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As the U.S. government tightens its grip on trade with new waves of tariffs—particularly those aimed at Chinese goods—some businesses are finding smart, legal ways to protect their bottom line. A little-known but entirely legitimate strategy known as the “first sale rule” is gaining traction across industries. Though this rule has existed in U.S. customs law since 1988, it’s now being used more strategically than ever before to bypass significant tariff costs.

What Is the First Sale Rule?

The first sale rule allows importers to pay duties based on the original manufacturing price of a good—not the final resale price paid by the U.S. buyer. In practical terms, this means that if a product passes through multiple middlemen before reaching the U.S., only the price from the initial manufacturer counts for duty calculation—provided specific conditions are met.

Example:

• A t-shirt made in China is sold to a Hong Kong wholesaler for $5
• That wholesaler resells the t-shirt to a U.S. retailer for $10
• The U.S. retailer then sells it to customers for $40

Under standard rules, import duty would be calculated on the $10 transaction. But with the first sale rule in place, the duty can be based on the $5 factory price, potentially slashing the import tax by 50% or more.

Why It’s Gaining Momentum Now

The rule came back into focus during former President Donald Trump's first wave of tariffs on Chinese goods in 2018, which imposed up to 25% duties on thousands of items. Legal and trade experts say interest has resurged amid new tariff proposals and global supply chain realignments.

“When Trump’s 25% tariffs hit in 2018, we started getting calls,” said Sid Paruthi, a partner at consulting firm Moss Adams. “With the new tariff round, interest is rising again.”

“It’s been around for decades, but now everyone’s starting to explore it with more intensity,” added Brian Gleicher, senior lawyer at Miller & Chevalier Chartered.

How It Works: The Four Key Requirements

To qualify for the first sale rule, companies must ensure:

1. Multiple sales transactions exist (e.g., from a manufacturer to a middleman, and then to the U.S. importer).
2. The sales are arm’s length transactions between unrelated parties.
3. The goods must be destined for the U.S. at the time of the first sale—not rerouted later.
4. There must be clear documentation of the first sale price.

Importers also face a critical challenge: gaining access to accurate pricing data from overseas vendors. Suppliers are often reluctant to share their true costs, fearing exposure of their margins or loss of negotiating power.

“There’s a level of trust required,” said Rich Taylor, a China-based consultant who’s advised Fortune 500 firms on first sale strategies. “Without it, it’s difficult to execute.”

The Financial Upside

Despite the administrative hurdles, the payoff is massive—particularly for companies importing large volumes or high-margin products.

• Moncler, the luxury Italian fashion brand, cited the rule in its Q1 2025 earnings, calling it a “significant benefit.”

“The industrial cost is around 50% of our intercompany transfer price, so using the first sale price reduces our duty burden significantly,” said Luciano Santel, Moncler’s Executive Director.

• Kuros Biosciences, a biotech firm headquartered in Switzerland, announced during a May 2025 earnings call that it would restructure its supply chain around Zurich to leverage the rule.
• Traeger, the BBQ equipment manufacturer, and Fictiv, a digital manufacturing company, also cited the rule as a method to “mitigate supply chain costs” in their Q1 reports.

The Silent Impact on U.S. Tariff Goals

While entirely legal, the growing use of the first sale rule could inadvertently blunt the original intent behind tariffs: to pressure companies to bring manufacturing back to U.S. soil. By reducing the cost impact of tariffs, the incentive to reshore diminishes.

The White House has not commented on the increased use of the rule, and U.S. Customs and Border Protection (CBP) has declined to share recent usage data.

Still, experts note that the first sale rule doesn't violate trade laws—it merely optimizes them.

Expert Take: Competitive Advantage or Hidden Risk?

“If your competitor is using the first sale rule and you’re not, you're at a pricing disadvantage,” explained Taylor. “It’s a legal edge—and in today's market, margins matter.”

Companies that embrace this approach show partners and clients they’re taking every step to remain cost-effective. But the system requires transparency, compliance, and cooperation across international supply chains.

A Tool Worth Considering

In an era where geopolitical tensions and tariff uncertainties loom large, the first sale rule presents a powerful, underused option for cost savings. For businesses willing to navigate the regulatory complexity, it’s not just a legal loophole—it’s a competitive advantage.

Additional Insights from Global Trade Experts:

• World Trade Organization (WTO) data from 2023 shows that tariff rates on Chinese imports into the U.S. remain at 16.5% average—up from 3.1% in 2017.
• Legal experts expect more companies across Europe and Asia to adopt similar supply chain structures to comply with U.S. first sale standards while maximizing profits.
• CBP audits on first sale usage are increasing, signaling regulatory interest—but no intent to shut down the rule’s application.