Initial Comments on First Sale ICP Show Push Back Against Document List
Comments submitted to CBP so far on the agency's plans to update an informed compliance publication with information on first sale valuation show some strong objections to the effort. Law firm Sandler Travis called for the proposed changes to be "withdrawn in their entirety," while the American Apparel and Footwear Association (AAFA) said uncertainty over documentation requirements point to a need for auditor training, not a revised ICP. Several others are expected to submit comments in coming days. The draft ICP includes a controversial list of documents the agency might request from industry to verify the use of first sale pricing (see 14071025).
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Despite repeated assertions from CBP that the proposed changes don't make for a change in policy (see 14061317 and 14041117), the revisions to the ICP would in fact "constitute a change in policy with regard to how CBP has previously reviewed first sale transactions," said Sandler Travis. The agency would be making a policy change by "promulgating a long list of documents that CBP 'may' request to support first sale appraisement" including some "documents that have not been previously." CBP has not returned requests for comment on the ICP changes or whether the agency plans to make the industry comments public.
There's a "very real concern" that "CBP Import Specialists and auditors will use the enumerated list of documents in the Appendix to the ICP as a 'starting point' and request all documents for every first sale transaction even though many of the documents listed are not appropriate or necessary," it said. CBP could also use better paths so as to give more clarity to agency auditors, said the law firm. For instance, planned changes to the Focused Assessment program and related audit manual would be a more appropriate place for first sale documentation requirements "so that auditors would be provided with reasoned guidance and governance on the specific contexts in which particular documents could be regarded as sufficient and satisfactory," it said. "Providing a big bucket list of documents for any customs official to demand anytime a first sale claim is made could easily be used to discourage valid first sale claims," something that Acting Assistant Commissioner Richard DiNucci said he's trying to avoid.
The revisions would also make for a major expansion of statutory recordkeeping requirements, something that should require legislation, said the firm. "CBP lacks the legal authority to enlarge the statutory language to apply recordkeeping requirements to foreign manufacturers/sellers," it said. CBP also seeks to evade Administrative Procedure Act provisions that spell out the executive branch rulemaking process and required notice and comment procedures. Because the changes to the ICP alter the recordkeeping regulations, which were promulgated through notice-and-comment rulemaking procedures, any changes to those regulations must also be promulgated through notice-and-comment rulemaking."
The AAFA is similarly concerned with CBP's plans, it said in its comments (here). The changes being discussed are not the result of any congressional or judicial action, but a response to some of the agency's audits, the trade group said. "While we understand there have been questions raised surrounding a handful of audits, we measure that small number of audits against the sheer volume of First Sale transactions that have occurred over the past two decades," it said. "Such a small number of problems hardly represents a sample that should prompt a change in practice to affect an entire industry. In fact, the small number suggests that no change should be contemplated at all."
The group suggested that the auditing issue could be addressed by CBP through better training rather the ICP change. An ICP document list should not be considered to replace training for the auditors, who will still need to learn about the documents on the list, it said. "Perhaps we should focus our collective efforts on an audit curriculum," said AAFA. The document list is especially unnerving and should be ditched, it said. The proposed list "will quickly create an expectation that all documents are needed for all First Sale scenarios," effectively "redefining 'reasonable care,'" the association said. "Such an outcome is almost unavoidable as companies will migrate to the documentation requirements that appear to guarantee the most compliant outcome." Companies have already started to compare the draft document list to documents they previously used to support first sale claims, it said.
The changes would also discredit the agency's recent more collaborative efforts, such as Importer Self-Assessment and Customs-Trade Partnership Against Terrorism programs. "Publishing the Appendix undermines these efforts since compliance will be judged primarily against a list of documents rather than against working systems and partnerships," it said. The document list should be eliminated as it would "greatly expand the regulatory burdens and costs associated with First Sale, thereby jeopardizing continued viability of this important program."
Email ITTNews@warren-news.com for a copy of Sandler Travis' comments. ITT is interested in hearing views from others that have filed their comments with CBP. Send comments to ITTNews@warren-news.com.