U.S: Cut Tariffs Legally with First Sale
- Arne Mielken
- Aug 4
- 5 min read
Pay less in U.S. import duties by using this fully legal customs valuation method most importers ignore.
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The U.S. First Sale Rule lets importers legally declare a lower customs value and reduce tariffs. If your supply chain includes a manufacturer, a middleman, and then you, you might qualify to base your customs value on the factory price—not the price you pay. Here's how it works and whether it's right for you.
Arne's Takeaways
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Key Questions Covered in This Blog
What is the First Sale Rule and how does it reduce import duties?
Who qualifies to use First Sale customs valuation?
What documentation is required?
What are the risks if CBP rejects your claim?
Should your business pursue this strategy?
Abbreviations Used In This Blog
CBP – U.S. Customs and Border Protection
HTS – Harmonized Tariff Schedule
SME – Small and Medium-Sized Enterprises
"The smartest importers treat customs valuation not as a paperwork exercise but as a competitive edge."Arne Mielken, Managing Director, Customs Manager
Fancy a Call?Book a free consultation to explore First Sale valuation: www.customsmanager.org → Book Expert Call Get Weekly Game-Changing Updates with The Customs Watch USAStay ahead with compliance insights across the U.S. import landscape. Sign up at www.customsmanager.info. |
What is the First Sale Rule and how does it reduce import duties?
The First Sale Rule is a customs valuation method in the U.S. that allows importers to declare a lower value for duty purposes. Instead of using the final price paid to a reseller or intermediary, you can base your declaration on the manufacturer's original sale price—if specific conditions are met.
This approach is completely legal and recognized by CBP since the Nissho Iwai court case in 1992. With tariffs on the rise and more audits looming, getting this right could be the difference between surviving and thriving in today’s trade environment.
Who qualifies to use First Sale customs valuation?
To qualify, your transaction must involve three parties: a manufacturer, a reseller (middleman), and the U.S. importer.
You must also prove:
The first sale was bona fide, meaning a legitimate commercial transaction took place.
The goods were clearly destined for the U.S. at the time of the first sale.
The sale was conducted at arm’s length, especially if the parties are related.
Practical Expert Recommendation Ensure early contracts reference the U.S. as the only destination to establish export intent. |
What is the First Sale Rule and how does it reduce import duties?
The First Sale Rule is a customs valuation method in the U.S. that allows importers to declare a lower value for duty purposes. Instead of using the final price paid to a reseller or intermediary, you can base your declaration on the manufacturer's original sale price—if specific conditions are met.
This approach is completely legal and recognized by CBP since the Nissho Iwai court case in 1992. With tariffs on the rise and more audits looming, getting this right could be the difference between surviving and thriving in today’s trade environment.
Who qualifies to use First Sale customs valuation?
To qualify, your transaction must involve three parties: a manufacturer, a reseller (middleman), and the U.S. importer.
You must also prove:
The first sale was bona fide, meaning a legitimate commercial transaction took place.
The goods were clearly destined for the U.S. at the time of the first sale.
The sale was conducted at arm’s length, especially if the parties are related.
Practical Expert Recommendation Ensure early contracts reference the U.S. as the only destination to establish export intent. |
What documentation is required?
This isn’t a strategy you can wing. Documentation must be airtight. You'll need:
Sales contracts and purchase orders
Factory invoices
Bank statements or proof of payment
Bills of lading, cargo manifests, packing lists
Proof the goods were manufactured for the U.S. market
If any link in the chain is missing, your claim could fail—and the penalties can be harsh.
Practical Expert Recommendation Do a documentation audit before even attempting a First Sale declaration. Don’t risk CBP penalties. |
What are the risks if CBP rejects your claim?
CBP presumes the last sale price is the correct transaction value. If you can’t prove the First Sale conditions, they’ll deny your valuation and you may face:
Retroactive duty payments
Penalties under 19 U.S.C. § 1592
Delayed shipments or increased scrutiny
This isn't a theoretical risk. CBP actively audits First Sale claims and has zero tolerance for sloppy documentation.
Should your business pursue this strategy?
Start with these questions:
Do you purchase through an intermediary?
Is your middleman willing to disclose factory-level pricing?
Can you collect complete documentation?
Do you ship directly from factory to the U.S.?
If the answer is yes to all, First Sale could cut duties by 10% to 25%. But for many SMEs, the burden of proof and documentation complexity is a real barrier.
Practical Expert Recommendation Start with a feasibility check. If your supplier won’t share upstream invoices, stop right there. |
Example: How First Sale Works
Party | Price Paid | Role |
Factory (Vietnam) | $3.50 | Manufacturer |
Trading Co. (HK) | $5.75 | Middleman / Exporter |
U.S. Importer | $5.75 | Final Buyer / Declarant |
If all First Sale requirements are met, duties are assessed on the $3.50—not $5.75—saving the importer nearly 40% in tariffs.
Recap & Next Steps
The First Sale Rule is a high-reward strategy that requires high-compliance execution. If your documentation is tight and your supply chain partners transparent, this can be a powerful tool to reduce duty liability.
Need help? Our Customs Consultants can evaluate your eligibility, audit your documents, and support your CBP submissions.
Explore more on customs valuation strategies or book a discovery call now.
Sources & Further Information
CBP Informed Compliance: Bona Fide Sales
Nissho Iwai American Corp. v. United States
19 U.S.C. § 1401a – Customs Valuation Law
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Disclaimer
Please note that the information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While our aim is that the content is accurate and up to date, it should not be relied upon as a substitute for tailored advice from qualified professionals. We strongly recommend that you seek independent legal and tax advice specific to your circumstances before acting on any information contained in this article. We accept no responsibility or liability for any loss or damage that may result from your reliance on the information provided in this article. Use of the information contained in this article is entirely at your own risk.
