The SnowSports Industries Association is asking its members to submit comments to it by close of the day Friday on a proposed change to federal regulations that the trade group says could double duties on many goods imported by its members.

The SIA said U.S. Customs and Border Protection is contemplating how it calculates such duties. Currently, the agency values goods for purposes of calculating ad valorem (i.e., percentage rate) duties on the price paid by the first buyer of the goods from the manufacturer. This is known as the “first sale” rule. Often the first buyer is a distributor in the same country as the manufacturer, and buys the goods for a slight mark-up from the manufacturer, then turns around and sells to other intermediaries in the importer's wholesale supply chain.

Customs now proposes to change the price on which it bases its ad valorem duty calculation to the price paid by the last buyer before the goods are physically introduced into the United States. This new rule would be a “last sale” rule. As such, duties would be based on the higher price of goods at the end of the wholesale supply chain.

How duties might double

A simple example illustrates how this change could U.S. importers more in duties. Imagine that a pair of ski pants is made by a factory in China and sold to a Chinese distributor for $10.00. The Chinese distributor then ships the goods to the United States and charges the importer $20.00. For purposes of this example, the U.S. importer must pay a 10% duty on the pants. Under the current rule, Customs would charge the 10% duty on the $10.00 value – the price charged in the “first sale” – or $1.00 worth of duties. Under the proposed rule, Customs would charge the 10% duty on the $20.00 value – the price charged in the “last sale” – or $2.00 worth of duties. The amount you pay in duties would increase 100%.

More details on the proposed change are available in Volume 73 of the Federal Register, pages 4254 through 4264 (Customs and Border Protection Notice of Proposed Interpretation and Solicitation of Comments, issued January 24, 2008). SIA will send a copy of this Federal Register notice upon request.

Industries uniting to submit comments

SIA is responding to this threatened change in rules by participating in the American Association of Exporters and Importers' (AAEI) First Sale Working Group. On the first Working Group conference call on February 12, various industries registered serious opposition to the proposed “last sale” rule. AAEI is planning to submit comments in response to the Federal Register notice announcing Customs' proposed change.

Comments are due to AAEI by March 14, 2008. AAEI will then vet the comments through its Customs Committee and Executive Committee and submit formal, written comments to Customs by April 23, 2008.

If you believe that your company will be adversely affected by a change to a “last sale” rule, SIA wants to hear from you. In particular, please consider the following questions:

  • Are you currently claiming the price of the “first sale” from the manufacturer for valuation purposes when you import goods? If not, what price are you using?
  • How many times do your goods change hands along the wholesale supply chain?
  • How would an increase in duties affect your competitiveness?
  • Do you feel you could pass on price increases to consumers?
  • Is there any chance that this increase in duties charged could force you out of business?
  • What is the percentage increase in price between (a) the price of the first sale from the manufacturer of the goods and (b) the sales price to you upon the arrival of the goods in the United States?

SIA asks members to e-mail responses to this request for information to Shaun Corette at no later than Friday, March 7, 2008. We welcome any additional comments you may have in response to Customs' proposed change to a “last sale” rule, and, as always, we are available to respond to any questions you may have. If you have additional comments or questions please contact either Shaun Corette at 202-799-4201 or;or Kate Mueller at 202-799-4112 or