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Import Duty Increase Decision Put on Hold

U.S. Customs & Border Protection Commissioner W. Ralph Basham told a Senate committee on Tuesday that his agency would accede to Congress and delay until...

WASHINGTON — U.S. Customs & Border Protection Commissioner W. Ralph Basham told a Senate committee on Tuesday that his agency would accede to Congress and delay until 2011 a decision on raising import duties.

This story first appeared in the June 25, 2008 issue of WWD.  Subscribe Today.

The move came in the aftermath of legislative moves in Congress to thwart the controversial Customs plan.

Customs proposed a rule change last year on how it values imports for the purpose of collecting duties, drawing opposition from the business community and Congress. The agency said it was considering changing its long-standing practice of determining the value of an imported finished product based on the cost of the item at the point of first sale in the supply chain — factory to wholesaler — to the higher value of a product at final import, basically the wholesale price.

The proposed rule would force U.S. importers to pay millions of dollars in additional duties on the products they make abroad and ship to the U.S.

“We are not going forward with any further action to implement this interpretative rule or otherwise change the interpretation of the ‘First Sale’ rule before 2011,” Basham testified during a trade oversight hearing before the Senate Finance Committee.

Several apparel brands and retailers that contributed to the $96.1 billion worth of apparel and textiles imported into the U.S. in 2007 wrote a letter to Homeland Security Secretary Michael Chertoff in February urging him to withdraw the proposal. Customs is an agency within the Homeland Security Department.

Before Customs made a final determination, Congress stepped in and passed a provision in the multibillion-dollar farm bill that directed the agency to conduct impact studies in conjunction with the U.S. International Trade Commission and forgo any action until January 2011 at the earliest.

Basham said he would follow the instructions of Congress as outlined in the farm bill.

“We’re very pleased with his comments today,” said Julia Hughes, senior vice president of the U.S. Association of Importers of Textiles & Apparel. “I wish he would have gone further [pledging that the proposed change would never be resurrected], but I still think he gave the right answer.”

It is unclear how the new administration that takes office next January will approach the current Customs policy on valuing duties on imports.