Data presented by the U.S. International Trade Commission (ITC) shows that many U.S. importers are not taking advantage of duty savings opportunities offered by the “first sale rule.” As a result, they are potentially paying substantially more in duties than they should.
Under the “first sale rule” U.S. importers may lower duties by using the first sales price for goods, which are sold multiple times before importation, to determine duty liability. For example, an item may be produced in China, sold to a middleman in Hong Kong, and in turn sold to a buyer/importer in Los Angeles. The first sale rule allows the U.S. importer to declare the product’s value, for import duty purposes, as the price of the original China-Hong Kong transaction. Because the value attributable to earlier sales may be lower than that assigned to later sales, use of the first sale rule can lower the duties paid by importers. It is not uncommon for the first sale rule to reduce import duty payments by 50 percent.