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First Sale Valuation

First Sale Valuation (also known as First Sale for Export) was established decades ago through judicial interpretations of the customs valuation statute.   Techniques developed to better use the judicial precedents, while effecting duty-savings an import transaction.  And correspondingly, over time, a push and pull, effected vis-a-vis Customs administrative decisions, rulings, and additional court cases, has been ongoing between the regulators and the regulated in the struggle to better define the acceptable methods by which importers may take advantage of first sale duty savings.   See, .ppt presentation

Today, first sale techniques may be used widely by importers seeking competitive market and pricing advantages.  While the technique is particularly well suited for highly dutiable commodities (such as apparel, footwear, bags/cases, and foods) it is not limited in scope.   Indeed, the International Trade Commission's Summary Report on First Sale Valuation revealed that first sale is now used by a wide diversity of importers across in all manner of commodities imported into the United States.

The defining characteristic of a first sale duty savings program is the creation of a chain of multiple arms-length sales for the export of merchandise into the United States.  The importer is allowed to elect a value declaration to U.S. Customs using the lowest of potentially many bona fide sales, and this chosen value may then serve as the basis of duty appraisal - provided that each of the sales have been properly documented and established as bona fide to that end.   A lower declared "transaction value" will obviously translate directly into lower ad valorem duties and fees paid to the government.  

Given the effort involved in setting up a documented and compliant first sale program, the best candidates are those companies which:

  1. import dutiable commodities, in sufficient volume to generate significant annual duty liabilities; and

  2. enjoy stable cooperative sourcing relationships with their largest overseas suppliers.

The technique may provide importers with substantial duty savings.  By means of example, assume a hypothetical importer of dutiable goods (perhaps apparel, footwear, bags, or food).  The importer's largest foreign supplier ships a total of $5 million in goods which are subjected to a 15% duty rate.  This results in an annual liability of $750,000 in customs duties.   The importer implements a first sale program and realizes a reduction in its duty liabilities of approximately 20% - an annual duty savings of $150,000 per year.   Thus, over 5 years, the importer saves $750,000 in import duties (which would otherwise have been paid to the government).  Over a decade, the hypothetical savings would compound to over $1.5 million. 


Due to the large potential savings (and commensurate compliance risk) first sale valuation requires careful and experienced planning to ensure all legal requirements are satisfied.  An incorrectly implemented first sale program can expose an importer to significant liability.   Experienced, implementation and rigorous auditing procedures are the hallmarks of a successful first sale implementation.   Should you have further questions about our first sale auditing or implementations, please feel free to contact Matt Nakachi