When goods pass through multiple hands before reaching the United States — from manufacturer to middleman to importer — the dutiable value is typically calculated on the last sale price, the price paid by the importer to the foreign seller.
First sale valuation is a lawful alternative that uses the manufacturer's price as the basis for duty calculation, which in multi-tier supply chains can be meaningfully lower.
Legal Basis
U.S. law provides that customs value may be based on the transaction value of the merchandise at the first sale for exportation to the United States, provided that sale meets certain legal requirements.
Eligibility Requirements
For first sale valuation to apply, the program requires:
— A bona fide sale must have occurred between the manufacturer and the middleman
— The goods must be clearly destined for the United States at the time of the first sale
— The price must be arm's length — unaffected by any relationship between buyer and seller
— Sufficient documentation to substantiate the first sale price
Documentation is Everything
CBP requires robust documentation to support first sale claims. This typically includes purchase orders, commercial invoices, and evidence of payment from both transactions in the supply chain. Importers must be prepared to produce this documentation on demand.
Prospective Savings
Unlike duty drawback, first sale valuation is a forward-looking strategy that reduces duty liability on ongoing imports. The calculation of potential savings is straightforward: the difference in duty rates applied to the spread between first and last sale prices, multiplied by import volume.
For importers with established supplier relationships and multi-tier supply chains, the savings opportunity is often substantial and immediately realizable with proper program implementation.