Wednesday, May 28, 2008

First Sale, the Farm Bill, and Bad Parenting

This is for Paul, who by posting a comment here, prompted me out of my blog stupor. I was planning a satirical rant about how I have this awful day job that gets in they way of my blogging. I was going to explain my goal to emulate now-professional bloggers like Heather Armstrong (AKA Dooce) or parlay my blogging success into a book deal like Jessica Hagy (of Indexed) and, more important, a shot on the Today Show.

But, I can't. I'm beat. I've had a fair amount of substantive work going on. Those of you who follow the court decisions may know that I am headed up to the CAFC. Thus, I won't comment on that. I've also just gotten out a complicated perfection of a prior disclosure and have a number of investigations going on. I am not complaining. Really. I am happy and don't have a horrible day job. I like my job. As a result, it sometimes get in the way of blogging.

In particular, for those of you who have been reading for a long time, it gets in the way of the off topic, funny posts. I have heard, as an alien once said to Woody Allen, "We liked your early, funny work." I'll try to spice things up when I can.

Which brings me to the Farm Bill.

This is a great example of what is wrong with the legislative process in DC. Here we have a Farm Bill. Technically, it is the Food, Conservation and Energy Act of 2008. The law covers a million things related to agriculture include agricultural trade. The table of contents mentions softwood lumber, although I can't quite figure out why. There is also a section on unused merchandise drawback.

But, drum roll please, the important part for us is section 15422(d), which says:

It is the sense of Congress that the Commissioner responsible for U.S. Customs and Border Protection should not implement a change to U.S. Customs and Border Protection's interpretation (as such interpretation is in effect on the date of the enactment of this Act) of the term `sold for exportation to the United States', as described in section 402(b) of the Tariff Act of 1930 (19 U.S.C. 1401a(b)), for purposes of applying the transaction value of the imported merchandise in a series of sales, before January 1, 2011.

That, my friends, is Customs and Border Protection getting a time out from Congress. It is Congress saying, "put that first sale change on hold until we have a chance to look into it. Oh, and when that happens, there will be a new administration, a new congress, and likely a new Commissioner."

To facilitate this review, Congress also mandated that Customs start collecting data on the use of first sale valuation and report that data to the International Trade Commission for appropriate number crunching. Unfortunately, the initial reporting will fall on importers. As Paul points out, it is not entirely clear how that information will be transmitted to CBP for collection. One assumes it will happen through something simple like a Special Program Indicator.

But here's the thing: This does not exactly say "No, don't do that." Rather, it provides a "sense of Congress." That is kind of like a parent saying "I'd rather you didn't eat peanut butter from the jar." My own experience on both sides of that weak command is: that's not a "No" and "Not a no" can be as good as a yes (unless it involves romance, in which case anything resembling a no is a no).

I seriously doubt that CBP will take any action contrary to the sense of Congress. That would simply invite more direct legislative action. Also, this time out gives CBP some time to lobby Congress on the merits of its position. So, I suspect nothing will happen before 2011. After that, all bets are off.

Which leads to the last question: What are importers supposed to do now? If you currently use first sale valuation, go ahead knowing that you might lose the benefit in a couple years. If you have been thinking starting to use first sale, you should figure out what you stand to save in the next couple years and decide whether that savings is worthwhile. If you would not make back your investment in administering the program for five years, it might not be a good investment now.

Have a good weekend.

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