Recently, there has been a good bit of discussion about the withdrawal of “First Sale of Export” as part of the Unified Customs Code (UCC) Implementing Provisions.  After seeing a discussion in LinkedIn, we reached out to Mr. Ian Worth, Head of Customs at Grant Thornton UK LLP to see if he would share his thoughts on this topic.  Below is what Worth posted in LinkedIn and agreed that we could share here.  

The customs valuation provision which allows for attestation to an earlier sale value is to be withdrawn, according to the draft Delegated and Implementing Acts of the Union Customs Code.

Customs valuation is the basis by which goods declared at import are valued for the purposes of calculating the correct amount of customs duty payable. In most cases, the correct value is based on the commercial invoice value for the goods being imported but, in some instances, it has been advantageous to declare an earlier (lower) sales value. The EU has now proposed to withdraw this well established practice.


Where a product is the subject of several transactions before it is finally imported, current legislation permits an importer to declare the earliest sale value at a point when the goods in question are identified as being destined for the EU, without further processing. By using this rule, the importer has been able to reduce his customs duty cost by eliminating any additional mark-ups applied during successive transactions of the same goods. The draft Delegated and Implementing Acts, which will give legal effect to the Union Customs Code (the replacement customs legislation) has just been published, but excludes the provisions applicable to earlier sales.

Affected importers

Importers who have successfully used such a customs valuation strategy could, therefore, see significant increases in their customs duty costs which, for the most part, are not recoverable and so this is an increase in cost which hits the bottom line. Particularly affected are likely to be those who import goods from related parties, owing to the ease with which earlier sales documentation is available.

Effect on export preference

For many businesses, particularly manufacturers, the use of an earlier sale value has enabled their finished product to meet the preferential origin criteria for exports to customers. An increase in the customs value for imported materials and components will make it more difficult to fulfil preferential origin rules, which will in turn increase the import costs for customers in other countries.

Making the case for "first sale"

Whilst the Delegated and Implementing Acts are currently only in draft form, there is an opportunity for affected importers to emphasise the importance of maintaining the "first sale" provision in EU legislation. However, evidence from businesses will be needed to demonstrate the financial impact of the proposed removal of this provision. In particular, UK Customs is seeking any evidence which indicates that, as a result of the proposed changes, UK businesses will be unable to compete against overseas businesses.

Our Recommendations

It is important to remember that the current status of this legislation is "draft" and that there may be an opportunity to influence the final position. We therefore urge all businesses that may be affected to submit their point of view to UK Customs, as well as to the European Parliament, either directly or through Trade Associations.

We will be attending the next Joint Customs Consultative Committee meeting of HMRC as well as the Trade Contact Group meeting in Brussels where this is expected to be high on the agenda.

If you are considering attending the NAFTZ Legislative Conference in Washington, DC and haven’t registered yet, there are now two seminars on global trade you can attend in the same trip! KPMG, a global audit, tax and advisory firm, is hosting a Trade & Customs Update on February 12, 2014, at their offices in Mclean, Virginia, and the session is free to all who wish to attend.

The conference will cover international trade topics, including: customs savings opportunities, global trade management solutions, and import/export compliance.

Topics include :

  • Export Control Reform Update
  • OFAC Risks and Best Practices
  • Foreign-Trade Zones for Aerospace & Defense Industry
  • Global Trade Management Solutions
  • Customs Valuation and Transfer Pricing for Related Parties

The seminar is eligible for CPE credits. KPMG will be providing a light lunch and registration for the session will begin at 12:30 p.m. EST. You can RSVP for this event here.

For Nicaragua, a poor nation of about five million people, dreams of a transoceanic canal are closer to becoming a reality, thanks to interest from China. In 2013, a Chinese company won a 50-year renewable allowance to build a canal in the nation which would open a trade route to the Americas that wouldn’t be dependent on access to the Panama Canal.

According to Business Mirror, “the project may punch [Nicaragua’s] ticket out of poverty, creating jobs and prosperity.” The promise, however, comes with challenges. The project is considered to be one of the largest engineering challenges ever seen. Chinese engineers have already set out to map topography and the search has begun for investors.

Despite the challenges, the potential benefits are outweighing doubts in the push to green-light the transoceanic canal. China is viewing easier access to crude oil from Venezuela, as well as advancements in the Western Hemisphere.

Benefits to the people of Nicaragua are also being realized. “In the initial scenarios we looked at, you can see that up to a million people could be employed within the 10-year span of construction,” said Manuel Coronel Kautz, an engineer who heads the Transoceanic Grand Canal Authority of Nicaragua.

For more on the project and its challenges, including environmental, financial and economic concerns, view the full story here.