Under pressure from major importers and business groups and finally Congress the U.S. Customs and Border Protection agency has dropped its plan to increase import duties.

Earlier this year, the agency had proposed eliminating the so-called “first-sale rule” on imports, which bases duty payments on the price at the first point of sale instead of the final point of sale before entry into the U.S. This would have slammed importers with increased costs, just as the lower value of the U.S. dollar was making imported goods more expensive.

Many products that are made overseas pass through middlemen before coming into the U.S., with each middleman taking profits and boosting the product’s price. Under the first-sale rule, a pair of shoes made in Vietnam and sold to a Hong Kong buying agent who then sells them to a U.S. company would have duty taxes levied on the initial sale price, not the final selling price. On bulk purchases by U.S. importers like Target Corp. or Wal-Mart Stores Inc., this practice saves millions of dollars.

But in January, the customs agency proposed eliminating this first-sale rule, stating the U.S. needed to be in compliance with recent international court rulings. The move stirred howls of protests from importers and business groups, which hastily formed a coalition called Save the First Sale Rule.

The coalition lobbied Congress to intervene and order the agency to drop its proposal; it secured support from at least 17 senators and 50 House members, who then wrote Homeland Security Secretary Michael Chertoff, urging him to order the rule dropped. The legislators also inserted a “sense of Congress” amendment into the massive farm subsidies bill signed by President Bush that in essence ordered customs to put off consideration of its proposal until at least 2011.

Facing this pressure, Customs and Border Protection Commissioner Ralph Basham agreed to drop the proposal from consideration until at least Jan. 1, 2011.

“This is excellent news for companies that were using the first-sale rule to bring their products in with a lower duty cost,” said Robert Krieger, president of Krieger Worldwide, a Rancho Dominguez international freight forwarder and customs broker. “It helps counteract the impact of the dollar.”

Living Wage in Effect

The Hilton Los Angeles Airport Hotel was unsuccessful in its recent attempt to get an immediate court injunction preventing the city of Los Angeles’ living wage law targeting airport-area hotels from going into effect.

Instead, U.S. District Court Judge Stephen Wilson has taken the hotel’s request under submission and will decide on the injunction at a later date.

As a result, the city’s living wage law which requires certain companies to pay their employees $10 an hour with health benefits or $11.25 an hour without benefits now includes the 12 hotels along Century Boulevard near Los Angeles International Airport.

On June 30, the Hilton Los Angeles Airport Hotel filed a lawsuit in state Superior Court challenging the city’s authority to extend its living wage law to businesses that have no direct contractual relationship with the city. The lawsuit also sought an injunction to prevent the extension of the living wage from going into effect while the merits of the case were being decided.

However, on July 3 just two days before the ordinance extending the living wage to the airport-area hotels was to go into effect the city successfully petitioned to have the case moved to federal court in Los Angeles. Wilson was assigned the case.

The lawsuit came two months after the state Supreme Court rejected the hotels’ effort to overturn the extension of the ordinance on procedural grounds.

Mileage Reimbursement Increase

Though it might seem small consolation to those who have seen their gas bills nearly double in the last year, the federal Internal Revenue Service has upped the suggested mileage reimbursement rate for business-related travel to 58.5 cents per mile from 50.5 cents.

The hike took effect July 1 and lasts through the rest of the year. It marks an unusual midyear step for the IRS, which normally adjusts the mileage reimbursement rate only once a year, on Jan. 1.

It was no surprise that IRS Commissioner Doug Shulman attributed the midyear adjustment to higher gas prices.

“Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile,” Shulman said in a statement late last month.

Along with the increase for standard business-related vehicle operations, the IRS also raised the suggested reimbursement rate for deductible medical or moving expenses to 27 cents per mile from 19 cents.

Staff reporter Howard Fine can be reached at [email protected] or at (323) 549-5225, ext. 227.