First Sale Decision Seen as Relief to Importers, Though 'Meyer Case Still Breathes'

The U.S. Court of Appeals for the Federal Circuit ruling to overturn a Court of International Trade decision that called into question the use of first sale treatment for imported goods involving non-market economy countries (see 2208110060) is largely seen as providing a welcome relief to importers, several law firms said. "For those importers enjoying the benefits of lower declared values and duties, particularly from China in light of Section 301 tariffs, there is no longer a need for concern now that, on appeal, the court has given first sale a nod," Sandler Travis lawyer Lenny Feldman said on a podcast. The original CIT decision (Meyer Corporation v. U.S., Fed. Cir. #21-1392) raised some concerns for the future of first sale treatment (see 2104200028).

The CAFC ruling "is significant as it resolves an open question regarding the valuation of goods imported from China (and other non-market economies) and the viability of the first sale duty savings program in connection with those purchases," the Grunfeld Desiderio law firm said in a blog post. DOJ didn't comment on whether it plans to further appeal the ruling.

The ruling also seemed to further solidify first sale treatment when CAFC described its previous decision in Nissho Iwai that established first sale treatment as "merely restating the statutory requirements for a transaction value, rather than introducing a new requirement separate from the arm’s-length requirement," Barnes Richardson lawyer Ashley Bodden said in a blog post. "This is significant because it shows that, notwithstanding Customs’ hostility to First Sale transactions, the CAFC regards First Sale as inherent in the statute," she said. "Therefore, First Sale can only be repealed by changing the statute. Since the statute’s language is intended to conform to the Valuation Agreement in the World Customs Organization, it is unlikely the statute will be changed."

While the CAFC decision "has relieved many concerns," the "Meyer case still breathes, because the CIT has yet to reconsider whether some other rationale than a presumptively 'distortive' NME influence prohibits the importer from using the 'first sale' price," White and Case said in blog post. "If upheld, the CIT's original Meyer decision would have forced many importers to reassess their valuation methodologies or their sourcing patterns, because these often involve not only related-party transactions but also NME inputs, processing, suppliers, and middlepersons. For now, the CAFC's action has made such reassessments unnecessary."