What is the significance of the “First Sale Rule” in customs valuation?

The significance of the “First Sale Rule” in customs valuation lies in its capacity to allow importers to use the price of goods from the first sale that occurred in the distribution chain, as the basis for customs valuation. This can significantly reduce the dutiable value of imported merchandise.

When goods are sold several times before reaching the ultimate purchaser, the last sale price can include markups from each step in the supply chain. The First Sale Rule enables customs valuation to consider the price paid by the first buyer in the export country, rather than the final retail price in the importing country. By utilizing this first sale price, companies can potentially lower the duties they owe, as this price is typically lower than the subsequent sales prices, thus leading to cost savings when importing goods.

This rule is particularly beneficial in scenarios where the manufacturer sells to an intermediary before the goods are sold to the final importer. Using the first sale price reflects a more accurate and often more favorable valuation for customs purposes.