U.S. legal system requires the utmost attention because of the inherent diversity of the customs regulations we are used to in other countries

A practical example of the concept of risk during the procedure of customs clearance and import of goods into the United States

U.S. Customs and U.S. importers take it as a given that three requirements are needed to avail of the import duty savings in America based on the First Sale Rule:

• a bona fide sale;
• of goods destined for the U.S.;
• it is part of an arm's length transaction, i.e., free of non-market influences that could affect the price.

However, Meyer’s decision, Court of International Trade, March 01, 2021 [pdf] about the First Sale Rule [https://www.cit.uscourts.gov/sites/cit/files/21-26.pdf] focused on the detail of "non-market influences" from the analysis and decision-making process paving the way for uncertainty in customs compliance programs to import into the United States that pertain to the First Sale Rule.

The Meyer decision ruled against using the first sale rule in calculating the duty because the importer could not prove that the transaction between the manufacturer and the intermediary was an arm's length transaction free from non-market influences.

The judge in the Meyer decision merely questioned the applicability of the First Sale Rule in any transaction with producers from non-market economies and left it to the U.S. Court of Appeal to provide clarification in case of an appeal. Until the appeal is heard, the effect is to create a giant sword of Damocles over the heads of U.S. importers who rely on the First Sale Rule to calculate import duties on goods imported into America. Even doubt is enough to discourage imports from China.