If a trading company sits between you and the factory, you may be paying duty on their margin

Key takeaways

• In a multi-tier supply chain, duty is normally assessed on the price you paid the intermediary. First sale valuation uses the earlier price the intermediary paid the manufacturer.
• Reported saving: 15% to 25% of the dutiable base on eligible transactions. It applies to the value, not the rate — so it stacks with everything else in the duty calculation.
• It is most valuable where the intermediary's margin is widest and the duty rate is highest, which is exactly the Section 301 situation many sellers are in.
• The Last Sale Valuation Act, introduced February 11, 2026, would eliminate it. It is not law, a similar attempt was abandoned in 2008, and the legislative risk is real enough to be worth acting on now.
• This requires documented evidence of the first sale and legal review. It is not a box to tick on an entry form, and getting it wrong is a valuation misstatement.

Most duty guidance is about the rate. This is about the number the rate is applied to, and for anyone buying through a trading company or sourcing agent it is frequently the larger opportunity.

This is not legal or customs advice. Every source on this subject recommends qualified review, and that recommendation is correct.

01The mechanism

Picture a typical arrangement: a factory sells to a trading company at $6 a unit; the trading company sells to you at $9.

Normally, duty is assessed on $9 — the price you paid.

Under first sale valuation, qualifying importers may declare duty on the $6 — the price the intermediary paid the manufacturer.

At a combined duty rate of 30%, that is $2.70 against $1.80 per unit. Illustrative, and the shape is the point: the saving scales with both the intermediary’s margin and the duty rate.

02Why it matters more now

Reporting is direct: reliance on the first sale principle surged after Section 301 tariffs were introduced and has grown faster since 2025.

The reason is arithmetic. The higher the duty rate, the more a reduction in the dutiable base is worth. One analysis notes that US companies importing Chinese-origin goods subject to Section 301 duties through multi-tier procurement can effectively reduce that burden by declaring the first sale value, where the qualifying conditions are met.

Against a tariff stack where sources report effective rates commonly at 20% to 30% and higher in some categories, a 15% to 25% reduction in the base is a material line.

03Who qualifies

The conditions are the whole subject, and they are why this needs professional review rather than a decision.

Broadly, and consistently described across sources, you need:

A genuine multi-tier transaction. A real sale from manufacturer to intermediary, and a separate sale from intermediary to you. Not one transaction with an invoice re-issued.

Goods clearly destined for the United States at the time of the first sale.

An arm’s-length first sale at a price unaffected by any relationship between the parties.

Documentation of that first sale — the manufacturer’s invoice, payment evidence, and the commercial terms.

That last requirement is where most sellers stop. It means your trading company has to show you what they paid the factory. Many will not, and asking changes the relationship.

Which is the honest limitation: first sale is available to importers whose intermediaries will co-operate, and that is a commercial negotiation before it is a customs question.

04What it is not

It is not a way to lower your declared value. It is a legally defined alternative valuation basis with specific conditions. Declaring a lower value without meeting them is a valuation misstatement, exposed under the penalty tiers covered in the classification guide.

It does not change your HTS code. Reporting is explicit that first sale reduces the value on which duty is calculated and pairs well with a classification review, but the two are separate exercises.

It is not the same as an FTA preferential rate. these are two separate and independent tools: a free trade agreement reduces the applicable percentage; first sale reduces the value the percentage is applied to. Where both are available, both apply.

05The legislative risk

Worth stating plainly because it changes the timing calculation.

The Last Sale Valuation Act, introduced on February 11, 2026 by Senators Cassidy and Whitehouse (per trade-press coverage; check its status on congress.gov before relying on it), would eliminate first sale for export by requiring duties to be calculated on the last sale price before importation.

It is not law. a similar proposal was attempted in 2008 and abandoned.

But the practical advice in the source material is sound: if you have a qualifying supply chain, the savings available now become permanently unavailable if the bill passes. That argues for evaluating and documenting eligible claims promptly rather than treating it as a project for next year.

06How to work out whether it applies to you

Four questions, in order:

1. Is there an intermediary between you and the factory? No intermediary, no first sale. This eliminates most sellers buying direct.
2. How wide is their margin? The saving is a percentage of the gap. A 5% intermediary margin is not worth the compliance work; a 40% one is.
3. What is your duty rate? At 3% the saving is trivial. At 30% it is not.
4. Will the intermediary provide the manufacturer’s invoice and payment evidence? If not, the answer is no regardless of the first three.

Then take it to a customs attorney or a trade compliance specialist, with the documents. this work as sitting between what a standard customs broker handles and what trade counsel produces for litigation — which is a fair description of where the expertise lives.

07What to do

Establish whether your supply chain is multi-tier. Many sellers do not know whether their “factory” is a factory — see the supplier verification guide, where reading the business license scope tells you whether you are dealing with 制造 (manufacturing) or 贸易 (trade).

Calculate the prize before doing the work. Intermediary margin multiplied by duty rate multiplied by annual volume. If that number does not justify professional fees, stop here.

Ask the intermediary early. Their willingness to document the first sale decides everything, and it is better discovered before you have paid for advice.

Do not attempt it without review. Every source recommends qualified legal or customs review, and the downside of an unsupported valuation claim is the penalty regime rather than a rejected form.

If it applies, act on it this year rather than next, given the pending bill.

Ask your trading company one question: will you give me the factory’s invoice to you? Their answer tells you whether first sale is available — and whether the margin you have been paying duty on was worth hiding.

Frequently asked

What is first sale valuation?

A legally defined alternative customs valuation basis. In a multi-tier supply chain, duty is normally assessed on the price you paid the intermediary; first sale allows qualifying importers to declare duty on the earlier price the intermediary paid the manufacturer.

How much can it save?

At 15% to 25% of the dutiable base on eligible transactions. Because it reduces the value rather than the rate, the saving scales with both the intermediary's margin and your duty rate.

Do I qualify?

Broadly you need a genuine multi-tier transaction, goods clearly destined for the US at the time of the first sale, an arm's-length price, and documentation of that first sale. The last one is where most sellers stop, because the intermediary must disclose what they paid the factory.

Is it legal?

Yes. It is a recognized valuation methodology with specific conditions. Declaring a lower value without meeting those conditions is a valuation misstatement and is treated as such.

Is it going away?

Possibly. The Last Sale Valuation Act, introduced February 11, 2026, would eliminate it. It is not law and a similar 2008 attempt was abandoned — but the risk argues for acting now rather than later if you qualify.

Can I combine it with a free trade agreement rate?

Yes. them as separate and independent tools — an FTA reduces the percentage, first sale reduces the value the percentage applies to.

Sources

1. 19 U.S.C. § 1401a (transaction value) and the first-sale rule under Nissho Iwai American Corp. v. United States (Fed. Cir. 1992); CBP informed compliance publication on first sale, United States Code, Title 19; U.S. Customs and Border Protection accessed 2026-09-05
2. First sale for export: the complete guide to reducing US import duty through customs valuation (Last Sale Valuation Act introduced 11 February 2026 and the abandoned 2008 attempt; surge in first sale reliance since Section 301; PwC and Perkins Coie analysis; separateness from FTA preferential rates), Carra Globe Secondary accessed 2026-09-05
3. Using tariff engineering to lower your 2026 import costs (first sale using the earlier price paid by the intermediary to the manufacturer; pairing with a classification review; savings widest where the intermediary margin is wide), Dedola Secondary accessed 2026-09-05
4. How American importers are cutting their 2026 duty bills (first sale cutting the dutiable base by 15–25% on eligible transactions; the tariff mitigation market sitting between broker work and trade counsel), Big News Network Secondary accessed 2026-09-05
5. 7 legal strategies to reduce import duties for US importers (first sale on the transaction side combined with tariff engineering and FTZ or drawback on the operations side), Camtom Secondary accessed 2026-09-05
6. Reduce import duty US 2026 (exploring first sale valuation where a middleman sits in the supply chain), Carra Globe Secondary accessed 2026-09-05