U.S. Customs and Border Protection (CBP) reinforced its expectations for first sale valuation in Ruling H337689, issued October 6, 2025, and recently published publicly. The decision highlights that first sale eligibility depends on an importer’s ability to document how title, risk of loss, and pricing operate across each tier of a multi party transaction. The ruling does not introduce new policy, but it illustrates how CBP applies existing first sale standards when documentation gaps exist.
WHAT WAS AT ISSUE IN HQ H337689?
CBP reviewed a protest involving apparel entries purchased through multiple middleman vendors, some of which sourced goods from related factories. The importer sought to appraise the merchandise using the transaction value between the middlemen and the factories rather than the sale to the importer. While CBP acknowledged that the goods were clearly destined for the United States, the agency focused on whether each upstream transaction qualified as a bona fide sale for export.
HOW DOES CBP DEFINE A “COMPLETE PAPER TRAIL”?
CBP reiterated that the importer bears the burden of providing a complete paper trail that explains the structure of the entire transaction. This includes records that demonstrate who assumed title and risk of loss at each stage, how pricing was established, and how the parties functioned commercially. The ruling makes clear that the existence of multiple documents is not sufficient if those records do not collectively establish these elements.
Related analysis: In August 2025, CBP issued a separate ruling addressing documentation requirements for first sale valuation and buying agent claims, emphasizing the need for a complete and verifiable paper trail linking payment, title transfer, and risk of loss to specific shipments. A detailed analysis of that decision is available here:
https://www.greenworldwide.com/cbp-requires-complete-documentation-for-first-sale-treatment-and-buying-agent-claims/
WHY WERE THE FIRST SALE CLAIMS DENIED?
CBP found that the documentation submitted did not clearly show when or whether the middlemen assumed risk of loss and title between the factory door and export point. In several instances, supporting records were untranslated, incomplete, or inconsistent. CBP also noted the absence of inland freight documentation and other operational records needed to confirm how risk moved through the transaction. As a result, the agency could not conclude that the middlemen functioned as true buyers and sellers.
HOW DID RELATED PARTY TRANSACTIONS FACTOR INTO THE RULING?
For transactions involving related middlemen and factories, CBP applied arm’s length standards and found the evidence insufficient. Generalized profit and loss statements were not limited to merchandise of the same class or kind and did not demonstrate that pricing was unaffected by the relationship. Without transaction specific support, CBP determined that the related party sales could not form the basis of first sale valuation.
WHAT ROLE DID INCOTERMS PLAY IN CBP’S FIRST SALE CLAIM ANALYSIS?
Although various Incoterms were referenced in the documentation, CBP emphasized that contractual terms alone do not establish commercial reality. Without corroborating records such as freight contracts or insurance documentation, CBP could not confirm that the middlemen actually bore risk during inland movement and export preparation.
WHAT SHOULD IMPORTERS TAKE FROM THIS CBP RULING?
HQ H337689 reinforces that first sale claims are evaluated holistically and on a transaction by transaction basis. Even when goods are clearly destined for the United States, first sale valuation will be denied if the documentation does not clearly establish bona fide sales, arm’s length pricing where required, and documented risk transfer at each tier. The ruling serves as a practical example of how CBP tests first sale frameworks during protest and audit review.
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