Importers Achieve Cost Savings Through The First Sale Rule!

The trade war currently ensuing between the US and several nations around the globe, most fiercely with China, shows no signs of the first set of tariffs levied against solar…

The First Sale Rule is one which allows importers to use the price paid in the first, or earlier sale, as the basis for customs duty to be paid. Many importers purchase at the second sale, from a middleman vendor who serves as the go-between from the manufacturer to the importer. This second sale is a marked up price. Paying duties on a lesser, first sale price, presents a tremendous savings opportunity, not only for the textiles and footwear supply chain industries where apparel and sneakers are subject to higher duty rates but also for manufacturing, electrical equipment, machinery, food and agriculture, and others. The bottom line, if you are purchasing from a trading company or sourcing agent, there may likely be an opportunity to take advantage of first sale pricing.

Paying duties on a lesser, first sale price, presents a tremendous savings opportunity, not only for the textiles and footwear industry where apparel and sneakers are subject to higher duty rates but also for manufacturing, electrical equipment, machinery, food and agriculture and others.

To review example savings, let’s say a company purchases an item from a middleman at $12 per unit, yet the original purchase price from the manufacturer is $9. While duty rates upwards of 25% can be attributed to the apparel world, let’s assume a conservative duty rate of 15%. If importing 30,000 units at the second sale price of $12, the importer is paying duties of $54,000. However, if the importer purchases the goods at the first sale of $9, the duties paid are reduced to $40,500, a savings of $13,500, or 25%. Across $100 million in annual purchased goods, the first sale duty reduction of 25% translates to a savings of $3.75M.